question
unlike implicit costs, explicit costs:
a. reflect opportunity costs
b. include the value of the owner's time
c. are not included in the accounting statement of the firm
d. are actual cash payments
a. reflect opportunity costs
b. include the value of the owner's time
c. are not included in the accounting statement of the firm
d. are actual cash payments
answer
d. are actual cash payments
question
a young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What is the sum of his explicit costs?
a. $26,000
b. $66,000
c. $78,000
d. $52,000
a. $26,000
b. $66,000
c. $78,000
d. $52,000
answer
d. $52,000
question
sash payments to a steel mill for steel used in production would be an example of:
a. entrepreneurial costs
b. fixed costs
c. explicit costs
d. implicit costs
a. entrepreneurial costs
b. fixed costs
c. explicit costs
d. implicit costs
answer
c. explicit costs
question
Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for $5,000 per year. He rents a computer for $1,200, buys office supplies for $500, rents an airplane for $6,000, pays $1,300 for fuel and maintenance, and hires one worker for $30,000. Sam's total revenue from pilot training classes this year equaled $90,400. Sam's accounting profit this year equals:
a. $45,600
b. $51,400
c. $39,000
d. $44,800
a. $45,600
b. $51,400
c. $39,000
d. $44,800
answer
b. $51,400
question
Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?
a. The tax payments on property owned by the firm
b. The wages paid to the 12 employees
c. The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees
d. The accounting services provided free of charge to the firm by Paul's wife, who is an accountant
a. The tax payments on property owned by the firm
b. The wages paid to the 12 employees
c. The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees
d. The accounting services provided free of charge to the firm by Paul's wife, who is an accountant
answer
d. the accounting services provided free of charge to the firm by Paul's wife, who is an accountant
question
which of the following would be considered an implicit cost?
a. Health insurance of employees paid for by the firm
b. The water bill of the firm
c. The salaries paid to the managers of the firm
d. Foregone rent on assets owned by the firm
a. Health insurance of employees paid for by the firm
b. The water bill of the firm
c. The salaries paid to the managers of the firm
d. Foregone rent on assets owned by the firm
answer
d. foregone rent on assets owned by the firm
question
the opportunity costs associated with the use of resources owned by a firm are:
a. externalities
b. implicit costs
c. explicit costs
d. sunk costs
a. externalities
b. implicit costs
c. explicit costs
d. sunk costs
answer
b. implicit costs
question
monetary payments to nonowners of a firm are called:
a. implicit costs
b. accounting costs
c. explicit costs
d. economic costs
a. implicit costs
b. accounting costs
c. explicit costs
d. economic costs
answer
a. implicit costs
question
a firm's opportunity cost of using resources provided by the firm's owners is called:
a. sunk costs
b. fixed costs
c. explicit costs
d. implicit costs
a. sunk costs
b. fixed costs
c. explicit costs
d. implicit costs
answer
d. implicit costs
question
a young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000, for food and $2,000 for gas and electricity. What is the sum of his implicit costs?
a. $26,000
b. $66,000
c. $78,000
d. $52,000
a. $26,000
b. $66,000
c. $78,000
d. $52,000
answer
a. $26,000
question
two friends, Diane and Sam, own and run a bar. Diane tends bar on Monday, Wednesday, and Friday and receives a wage in addition to tips. Sam tends bar on Tuesday, Thursday, and Saturday and receives only tips. Which of the following represents an implicit cost of operating the bar?
a. Diane's wage
b. Sam's time
c. Diane's tips
d. Sam's tips
a. Diane's wage
b. Sam's time
c. Diane's tips
d. Sam's tips
answer
b. Sam's time
question
implicit costs are:
a. the opportunity costs of using resources owned by the entrepreneur in his/her own business
b. payments the business owner must make on borrowed funds
c. costs which vary as the level of output varies
d. those payments the business owner makes in cash
a. the opportunity costs of using resources owned by the entrepreneur in his/her own business
b. payments the business owner must make on borrowed funds
c. costs which vary as the level of output varies
d. those payments the business owner makes in cash
answer
a. the opportunity costs of using resources owned by the entrepreneur in his/her own business
question
economic profit is:
a. total revenues minus variable costs
b. total revenues minus implicit costs
c. total revenues minus explicit costs
d. total revenues minus explicit costs minus implicit costs
a. total revenues minus variable costs
b. total revenues minus implicit costs
c. total revenues minus explicit costs
d. total revenues minus explicit costs minus implicit costs
answer
d. total revenues minus explicit costs minus implicit costs
question
suppose that a small business takes in monthly revenue of $100,000. Labor, rental, energy, and other purchased input costs are $70,000. The owner/entrepreneur could earn $5,000 per month in another job, and the owner/entrepreneur could get a return of $5,000 each month if she sold her business and invested the net proceeds in a financial asset, such as a treasury bond. Which of the following correctly describes her monthly economic profit?
