question
Capital is a factor of production that has been produced for use in the production of other goods and services. Which of the following are examples of capital?
answer
-airports
-computer software
-computer software
question
Suppose a computer manufacturer is producing in the short run when capital is fixed and the only variable factor of production is labor. The firm's production data is given in the table below. What does the production function given illustrate?
Labor Quantity of Computers Produced (Total Product)
0 0
1 15
2 28
3 38
4 46
5 52
Labor Quantity of Computers Produced (Total Product)
0 0
1 15
2 28
3 38
4 46
5 52
answer
Decreasing marginal productivity of labor
question
Salary payments are ________.
answer
explicit costs
question
Sunk costs ________.
answer
should have no effect on output decisions
question
Suppose that a firm produces 10 units of output. Its Average Variable Cost (AVC) = $25, Average Fixed Cost (AFC) = $5, and Marginal Cost (MC) = $30. The firm's total cost is:
answer
$300
question
When the Long Run Average Cost (LRAC) curve is horizontal, it implies that there are ________.
answer
Constant returns to scale
question
When a long-run average cost curve illustrates economies of scale it will be:
answer
Downward sloping
question
Natural resources and labor are two factors of what?
answer
production
question
When an economist uses the term "technology," what they mean is
answer
The specific processes used to produce a product
question
If a producer increases the amount of labor used in production, holding other inputs constant:
answer
total product will increase at a decreasing rate
question
When the total product curve reaches its maximum point, the value of the marginal product at that point is ________.
answer
zero
question
Total product refers to:
answer
The quantity of output produced from a given amount of labor, holding other inputs constant.
question
Average product refers to:
answer
The quantity of output divided by the amount of labor used to produce it.
question
A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. What was the firm's accounting profit?
answer
$50,000
question
Implicit costs are ________.
answer
a forgone opportunity to do something else with your resources
question
If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?
answer
divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be
question
The term ________ is used to describe the additional cost of producing one more unit.
answer
Marginal Cost
question
________ include all of the costs of production that increase with the quantity produced.
answer
Variable costs
question
The term "constant returns to scale" describes a situation where
answer
expanding all inputs does not change the average cost of production
question
The upward sloping portion of a long-run cost curve illustrates:
answer
Diseconomies of scale
question
constant returns to scale
answer
expanding all inputs proportionately does not change the average cost of production
question
The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market. Because there are so many individuals buying and selling hot dogs:
answer
market forces set the price in the market.
question
Competitive markets exist when:
answer
there are so many buyers and sellers that each has only a small impact on the market price and the market output.
question
A monopoly:
answer
is characterized by a single seller who produces a well-defined product for which there are no good substitutes.
question
Monopolistic competition is like monopoly in that:
answer
both industries represent price-making firms.
question
One critical characteristic of monopolistic competition is:
answer
there are many small firms in the industry.
question
The greeting card industry is:
answer
most likely monopolistically competitive and has low markups.
question
Like a pure monopoly, an oligopoly is characterized by:
answer
significant barriers to entry.
question
A price-maker:
answer
has some control over the price it charges.
question
Product differentiation:
answer
refers to firms' attempts to make real or apparent differences in essentially substitutable products look different in the minds of consumers.
question
Monopolistic competition means:
answer
firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent.
question
When a market is characterized by mutual interdependence:
answer
the actions of one firm have an impact on the price and output of its competitors.
question
Which is an example of an almost perfectly competitive market?
answer
farmer's market
question
Monopolistic competition:
answer
is more similar to perfect competition than to monopoly.
question
Which of the following industries is most likely an oligopoly?
answer
airline industry
question
The local ice cream shop is trying to figure out how many workers to hire, and part of the decision will be based on the marginal product of labor. The following table shows a short-run production function for quantity of ice cream tubs produced. Diminishing marginal returns begins after hiring which worker?
Workers hired Quantity of ice cream tubs produced
1 110
2 200
3 270
4 300
5 320
6 330
7 300
Workers hired Quantity of ice cream tubs produced
1 110
2 200
3 270
4 300
5 320
6 330
7 300
answer
2nd
question
The following table shows a short-run production function for laptop computers. Use the data to determine where diminishing product begins.
