# ECO 550/ECO550 Final Exam (Solution 25/25) Guarantee - 89198

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Question 1

1. In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:

a. variable margin per unit

b. variable cost ratio

c. contribution margin per unit

d. target margin per unit

Question 2

Evidence from empirical studies of long-run cost-output relationships lends support to the: Answer

a. existence of a non-linear cubic total cost function

b. hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of           the firm

c. hypothesis that total costs increase quadratically over the ranges of output examined

d. hypothesis that total costs increase linearly over some considerable range of output examined

Question 3

George Webb Restaurant collects on the average \$5 per customer at its breakfast & lunch diner. Its variable cost per customer averages \$3, and its annual fixed cost is \$40,000. If George Webb wants to make a profit of \$20,000 per year at the diner, it will have to serve__________ customers per year.

a. 10,000 customers

b. 20,000 customers

c. 30,000 customers

d. 40,000 customers

e. 50,000 customers

Question 4

Which of the following is not an assumption of the linear breakeven model:

a. constant selling price per unit

b. decreasing variable cost per unit

c. fixed costs are independent of the output level

d. a single product (or a constant mix of products) is being produced and sold

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