a. $90,000
b. $80,000
c. $25,000
d. $20,000
a. $90,000
b. $80,000
c. $25,000
d. $20,000
answer
d. $20,000
question
the difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's:
a. economic profit
b. accounting profit
c. opportunity cost of capital
d. long-run average total cost
a. economic profit
b. accounting profit
c. opportunity cost of capital
d. long-run average total cost
answer
a. economic profit
question
a firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10 percent interest rate per year. The firm's economic profit is:
a. $400 million
b. $100 million
c. $80 million
d. zero
a. $400 million
b. $100 million
c. $80 million
d. zero
answer
d. zero
question
when total revenue minus total cost is equal to zero, the firm is:
a. earning above-average economic profit
b. earning a normal profit
c. losing too much money to stay in business
d. earning abnormally low profits
a. earning above-average economic profit
b. earning a normal profit
c. losing too much money to stay in business
d. earning abnormally low profits
answer
b. earning a normal profit
question
variable inputs are defined as any resource that:
a. varies with the size of the firm's plant
b. cannot be changed as output changes
c. can be changed as output changes
d. can be increased or decreased hourly
a. varies with the size of the firm's plant
b. cannot be changed as output changes
c. can be changed as output changes
d. can be increased or decreased hourly
answer
c. can be changed as output changes
question
which of the following represents the key difference between the short run and the long run?
a. in the long run, the firm makes commitments to a certain type of production technology which are represented as fixed costs in the long run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the short run
b. in the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run
c. the short run refers to less than two years and the long run is over two years
d. in the short run, all costs are fixed but in the long run, capital costs are variable
a. in the long run, the firm makes commitments to a certain type of production technology which are represented as fixed costs in the long run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the short run
b. in the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run
c. the short run refers to less than two years and the long run is over two years
d. in the short run, all costs are fixed but in the long run, capital costs are variable
answer
b. in the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run
question
during the short-run period of the production process, a firm will be:
a. unable to vary any of its factors of production
b. able to vary some of its factors of production
c. able to vary all of its factors of production
d. able to vary the size of its plant
a. unable to vary any of its factors of production
b. able to vary some of its factors of production
c. able to vary all of its factors of production
d. able to vary the size of its plant
answer
b. able to vary some of its factors of production
question
the short run is a period of time:
a. in which a firm uses at least one fixed input
b. that is long enough to permit changes in the firm's plant size
c. in which production occurs within one year
d. in which production occurs within six months
a. in which a firm uses at least one fixed input
b. that is long enough to permit changes in the firm's plant size
c. in which production occurs within one year
d. in which production occurs within six months
answer
a. in which a firm uses at least one fixed input
question
during the course of a week, McDonald's has enough time to hire or layoff workers, but it does not have enough time to expand its kitchen or add an additional seating area. In this situation, McDonald's:
a. has no fixed costs
b. is in the short run
c. suffers an economic loss
d. earns a large profit
a. has no fixed costs
b. is in the short run
c. suffers an economic loss
d. earns a large profit
answer
b. is in the short run
question
which of the following factors of production is not variable in the long run?
a. the size of the firm's plant
b. property taxes on the assets of the firm
c. highly trained labor
d. all factors of production are variable in the long run
a. the size of the firm's plant
b. property taxes on the assets of the firm
c. highly trained labor
d. all factors of production are variable in the long run
answer
d. all factors of production are variable in the long run
question
the long run is a period of:
a. at least one year
b. sufficient length to allow a firm to expand output by hiring additional workers
c. sufficient length to allow a firm to alter its plant size and capacity and all other factors of production
d. sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers
a. at least one year
b. sufficient length to allow a firm to expand output by hiring additional workers
c. sufficient length to allow a firm to alter its plant size and capacity and all other factors of production
d. sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers
answer
c. sufficient length to allow a firm to alter its plant size and capacity and all other factors of production
question
the long run is a planning period:
a. during which the firm can vary all inputs including its plant size
b. less than six months
c. less than one year
d. less than five years
a. during which the firm can vary all inputs including its plant size
b. less than six months
c. less than one year
d. less than five years
answer
a. during which the firm can vary all inputs including its plant size
question
which of the following best describes a production function?
