Chapter 9 Concepts: Quiz #7 - Assignment Essays

question

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

The marginal product of the fourth worker is

answer

24 units of output.

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The law of diminishing returns describes the

answer

relationship between resource inputs and product outputs in the short run.

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Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

answer

The firm may earn positive accounting profits but will face economic losses.

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Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

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$500,000 and an economic profit of $200,000.

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The basic characteristic of the short run is that

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the firm does not have sufficient time to change the size of its plant.

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The question is based on the following table, which provides information on the production of a product that requires one variable input.

Marginal product is largest for the

answer

second unit of variable input.

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Which statement is correct?

answer

The marginal cost curve cuts the average variable cost curve at its lowest point.

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If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there

answer

are constant returns to scale.

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Refer to the diagram. At output level Q, total cost is

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0BEQ + BCDE.

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Which of the following is a typical example of a fixed cost of production in a manufacturing firm?

answer

depreciation of capital

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When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

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the loss of economies of scale.

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Refer to the cost data provided. How much is the firm's total fixed costs?

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$400

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Refer to the diagram. Minimum efficient scale

answer

is achieved at Q1.

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A natural monopoly is characterized by

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a decreasing average-cost curve extending beyond the market's size.

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If you operated a small bakery, which of the following would be a variable cost in the short run?

answer

baking supplies (flour, salt, etc.)

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Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The economic profits of Harvey's firm in the first year were

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$160,000.

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Which of the following is most likely to be a fixed cost?

answer

property insurance premiums

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The following schedule gives the cost data for a firm.

Diseconomies of scale start between

answer

40 and 50 units of output.

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Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars. For which graph is the output level Q0 at minimum efficient scale?

answer

graph A

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Economic costs are equal to

answer

the sum of all explicit costs and implicit costs.

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If you owned a small farm, which of the following would most likely be a fixed cost?

answer

hail insurance

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Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $12/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be

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less than $12/unit.

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In comparing the changes in TC and TVC associated with an additional unit of output, we find that

answer

both TC and TVC changes are equal to MC.

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Economic cost can best be defined as

answer

a payment that must be made to obtain and retain the services of a resource.

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Variable costs are

answer

costs that change with the level of production

question

Assume that the only variable resource used to produce output is labor.

Refer to the provided table. When the firm hires four units of labor, the average product of labor is

answer

7.50 units of output.

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Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.

The total cost of producing 4 units of output is

answer

$124.

question

Use the following data to answer the question.

When five units of labor are hired, the marginal product (MP) of the last worker is

answer

10.

question

Assume that the only variable resource used to produce output is labor.

Refer to the provided table. With diminishing marginal returns, if the firm hires seven units of labor, which of the following numbers would most probably be the total product?

answer

question

At the point where diminishing marginal returns of an input sets in, the

answer

marginal product starts to decrease.

question

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

answer

as more variable inputs are hired, the amount of the fixed input per unit of variable input decreases.

question

Diseconomies of scale arise primarily because

answer

of the difficulties involved in managing and coordinating a large business enterprise.

question

Which of the following is correct as it relates to cost curves?

answer

Marginal cost intersects average total cost at the latter's minimum point.

question

When a firm is experiencing economies of scale,

answer

long-run average (per-unit) total cost is decreasing.

question

Marginal product of labor refers to the

answer

increase in output resulting from employing one more unit of labor.

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If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

answer

10 percent

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Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

answer

a switch in production to a redesigned and retooled facility

question

Refer to the provided graph. If the firm is producing at Q1, the area BADE represents

answer

total fixed costs.

question

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

Average product is at a maximum when

answer

two worker(s) is/are hired.

question

(Last Word) The development of additive manufacturing technology (3-D printers) is expected to lower prices by doing which of the following?

answer

reducing both large fixed set-up costs and transportation costs

question

The following is cost information for the Creamy Crisp Donut Company.

Entrepreneur's potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Creamy Crisp's explicit costs are

answer

$150,000.

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The vertical distance between the TC curve and TVC curve is equal to

answer

TFC.

question

When total product is increasing at an increasing rate, marginal product is

answer

positive and increasing.

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Refer to the provided graph showing the marginal product (MPL) and the average product of labor (APL). At which quantity of labor employed is total product maximized?

answer

question

Which of the following holds true?

answer

When AP is rising, AVC is falling, and when AP is falling, AVC is rising.

question

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question.

The average fixed cost of 3 units of output is

answer

$13.33.

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When producing 8 units of output, average fixed cost is $12.50 and average variable cost is $81.25. Total cost at this output level is

answer

$750.