Number of Workers Total output of laptop computers
0 0
1 50
2 120
3 200
4 260
5 310
6 325
7 320
8 310
Number of Workers Total output of laptop computers
0 0
1 50
2 120
3 200
4 260
5 310
6 325
7 320
8 310
answer
4
question
Diminishing marginal product refers to marginal product that initially _____ but eventually ______.
answer
increases; decreases
question
At 76 units of labor, a firm finds that average product of labor equals 36.6 and marginal product of labor equals 42.9. We can conclude that the average product is
answer
increasing
question
# of workers Bagels
0 0
1 5.000
2 15,000
3 30,000
4 42,000
5 51,000
6 57,000
7 60,000
8 50,000
9 47,000
Using the table above, the marginal product of the fifth worker is:
0 0
1 5.000
2 15,000
3 30,000
4 42,000
5 51,000
6 57,000
7 60,000
8 50,000
9 47,000
Using the table above, the marginal product of the fifth worker is:
answer
9,000
question
A farm can produce 1,000 bushels of wheat per year with 2 workers and 1,300 bushels of wheat per year with 3 workers. The marginal product of the third worker is
answer
300 bushels
question
# of workers Bagels
0 0
1 5.000
2 15,000
3 30,000
4 42,000
5 51,000
6 57,000
7 60,000
8 50,000
9 47,000
Using the table above diminishing returns begin with the addition of the _____ worker
0 0
1 5.000
2 15,000
3 30,000
4 42,000
5 51,000
6 57,000
7 60,000
8 50,000
9 47,000
Using the table above diminishing returns begin with the addition of the _____ worker
answer
4th
question
Marginal product, mathematically, is the slope of the:
answer
total product curve
question
When a total product curve is increasing at a decreasing rate, its corresponding marginal product curve is:
answer
falling
question
The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day.
Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700
If two workers are hired, the variable costs are
Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700
If two workers are hired, the variable costs are
answer
$150
question
The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day.
Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700
The fixed costs of production are
Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700
The fixed costs of production are
answer
$250
question
A pizza business has the cost structure described below. The firm's fixed costs are $20 per day.
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's marginal costs (MC) at an output of 35 pizzas?
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's marginal costs (MC) at an output of 35 pizzas?
answer
$4.00
question
A pizza business has the cost structure described below. The firm's fixed costs are $20 per day.
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's average fixed costs (AFC) at an output of 5 pizzas?
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's average fixed costs (AFC) at an output of 5 pizzas?
answer
$4
question
A pizza business has the cost structure described below. The firm's fixed costs are $20 per day.
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's average total costs (ATC) at an output of 10 pizzas?
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's average total costs (ATC) at an output of 10 pizzas?
answer
$12
question
A pizza business has the cost structure described below. The firm's fixed costs are $20 per day.
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's average variable costs (AVC) at an output of 25 pizzas?
Output (pizzas per day) Total cost of output (fixed + variable)
0 $20
5 $80
10 $120
15 $150
20 $175
25 $195
30 $210
35 $230
40 $255
What are the firm's average variable costs (AVC) at an output of 25 pizzas?
answer
$7.00
question
The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day.
Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700
The total costs when three workers are hired is
Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700
The total costs when three workers are hired is
answer
$475
question
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's accounting profit.
answer
$30,000
question
Which of the following does not represent an implicit cost for a business owner?
answer
a worker's salary
question
The table below lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production? Use Figure. Click to view graphic.
answer
$100
question
Which of the following types of cost always decreases with increasing output? Refer to the figure below.
answer
Average Fixed Cost (AFC)
question
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's implicit costs.
answer
$50,000
question
Use the following scenario to answer the questions that follow.
Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes.
Steve's average variable cost was __________ per bike.
Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes.