a. the relationship between consumer preferences and market demand
b. the relationship between the quantity of labor employed and total cost
c. the relationship between the maximum amounts of output a firm can produce and various quantities of inputs
d. the relationship between price and quantity supplied by sellers in a market
a. the relationship between consumer preferences and market demand
b. the relationship between the quantity of labor employed and total cost
c. the relationship between the maximum amounts of output a firm can produce and various quantities of inputs
d. the relationship between price and quantity supplied by sellers in a market
answer
c. the relationship between the maximum amounts of output a firm can produce and various quantities of inputs
question
if two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is:
a. 8 units
b. 10 units
c. 22 units
d. 30 units
a. 8 units
b. 10 units
c. 22 units
d. 30 units
answer
a. 8 units
question
a farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:
a. 6,000 bushels per acre per year
b. 5,000 bushels per acre per year
c. 1,000 bushels per acre per year
d. 11,000 bushels per acre per year
a. 6,000 bushels per acre per year
b. 5,000 bushels per acre per year
c. 1,000 bushels per acre per year
d. 11,000 bushels per acre per year
answer
c. 1,000 bushels per acre per year
question
suppose when a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day. When it adds a third station, but no more workers, it is able to wash 150 cars per day. The marginal product of the third washing station is:
a. 100 cars per day
b. 150 cars per day
c. 5 cars per day
d. 50 cars per day
a. 100 cars per day
b. 150 cars per day
c. 5 cars per day
d. 50 cars per day
answer
d. 50 cars per day
question
marginal product measures the change in:
a. total cost brought about by changing production by one unit
b. product price brought about by changing production by one unit
c. a firm's revenue brought about by changing production by one unit
d. the firm's output brought about by employing one additional unit of input
a. total cost brought about by changing production by one unit
b. product price brought about by changing production by one unit
c. a firm's revenue brought about by changing production by one unit
d. the firm's output brought about by employing one additional unit of input
answer
d. the firm's output brought about by employing one additional unit of input
question
which of the following is an implication of the law of diminishing returns?
a. total output will decline as more workers are hired
b. in the long run, average total cost will eventually decline as output is expanded
c. in the short run, expansion of output will eventually lead to increases in marginal cost and average total cost
d. a doubling of all inputs will lead to more than a doubling of output
a. total output will decline as more workers are hired
b. in the long run, average total cost will eventually decline as output is expanded
c. in the short run, expansion of output will eventually lead to increases in marginal cost and average total cost
d. a doubling of all inputs will lead to more than a doubling of output
answer
c. in the short run, expansion of output will eventually lead to increases in marginal cost and average total cost
question
Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?
a. the law of diminishing marginal utility
b. the law of diminishing returns
c. return equalization principle
d. the principal-agent problem
a. the law of diminishing marginal utility
b. the law of diminishing returns
c. return equalization principle
d. the principal-agent problem
answer
b. the law of diminishing returns
question
the law of diminishing marginal returns implies that, in the short run:
a. output must fall beyond a certain point
b. price must fall beyond a certain point
c. the marginal product of the variable input must eventually decrease
d. wages of workers must eventually increase
a. output must fall beyond a certain point
b. price must fall beyond a certain point
c. the marginal product of the variable input must eventually decrease
d. wages of workers must eventually increase
answer
c. the marginal product of the variable input must eventually decrease
question
for the law of diminishing returns to be present, we must have:
a. at least one factor of production to be fixed
b. output decreasing as more laborers are hired
c. the price of labor increasing as more workers are hired
d. simultaneous changes in labor and capital
a. at least one factor of production to be fixed
b. output decreasing as more laborers are hired
c. the price of labor increasing as more workers are hired
d. simultaneous changes in labor and capital
answer
a. at least one factor of production to be fixed
question
as a fishing firm hires its first, second, and third workers, it could find that marginal product actually rises. The reason for this is:
a. diminishing returns have set in
b. the division of labor creates greater productivity
c. less qualified workers are becoming available
d. all workers perform identical tasks
a. diminishing returns have set in
b. the division of labor creates greater productivity
c. less qualified workers are becoming available
d. all workers perform identical tasks
answer
b. the division of labor creates greater productivity
question
which of the following best describes total fixed cost?
a. costs that do not vary as output varies
b. total cost divided by the quantity of output produced
c. total variable cost divided by the quantity of output produced
d. total fixed cost divided by the quantity of output produced
a. costs that do not vary as output varies
b. total cost divided by the quantity of output produced
c. total variable cost divided by the quantity of output produced
d. total fixed cost divided by the quantity of output produced
answer
a. costs that do not vary as output varies
question
which of the following is true about average fixed cost?