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Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

use of savings to pay operating expenses instead of generating interest income

question

Other things equal, if the wage rates paid to a firm's labor inputs were to rise, we would expect the

answer

AVC, ATC, and MC curves all to rise.

question

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

answer

AP continues to rise so long as TP is rising.

1 of 50

question

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

The marginal product of the fourth worker is

answer

24 units of output.

question

The law of diminishing returns describes the

answer

relationship between resource inputs and product outputs in the short run.

question

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

answer

The firm may earn positive accounting profits but will face economic losses.

question

answer

$500,000 and an economic profit of $200,000.

question

The basic characteristic of the short run is that

answer

the firm does not have sufficient time to change the size of its plant.

question

The question is based on the following table, which provides information on the production of a product that requires one variable input.

Marginal product is largest for the

answer

second unit of variable input.

question

Which statement is correct?

answer

The marginal cost curve cuts the average variable cost curve at its lowest point.

question

If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there

answer

are constant returns to scale.

question

Refer to the diagram. At output level Q, total cost is

answer

0BEQ + BCDE.

question

Which of the following is a typical example of a fixed cost of production in a manufacturing firm?

answer

depreciation of capital

question

answer

the loss of economies of scale.

question

Refer to the cost data provided. How much is the firm's total fixed costs?

answer

$400

question

Refer to the diagram. Minimum efficient scale

answer

is achieved at Q1.

question

A natural monopoly is characterized by

answer

a decreasing average-cost curve extending beyond the market's size.

question

If you operated a small bakery, which of the following would be a variable cost in the short run?

answer

baking supplies (flour, salt, etc.)

question

answer

$160,000.

question

Which of the following is most likely to be a fixed cost?

answer

property insurance premiums

question

The following schedule gives the cost data for a firm.

Diseconomies of scale start between

answer

40 and 50 units of output.

question

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars. For which graph is the output level Q0 at minimum efficient scale?

answer

graph A

question

Economic costs are equal to

answer

the sum of all explicit costs and implicit costs.

question

If you owned a small farm, which of the following would most likely be a fixed cost?

answer

hail insurance

question

answer

less than $12/unit.

question

In comparing the changes in TC and TVC associated with an additional unit of output, we find that

answer

both TC and TVC changes are equal to MC.

question

Economic cost can best be defined as

answer

a payment that must be made to obtain and retain the services of a resource.

question

Variable costs are

answer

costs that change with the level of production

question

Assume that the only variable resource used to produce output is labor.

Refer to the provided table. When the firm hires four units of labor, the average product of labor is

answer

7.50 units of output.

question

answer

$124.

question

Use the following data to answer the question.

When five units of labor are hired, the marginal product (MP) of the last worker is

answer

10.

question

answer

question

At the point where diminishing marginal returns of an input sets in, the

answer

marginal product starts to decrease.

question

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

answer

as more variable inputs are hired, the amount of the fixed input per unit of variable input decreases.

question

Diseconomies of scale arise primarily because

answer

of the difficulties involved in managing and coordinating a large business enterprise.

question

Which of the following is correct as it relates to cost curves?

answer

Marginal cost intersects average total cost at the latter's minimum point.

question

When a firm is experiencing economies of scale,

answer

long-run average (per-unit) total cost is decreasing.

question

Marginal product of labor refers to the

answer

increase in output resulting from employing one more unit of labor.

question

answer

10 percent

question

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

answer

a switch in production to a redesigned and retooled facility

question

Refer to the provided graph. If the firm is producing at Q1, the area BADE represents

answer

total fixed costs.

question

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

Average product is at a maximum when

answer

two worker(s) is/are hired.

question

(Last Word) The development of additive manufacturing technology (3-D printers) is expected to lower prices by doing which of the following?

answer

reducing both large fixed set-up costs and transportation costs

question

answer

$150,000.

question

The vertical distance between the TC curve and TVC curve is equal to

answer

TFC.

question

When total product is increasing at an increasing rate, marginal product is

answer

positive and increasing.

question

Refer to the provided graph showing the marginal product (MPL) and the average product of labor (APL). At which quantity of labor employed is total product maximized?

answer

question

Which of the following holds true?

answer

When AP is rising, AVC is falling, and when AP is falling, AVC is rising.

question

answer

$13.33.

question

When producing 8 units of output, average fixed cost is $12.50 and average variable cost is $81.25. Total cost at this output level is

answer

$750.

question

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

use of savings to pay operating expenses instead of generating interest income

question

Other things equal, if the wage rates paid to a firm's labor inputs were to rise, we would expect the

answer

AVC, ATC, and MC curves all to rise.

question

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

answer

AP continues to rise so long as TP is rising.

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