Steve's average variable cost was __________ per bike.
answer
$625
question
As a waiter you earn $60,000 per year, including tips. Someone offers you a new job as an economic consultant, which pays $100,000 per year. In order to be a consultant, you'll need to rent an office and purchase supplies and new computer equipment. We can conclude which of the following?
answer
If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.
question
Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:
answer
$53,000.
question
Lauren owns a bakery. Her total costs are $150,000 per year, and her variable costs are $85,000. This means that her fixed costs are:
answer
$65,000.
question
Audrey owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are:
answer
$345,000.
question
When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:
answer
marginal product.
question
The production function of a restaurant includes items such as labor (i.e., cooks, waiters, a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of __________ given a fixed amount of __________.
answer
labor; capital and land
question
In the short run, average total costs at first decrease and then increase as more output is produced because:
answer
marginal cost is at first less than average total costs, then rises above it.
question
The long-run average cost curve is tangent to an infinite number of:
answer
average total cost curves
question
The out-of-pocket expenses incurred in producing a good are also known as:
answer
explicit costs.
question
Using the above graph. Look at the figure Long-Run and Short-run average cost curves. If a firm faced the long run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:
answer
ATC 2
question
Total variable cost for 5 units of output is _____.
answer
$190
question
Using the cost graphs above, curve 1 crosses the average variable cost curve at:
answer
3 units of output
question
Using the curve above point B is the point
answer
that ATC is at its minimum
question
By looking at the full set of short-run cost curves for a firm, we can determine:
answer
the profit-maximizing level of output. (incorrect)
question
Which of the following are forms of labor?
answer
the natural ability of a worker
the skills a worker has acquired
the skills a worker has acquired
question
A production function describes how firms
answer
determine the profit-maximizing quantity of output (incorrect)
question
Marginal product refers to:
answer
The quantity of additional output produced when the firm adds additional workers to the production process.
question
An entrepreneur quits a job where she was paid $75,000 to set up her own business. The new firm had sales revenue of $300,000 last year, while spending $150,000 on compensation for employees, $25,000 on capital, and $25,000 on materials. What was the firm's economic profit?
answer
$25,000
question
When an owner uses resources they own in a business, that usage should be considered
answer
an implicit cost
question
________ includes all spending on labor, machinery, tools, and supplies purchased from other firms.
answer
Total costs
question
A firm's ________ consist of expenditures that must be made before production starts that typically, over the short run, ________ regardless of the level of production.
answer
fixed costs; do not change,
question
Economists distinguish between the short run and the long run as follows:
answer
In the long run, all resources are variable; in the short run, at least one resource is fixed.
question
Which of the following is an example of a long-run fixed cost:
answer
None of the above; there are no fixed costs in the long run
question
The term ________ describes a situation where as the quantity of output rises, but the average cost of production falls.
answer
economies of scale
question
Diseconomies of scale arise ________.
answer
in the long run
question
Which of the following statements are true about the activity of production?
answer
Production is the process by which a firm combines inputs to product outputs
In a successful production activity, outputs are more valuable than the inputs
In a successful production activity, outputs are more valuable than the inputs
question
All of the things used in the process of production are called:
answer
Factors of production
Inputs
Inputs
question
The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The average product at this point would be ________.
answer
increasing
question
Which of the following is most likely to be a fixed cost?
answer
Mortgage payments
question
The table below shows cost data for WipeOutSki Company, which manufactures skis for beginners. If the company's fixed costs are $30, what is the average total cost in B?
Quantity Variable Cost Fixed Cost Total Cost Average Variable Cost Average Total Cost Marginal Cost
0 0 $30
1 $10 $30
2 $25 $30 A
3 $45 $30 C
4 $70 $30
5 $100 $30 B
6 $135 $30
Quantity Variable Cost Fixed Cost Total Cost Average Variable Cost Average Total Cost Marginal Cost
0 0 $30
1 $10 $30
2 $25 $30 A
3 $45 $30 C
4 $70 $30
5 $100 $30 B
6 $135 $30
answer
$26.00
question
Economies of scale may arise from which of the following activities?
answer
Doubling promotional expenses to expand sales more than proportionally
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