a. average fixed cost has a U-shape, and marginal cost crosses average fixed cost at its minimum point
b. average fixed cost does not vary as output increases
c. average fixed cost is the difference between marginal cost and average total cost
d. average fixed cost is total fixed cost divided by the quantity of output produced, and it declines steadily as output increases
a. average fixed cost has a U-shape, and marginal cost crosses average fixed cost at its minimum point
b. average fixed cost does not vary as output increases
c. average fixed cost is the difference between marginal cost and average total cost
d. average fixed cost is total fixed cost divided by the quantity of output produced, and it declines steadily as output increases
answer
d. average fixed cost is total fixed cost divided by the quantity of output produced, and it declines steadily as output increases
question
which of the following is most likely to be a fixed cost for a business?
a. expenditures on low-skill labor
b. shipping charges for the delivery of products
c. materials costs
d. property taxes on the firm's buildings
a. expenditures on low-skill labor
b. shipping charges for the delivery of products
c. materials costs
d. property taxes on the firm's buildings
answer
d. property taxes on the firm's buildings
question
in the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be:
a. $25
b. $2,500
c. $5,000
d. $7,500
a. $25
b. $2,500
c. $5,000
d. $7,500
answer
b. $2,500
question
the total fixed cost remains constant as which of the following varies?
a. cost of resources
b. time
c. output in a given period of time
d. profit
a. cost of resources
b. time
c. output in a given period of time
d. profit
answer
c. output in a given period of time
question
the total fixed cost curve:
a. varies with the quantity of inputs used
b. decreases with output
c. increases with output
d. remains constant regardless of output
a. varies with the quantity of inputs used
b. decreases with output
c. increases with output
d. remains constant regardless of output
answer
d. remains constant regardless of output
question
Bill is an accountant for a small machine shop. His boss has asked him to calculate the shop's total fixed cost. Which method will get Bill the correct answer?
a. subtracting total variable costs from total revenue
b. calculating the product of average total cost and quantity
c. subtracting the average variable cost from the total cost
d. subtracting the total variable cost from the total cost
a. subtracting total variable costs from total revenue
b. calculating the product of average total cost and quantity
c. subtracting the average variable cost from the total cost
d. subtracting the total variable cost from the total cost
answer
d. subtracting the total variable cost from the total cost
question
which of the following statements is true?
a. TC = TFC − TVC
b. AVC = TC / Q
c. TFC = TC − TVC
d. MC equals the change in ATC divided by the change in Q
a. TC = TFC − TVC
b. AVC = TC / Q
c. TFC = TC − TVC
d. MC equals the change in ATC divided by the change in Q
answer
c. TFC = TC − TVC
question
which of the following is an example of a fixed cost for a fishing company?
a. the cost of hiring a fishing crew
b. the fuel costs of running the boat
c. the monthly loan payment on the boat
d. the supply of nets, hooks, and fishing lines
a. the cost of hiring a fishing crew
b. the fuel costs of running the boat
c. the monthly loan payment on the boat
d. the supply of nets, hooks, and fishing lines
answer
c. the monthly loan payment on the boat
question
if average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be:
a. $40
b. $60
c. $6,000
d. $8,000
a. $40
b. $60
c. $6,000
d. $8,000
answer
c. $6,000
question
which of the following is true if the total variable cost curve is increasing at an increasing rate?
a. average fixed cost is increasing
b. marginal cost is decreasing
c. marginal cost is increasing
d. average fixed cost is constant
a. average fixed cost is increasing
b. marginal cost is decreasing
c. marginal cost is increasing
d. average fixed cost is constant
answer
c. marginal cost is increasing
question
Barbara owns a small shop where dresses are made. At the end of a given month, she has 250 dresses. Her expenses for the month are $1,000 for rent, $6,000 for wages, $1,500 for fabric and thread, and $500 for electricity. Her total variable costs for the month are:
a. $8,000
b. $4,000
c. $32 per dress
d. $7,500
a. $8,000
b. $4,000
c. $32 per dress
d. $7,500
answer
a. $8,000
question
which statement about the total variable cost curve is true?
