question
In the above diagram curves 1, 2, and 3 represent the:
average, marginal, and total product curves respectively.
marginal, average, and total product curves respectively.
total, average, and marginal product curves respectively.
total, marginal, and average product curves respectively.
average, marginal, and total product curves respectively.
marginal, average, and total product curves respectively.
total, average, and marginal product curves respectively.
total, marginal, and average product curves respectively.
answer
marginal, average, and total product curves respectively.
question
In the above diagram the range of diminishing marginal returns is:
0Q3.
0Q2.
Q1Q2.
Q1Q3.
0Q3.
0Q2.
Q1Q2.
Q1Q3.
answer
Q1Q3.
question
Refer to the above data. Diminishing marginal returns become evident with the addition of the:
sixth worker.
fourth worker.
third worker.
second worker.
sixth worker.
fourth worker.
third worker.
second worker.
answer
third worker.
question
Refer to the above data. The total variable cost of producing 5 units is:
$61.
$48.
$37.
$24.
$61.
$48.
$37.
$24.
answer
$37
question
Refer to the above diagram. At output level Q total variable cost is:
0BEQ.
BCDE.
0CDQ.
0AFQ.
0BEQ.
BCDE.
0CDQ.
0AFQ.
answer
0BEQ
question
Refer to the above diagram. The profit-maximizing level of output for this firm:
is at point a.
is at point b.
is at point c.
cannot be determined from the information given.
is at point a.
is at point b.
is at point c.
cannot be determined from the information given.
answer
cannot be determined from the information given.
question
The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. The shape of each individual curve reflects:
increasing returns, followed by diminishing returns.
economies of scale, followed by diseconomies of scale.
constant costs.
increasing costs, followed by decreasing costs.
increasing returns, followed by diminishing returns.
economies of scale, followed by diseconomies of scale.
constant costs.
increasing costs, followed by decreasing costs.
answer
increasing returns, followed by diminishing returns.
question
The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. In the long run the firm should produce output 0 x with a plant of size:
#4.
#3.
#2.
#1.
#4.
#3.
#2.
#1.
answer
#2
question
A fixed cost is:
associated with any productive resource whose price is fixed.
any cost that increases proportionately with output.
any cost that a firm would incur even if output was zero.
associated with all inputs whose short-run supply is perfectly inelastic.
associated with any productive resource whose price is fixed.
any cost that increases proportionately with output.
any cost that a firm would incur even if output was zero.
associated with all inputs whose short-run supply is perfectly inelastic.
answer
any cost that a firm would incur even if output was zero.
question
A natural monopoly exists when:
unit costs are minimized by having one firm produce an industry's entire output.
several formerly competing producers merge to become the only firm in an industry.
short-run average total cost curves are tangent to long-run average total cost curves.
minimum efficient scale is attained at a small level of output.
unit costs are minimized by having one firm produce an industry's entire output.
several formerly competing producers merge to become the only firm in an industry.
short-run average total cost curves are tangent to long-run average total cost curves.
minimum efficient scale is attained at a small level of output.
answer
unit costs are minimized by having one firm produce an industry's entire output.
question
For most producing firms:
marginal cost rises as output is carried to a certain level, and then begins to decline.
total costs rise as output is carried to a certain level, and then begin to decline.
average total costs decline as output is carried to a certain level, and then begin to rise.
average total costs rise as output is carried to a certain level, and then begin to decline.
marginal cost rises as output is carried to a certain level, and then begins to decline.
total costs rise as output is carried to a certain level, and then begin to decline.
average total costs decline as output is carried to a certain level, and then begin to rise.
average total costs rise as output is carried to a certain level, and then begin to decline.
answer
average total costs decline as output is carried to a certain level, and then begin to rise.
question
If average total cost is declining, then:
marginal cost must be greater than average total cost.
the average fixed cost curve must lie above the average variable cost curve.
marginal cost must be less than average total cost.
total cost must also be declining.
marginal cost must be greater than average total cost.
the average fixed cost curve must lie above the average variable cost curve.
marginal cost must be less than average total cost.
total cost must also be declining.
answer
marginal cost must be less than average total cost.
question
Marginal product is:
the increase in total output attributable to the employment of one more worker.
the increase in total revenue attributable to the employment of one more worker.
the increase in total cost attributable to the employment of one more worker.
total product divided by the number of workers employed.
the increase in total output attributable to the employment of one more worker.
the increase in total revenue attributable to the employment of one more worker.
the increase in total cost attributable to the employment of one more worker.
total product divided by the number of workers employed.
answer
the increase in total output attributable to the employment of one more worker.
question
One major advantage of limited liability is that it:
is not subject to a free-rider problem.
is not subject to a principal-agent problem.
has unlimited profit sharing among the firm's owners.
shields the personal assets of owners from liability claims.
is not subject to a free-rider problem.
is not subject to a principal-agent problem.
has unlimited profit sharing among the firm's owners.
shields the personal assets of owners from liability claims.
answer
shields the personal assets of owners from liability claims.
question
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:
profits were $100,000 and its economic profits were zero.
losses were $500,000 and its economic losses were zero.
profits were $500,000 and its economic profits were $1 million.
profits were zero and its economic losses were $500,000.
profits were $100,000 and its economic profits were zero.
losses were $500,000 and its economic losses were zero.
profits were $500,000 and its economic profits were $1 million.
profits were zero and its economic losses were $500,000.
answer
profits were zero and its economic losses were $500,000.
question
Suppose that you could prepare your own tax return in 15 hours, or you could hire a tax specialist to prepare it for you in 2 hours. You value your time at $11.00 an hour. The tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is:
$40.