a. it begins at the origin and increases before decreasing again
b. the total variable cost curve is the same at all levels of output
c. the total variable cost curve is increasing but at a decreasing rate
d. it begins at the origin and is always increasing
a. it begins at the origin and increases before decreasing again
b. the total variable cost curve is the same at all levels of output
c. the total variable cost curve is increasing but at a decreasing rate
d. it begins at the origin and is always increasing
answer
d. it begins at the origin and is always increasing
question
suppose a publisher faces the following costs of producing 10,000 newspapers each month: $5,500 cost of labor; $2,200 monthly mortgage payment; $250 cost of electricity to run the printing presses; $800 for ink and paper; and $200 in city property taxes (based on the value of the building and land). Its total variable costs are:
a. $8,950
b. $8,750
c. $6,550
d. $6,300
a. $8,950
b. $8,750
c. $6,550
d. $6,300
answer
c. $6,550
question
when costs that vary with the level of output are divided by the output, you have calculated:
a. total changing cost
b. total fixed cost
c. average fixed cost
d. average variable cost
a. total changing cost
b. total fixed cost
c. average fixed cost
d. average variable cost
answer
d. average variable cost
question
if fixed cost is $200,000 and variable cost is $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be:
a. $20
b. $30
c. $50
d. $70
a. $20
b. $30
c. $50
d. $70
answer
c. $50
question
what is the shape of the average total cost curve for a firm in the short run?
a. u-shaped
b. a horizontal line
c. a vertical line
d. a curve that slopes upward to the right
a. u-shaped
b. a horizontal line
c. a vertical line
d. a curve that slopes upward to the right
answer
a. u-shaped
question
the change in total cost that results from the production of one additional unit is called:
a. marginal revenue
b. average variable cost
c. marginal cost
d. average total cost
a. marginal revenue
b. average variable cost
c. marginal cost
d. average total cost
answer
c. marginal cost
question
suppose the fixed cost of building a nuclear power plant is $1 billion. Suppose also that the only variable cost is the labor of Homer Simpson, and he earns $10 per hour. If the plant generates 1,000 kilowatts each hour, and has already generated 1 billion kilowatts, what can you say about the marginal cost of the next kilowatt?
a. the marginal cost is falling
b. the marginal cost is equal to $.01
c. the marginal cost is equal to $1.01
d. the marginal cost is rising
a. the marginal cost is falling
b. the marginal cost is equal to $.01
c. the marginal cost is equal to $1.01
d. the marginal cost is rising
answer
b. the marginal cost is equal to $.01
question
American Airlines makes numerous nonstop flights from Chicago's O'Hare Airport to the airport at Dallas-Fort Worth. The distance between those two cities is 1,000 miles. The only variable cost, fuel, costs $.06 for each passenger-mile it flies. Bob, on his way to an emergency business meeting, buys a ticket in coach class for $1,300 at the very last minute. The marginal cost of flying Bob from Chicago to Dallas-Fort Worth is:
a. $60
b. $160
c. $600
d. $1,300
a. $60
b. $160
c. $600
d. $1,300
answer
a. $60
question
a bus is mostly filled with passengers and ready to travel from Los Angeles to San Francisco. At the last minute, a person comes running up to the bus and takes a seat. The change in the bus company's total cost as a result of transporting one more passenger on this trip is called:
a. marginal cost
b. average total cost
c. variable cost
d. fixed cost
a. marginal cost
b. average total cost
c. variable cost
d. fixed cost
answer
a. marginal cost
question
the mirror image of the marginal cost curve is the
a. average fixed cost curve
b. marginal product curve
c. total variable cost curve
d. average total cost curve
a. average fixed cost curve
b. marginal product curve
c. total variable cost curve
d. average total cost curve
answer
b. marginal product curve
question
when the marginal cost is higher than the average total cost,
a. the average fixed cost must exceed the average variable cost
b. the average variable cost must also be higher than the average total cost
c. the higher additional value causes the average to rise
d. the higher additional value causes the average to fall
a. the average fixed cost must exceed the average variable cost
b. the average variable cost must also be higher than the average total cost
c. the higher additional value causes the average to rise
d. the higher additional value causes the average to fall
answer
c. the higher additional value causes the average to rise
question
the marginal cost intersects the average variable cost
a. and the average total cost through their upward-sloping sections
b. in its upward-sloping section and the average total cost through its downward-sloping section
c. through its minimum point and the average total cost through its maximum point
d. and the average total cost through their minimum points
a. and the average total cost through their upward-sloping sections
b. in its upward-sloping section and the average total cost through its downward-sloping section
c. through its minimum point and the average total cost through its maximum point
d. and the average total cost through their minimum points
answer
d. and the average total cost through their minimum points
question
if the marginal cost of the 10th unit of output is $15 and the average total cost of the 10th unit of output is $15,
a. average total cost is minimized at 10 units of output
b. average total cost is decreasing at 10 units of output
c. average total cost is increasing at 10 units of output
d. average total cost is maximized at 10 units of output
a. average total cost is minimized at 10 units of output
b. average total cost is decreasing at 10 units of output
c. average total cost is increasing at 10 units of output
d. average total cost is maximized at 10 units of output
answer
a. average total cost is minimized at 10 units of output
question
suppose the marginal product is maximized when the 10th worker is hired. Then the marginal cost value is minimized when
a. 10 workers are hired
b. more than 10 workers are hired
c. fewer than 10 workers are hired
d. an unknown number of workers are hired. Marginal cost is independent of marginal product
a. 10 workers are hired
b. more than 10 workers are hired
c. fewer than 10 workers are hired
d. an unknown number of workers are hired. Marginal cost is independent of marginal product
answer
a. 10 workers are hired
question
if total cost is $1,000 when output is zero, and total cost is $1,200 when output is one, and total cost is $1,500 when output is two, then which of the following is true?
a. total fixed cost is $1,500
b. the marginal cost of producing the first unit of output is $1,200
c. the marginal cost of producing the second unit of output is $300
d. the average fixed cost is $750 when two units of output are produced
a. total fixed cost is $1,500
b. the marginal cost of producing the first unit of output is $1,200
c. the marginal cost of producing the second unit of output is $300
d. the average fixed cost is $750 when two units of output are produced
answer
c. the marginal cost of producing the second unit of output is $300
question
assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be:
a. greater than the average variable cost
b. less than the average variable cost
c. equal to the average variable cost
d. at its minimum
a. greater than the average variable cost
b. less than the average variable cost
c. equal to the average variable cost
d. at its minimum
answer
c. equal to the average variable cost
question
which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?
a. as more of the variable factor is used, the higher the price of that factor
b. when diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output
c. as the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs
d. as the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs
a. as more of the variable factor is used, the higher the price of that factor
b. when diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output
c. as the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs
d. as the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs
answer
b. when diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output
question
the minimum point on the marginal cost curve corresponds to the:
a. maximum point on the total cost curve
b. minimum point on the total cost curve
c. inflection point on the total variable cost curve
d. midpoint of the total cost curve
a. maximum point on the total cost curve
b. minimum point on the total cost curve
c. inflection point on the total variable cost curve
d. midpoint of the total cost curve
answer
c. inflection point on the total variable cost curve
question
both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the average variable cost curve, the marginal cost must be:
a. greater than the average variable cost
b. less than the average variable cost
c. equal to the average variable cost
d. at its minimum
a. greater than the average variable cost
b. less than the average variable cost
c. equal to the average variable cost
d. at its minimum
answer
c. equal to the average variable cost
question
which of the following is true at the point where diminishing returns set in?
a. both marginal product and marginal cost are at a maximum
b. both marginal product and marginal cost are at a minimum
c. marginal product is at a maximum and marginal cost is at a minimum
d. marginal product is at a minimum and marginal cost is at a maximum
a. both marginal product and marginal cost are at a maximum
b. both marginal product and marginal cost are at a minimum
c. marginal product is at a maximum and marginal cost is at a minimum
d. marginal product is at a minimum and marginal cost is at a maximum
answer
c. marginal product is at a maximum and marginal cost is at a minimum
question
when the cost curves have U-shapes, at the point where marginal cost equals average total cost:
a. the fixed cost has been fully depreciated
b. average fixed cost is rising
c. average total cost is at its minimum
d. average variable cost is falling
a. the fixed cost has been fully depreciated
b. average fixed cost is rising
c. average total cost is at its minimum
d. average variable cost is falling
answer
c. average total cost is at its minimum
question
if the marginal cost of the 100th unit is $3.25, the total cost of producing 100 units is $825, and the fixed cost is $500,
a. average variable cost is higher than marginal cost
b. marginal cost is falling
c. average variable cost is at its minimum
d. average total cost is increasing
a. average variable cost is higher than marginal cost
b. marginal cost is falling
c. average variable cost is at its minimum
d. average total cost is increasing
answer
c. average variable cost is at its minimum
question
if the marginal cost of the 5,000th unit is $0.06 and the average total cost of the 5,000th unit is $0.10:
a. total cost is falling
b. average variable cost is falling
c. average total cost is falling
d. average fixed cost is rising
a. total cost is falling
b. average variable cost is falling
c. average total cost is falling
d. average fixed cost is rising
answer
c. average total cost is falling
question
a firm estimates that when output is 10, its total costs are $900. It also finds that when output is 11, its total costs are $920. The marginal cost of the eleventh unit of output is:
a. $20 and the minimum point of the average total cost occurs at an output level less than 11
b. $20 and the minimum point of the average total cost occurs at an output level greater than 11
c. $90 and the average total cost is minimized
d. $90 and the minimum point of the average total cost occurs at an output level greater than 11
a. $20 and the minimum point of the average total cost occurs at an output level less than 11
b. $20 and the minimum point of the average total cost occurs at an output level greater than 11
c. $90 and the average total cost is minimized
d. $90 and the minimum point of the average total cost occurs at an output level greater than 11
answer
b. $20 and the minimum point of the average total cost occurs at an output level greater than 11
question
which of the following must be true if average total cost is rising?