$55.
$110.
$165.
$40.
$55.
$110.
$165.
answer
$165
question
The law of diminishing returns indicates that:
as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped.
the demand for goods produced by purely competitive industries is downsloping.
beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.
as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped.
the demand for goods produced by purely competitive industries is downsloping.
beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.
answer
as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
question
The minimum efficient scale of a firm:
is realized somewhere in the range of diseconomies of scale.
occurs where marginal product becomes zero.
is in the middle of the range of constant returns to scale.
is the smallest level of output at which long-run average total cost is minimized.
is realized somewhere in the range of diseconomies of scale.
occurs where marginal product becomes zero.
is in the middle of the range of constant returns to scale.
is the smallest level of output at which long-run average total cost is minimized.
answer
is the smallest level of output at which long-run average total cost is minimized.
question
The principal-agent problem in corporations arises from:
the fact that the principal objective of most corporations is to make profits and not to contribute to charity.
a conflict of interest between corporate executives who manage the firm and stockholders who own the firm.
the view that workers are agents who are not considered to be the principal asset of the corporations for which they work.
a perspective that corporations are agents that represent the principal source of power for government and the national economy.
the fact that the principal objective of most corporations is to make profits and not to contribute to charity.
a conflict of interest between corporate executives who manage the firm and stockholders who own the firm.
the view that workers are agents who are not considered to be the principal asset of the corporations for which they work.
a perspective that corporations are agents that represent the principal source of power for government and the national economy.
answer
a conflict of interest between corporate executives who manage the firm and stockholders who own the firm.
question
To economists, the main difference between the short run and the long run is that:
the law of diminishing returns applies in the long run, but not in the short run.
in the long run all resources are variable, while in the short run at least one resource is fixed.
fixed costs are more important to decision making in the long run than they are in the short run.
in the short run all resources are fixed, while in the long run all resources are variable.
the law of diminishing returns applies in the long run, but not in the short run.
in the long run all resources are variable, while in the short run at least one resource is fixed.
fixed costs are more important to decision making in the long run than they are in the short run.
in the short run all resources are fixed, while in the long run all resources are variable.
answer
in the long run all resources are variable, while in the short run at least one resource is fixed.
question
When a firm does more of something, it gets better at it. This learning-by-doing is:
a source of diseconomies of scale.
a source of economies of scale.
called the principle of natural progression.
called "spreading the overhead."
a source of diseconomies of scale.
a source of economies of scale.
called the principle of natural progression.
called "spreading the overhead."
answer
a source of economies of scale.
question
Which of the following is a short-run adjustment?
A local bakery hires two additional bakers.
Six new firms enter the plastics industry.
The number of farms in the United States declines by 5 percent.
BMW constructs a new assembly plant in South Carolina.
A local bakery hires two additional bakers.
Six new firms enter the plastics industry.
The number of farms in the United States declines by 5 percent.
BMW constructs a new assembly plant in South Carolina.
answer
A local bakery hires two additional bakers.
question
Which of the following is correct?
A person who purchases a corporate bond is borrowing money from a corporation.
A person who purchases a corporate stock is buying ownership in the corporation.
A person who purchases a corporate bond is guaranteed to earn dividends from the stock.
A person who purchases a corporate stock gets the option to buy other shares at lower prices.
A person who purchases a corporate bond is borrowing money from a corporation.
A person who purchases a corporate stock is buying ownership in the corporation.
A person who purchases a corporate bond is guaranteed to earn dividends from the stock.
A person who purchases a corporate stock gets the option to buy other shares at lower prices.
answer
A person who purchases a corporate stock is buying ownership in the corporation.
question
Which of the following is most likely to be a fixed cost?
Shipping charges
Property insurance premiums
Wages for unskilled labor
Expenditures for raw materials
Shipping charges
Property insurance premiums
Wages for unskilled labor
Expenditures for raw materials
answer
Property insurance premiums
question
Which of the following is most likely to be an implicit cost for Company X?
Depreciation charges on company-owned equipment
Rental payments on IBM equipment
Payments for raw materials purchased from Company Y
Transportation costs paid to a nearby trucking firm
Depreciation charges on company-owned equipment
Rental payments on IBM equipment
Payments for raw materials purchased from Company Y
Transportation costs paid to a nearby trucking firm
answer
Depreciation charges on company-owned equipment
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