a. average fixed cost must be rising
b. total fixed cost must be rising
c. average variable cost must be falling
d. marginal cost must be greater than average total cost
a. average fixed cost must be rising
b. total fixed cost must be rising
c. average variable cost must be falling
d. marginal cost must be greater than average total cost
answer
d. marginal cost must be greater than average total cost
question
which of the following statements is true?
a. when marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls
b. the marginal product is the output per unit of a variable input
c. average variable cost and average fixed cost are U-shaped curves
d. when marginal productivity of a variable input is falling then marginal costs of production must be rising
a. when marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls
b. the marginal product is the output per unit of a variable input
c. average variable cost and average fixed cost are U-shaped curves
d. when marginal productivity of a variable input is falling then marginal costs of production must be rising
answer
d. when marginal productivity of a variable input is falling then marginal costs of production must be rising
question
which of the following is true at the point where diminishing returns set in?
a. both marginal product and marginal cost are at a maximum
b. both marginal product and marginal cost are at a minimum
c. marginal product is at a maximum and marginal cost at a minimum
d. marginal product is at a minimum and marginal cost at a maximum
a. both marginal product and marginal cost are at a maximum
b. both marginal product and marginal cost are at a minimum
c. marginal product is at a maximum and marginal cost at a minimum
d. marginal product is at a minimum and marginal cost at a maximum
answer
c. marginal product is at a maximum and marginal cost at a minimum
question
suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?
a. average total cost is declining
b. average total cost is constant
c. average total cost is rising
d. average total cost is less than average fixed cost
a. average total cost is declining
b. average total cost is constant
c. average total cost is rising
d. average total cost is less than average fixed cost
answer
a. average total cost is declining
question
for a typical firm, the long-run average total cost curve:
a. is lower than the short-run average total cost curves
b. is tangent to each possible short-run average total cost curve at one point
c. intersects each possible short-run average total cost curve at two points
d. passes through the minimum points of all possible short-run average variable cost curves
a. is lower than the short-run average total cost curves
b. is tangent to each possible short-run average total cost curve at one point
c. intersects each possible short-run average total cost curve at two points
d. passes through the minimum points of all possible short-run average variable cost curves
answer
b. is tangent to each possible short-run average total cost curve at one point
question
when the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:
a. economies of scale
b. diseconomies of scale
c. constant returns to scale
d. diminishing returns
a. economies of scale
b. diseconomies of scale
c. constant returns to scale
d. diminishing returns
answer
c. constant returns to scale
question
if the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:
a. the firm should try to produce less output
b. total fixed costs are constant along the LRAC curve
c. there are economies of scale
d. when output is doubled, total costs are doubled
a. the firm should try to produce less output
b. total fixed costs are constant along the LRAC curve
c. there are economies of scale
d. when output is doubled, total costs are doubled
answer
c. there are economies of scale
question
a downward-sloping portion of a long-run average total cost curve is the result of:
a. economies of scale
b. diseconomies of scale
c. diminishing returns
d. the existence of fixed resources
a. economies of scale
b. diseconomies of scale
c. diminishing returns
d. the existence of fixed resources
answer
a. economies of scale
question
in the long run, firms in many industries often experience a falling average total cost curve as a result of:
a. gains through trade
b. increasing marginal returns
c. economies of scale
d. lower fixed costs
a. gains through trade
b. increasing marginal returns
c. economies of scale
d. lower fixed costs
answer
c. economies of scale
question
a large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:
a. diseconomies of scale
b. economies of scale
c. diminishing returns to a fixed factor of production
d. the principal agent problem is generally less severe for larger firms
a. diseconomies of scale
b. economies of scale
c. diminishing returns to a fixed factor of production
d. the principal agent problem is generally less severe for larger firms
answer
b. economies of scale
question
if the total cost of producing 10 jets is $28 million and the total cost of producing 11 jets is $30 million, this firm is experiencing
a. economies of scale in the range of 10 to 11 jets
b. constant returns to scale in the range of 10 to 11 jets
c. diseconomies of scale in the range of 10 to 11 jets
d. increasing average variable costs in the range of 10 to 11 jets
a. economies of scale in the range of 10 to 11 jets
b. constant returns to scale in the range of 10 to 11 jets
c. diseconomies of scale in the range of 10 to 11 jets
d. increasing average variable costs in the range of 10 to 11 jets
answer
a. economies of scale in the range of 10 to 11 jets
question
if the long-run average cost of producing 50 units of Good X is $3.00 and the long run average cost of producing 51 units of Good X is $3.25, the firm is
a. experiencing economies of scale in the range of 50 to 51
b. experiencing constant returns to scale in the range of 50 to 51
c. experiencing diseconomies of scale in the range of 50 to 51
d. operating at the minimum efficient scale
a. experiencing economies of scale in the range of 50 to 51
b. experiencing constant returns to scale in the range of 50 to 51
c. experiencing diseconomies of scale in the range of 50 to 51
d. operating at the minimum efficient scale
answer
c. experiencing diseconomies of scale in the range of 50 to 51
question
economies of scale are created by greater efficiency of capital and by:
a. longer chains of command in management
b. better wages for labor
c. smaller plant sizes
d. increased specialization of labor
a. longer chains of command in management
b. better wages for labor
c. smaller plant sizes
d. increased specialization of labor
answer
d. increased specialization of labor
question
economies of scale imply that within some range one can increase the size of operation and:
a. total cost will decrease
b. fixed cost will decrease
c. average total cost will decrease
d. average total cost will increase
a. total cost will decrease
b. fixed cost will decrease
c. average total cost will decrease
d. average total cost will increase
answer
c. average total cost will decrease
question
the decreasing portion of a firm's long run average cost curve is attributable to:
a. diminishing returns to scale
b. increasing marginal cost
c. economies of scale
d. diseconomies of scale
a. diminishing returns to scale
b. increasing marginal cost
c. economies of scale
d. diseconomies of scale
answer
c. economies of scale
question
economies of scale can be caused by all of the following except:
a. price discounts for large scale purchases
b. labor specialization
c. use of more productive equipment
d. increases in the firm's average total cost
a. price discounts for large scale purchases
b. labor specialization
c. use of more productive equipment
d. increases in the firm's average total cost
answer
d. increases in the firm's average total cost
question
a car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to:
a. diseconomies of scale
b. economies of scale
c. diminishing returns
d. greater use of large-volume purchases
a. diseconomies of scale
b. economies of scale
c. diminishing returns
d. greater use of large-volume purchases
answer
a. diseconomies of scale
question
diseconomies of scale exist over the range of output for which the long-run average cost curve is:
a. constant
b. falling
c. rising
d. subject to diminishing returns
a. constant
b. falling
c. rising
d. subject to diminishing returns
answer
c. rising
question
if a firm enlarges its factory size and realizes higher average costs of production then:
a. it has experienced economies of scale
b. it has experienced diseconomies of scale
c. it has experienced constant returns to scale
d. the long-run average cost curve slopes downward
a. it has experienced economies of scale
b. it has experienced diseconomies of scale
c. it has experienced constant returns to scale
d. the long-run average cost curve slopes downward
answer
b. it has experienced diseconomies of scale
question
diseconomies of scale exist for all of the following reasons except:
a. bureaucratic inefficiencies
b. management problems
c. failures in information flows
d. firm size is too small
a. bureaucratic inefficiencies
b. management problems
c. failures in information flows
d. firm size is too small
answer
d. firm size is too small
question
constant returns to scale cause the long-run average cost curve to be:
a. horizontal
b. vertical
c. upward-sloping
d. downward-sloping
a. horizontal
b. vertical
c. upward-sloping
d. downward-sloping
answer
a. horizontal
question
since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys their goods in large quantities and therefore at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices and free parking. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that:
a. consumers are boycotting local retailers
b. Wal-Mart engages in illegal acts of monopolization
c. there are diseconomies of scale in retail sales
d. there are economies of scale in retail sales
e. Wal-Mart is managed by ruthless business people
a. consumers are boycotting local retailers
b. Wal-Mart engages in illegal acts of monopolization
c. there are diseconomies of scale in retail sales
d. there are economies of scale in retail sales
e. Wal-Mart is managed by ruthless business people
answer
d. there are economies of scale in retail sales
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
