Question 1

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

Accepted Answer

A) the monthly electric bill 
B) sales taxes 
C) shipping and postage costs 
D) rent on office space 
E) charitable donations 
A) the monthly electric bill 
B) sales taxes 
C) shipping and postage costs 
D) rent on office space 
E) charitable donations

Question 2

Which of the following is a fixed cost of driving a car?

Accepted Answer

A) gasoline 
B) maintenance 
C) tires 
D) license plates 
E) motor oil 
A) gasoline 
B) maintenance 
C) tires 
D) license plates 
E) motor oil

Question 3

Cash payments for steel to be used in production would be an example of

Accepted Answer

A) sunk costs 
B) fixed costs 
C) explicit costs 
D) implicit costs 
E) entrepreneurial costs 
A) sunk costs 
B) fixed costs 
C) explicit costs 
D) implicit costs 
E) entrepreneurial costs

Question 4

The fact that since 1990 the number of movie screens in the United States has grown faster than the number of theaters illustrates the benefits of

Accepted Answer

A) economies of scale 
B) constant long-run average cost 
C) diseconomies of scale 
D) increasing long-run average cost 
E) a U-shaped marginal cost curve 
A) economies of scale 
B) constant long-run average cost 
C) diseconomies of scale 
D) increasing long-run average cost 
E) a U-shaped marginal cost curve

Question 5

Economic profit is defined as

Accepted Answer

A) total revenue minus implicit costs 
B) total revenue plus explicit costs 
C) total revenue plus implicit costs 
D) wages plus interest minus rent 
E) total revenue minus implicit and explicit costs 
A) total revenue minus implicit costs 
B) total revenue plus explicit costs 
C) total revenue plus implicit costs 
D) wages plus interest minus rent 
E) total revenue minus implicit and explicit costs

Question 6

All other things constant, higher implicit cost results in lower accounting profit.

Accepted Answer

A) True 
 B)False

Question 7

When diminishing marginal returns set in, total product

Accepted Answer

A) is negative 
B) decreases at an increasing rate 
C) decreases at a decreasing rate 
D) increases at an increasing rate 
E) increases at a decreasing rate 
A) is negative 
B) decreases at an increasing rate 
C) decreases at a decreasing rate 
D) increases at an increasing rate 
E) increases at a decreasing rate

Question 8

When marginal cost is decreasing, total cost is rising.

Accepted Answer

A) True 
 B)False

Question 9

For a person who owns and operates an automobile, insurance premiums are a __________ and maintenance and repairs are a __________.

Accepted Answer

A) revenue; cost 
B) fixed cost; fixed cost 
C) variable cost; variable cost 
D) variable cost; fixed cost 
E) fixed cost; variable cost 
A) revenue; cost 
B) fixed cost; fixed cost 
C) variable cost; variable cost 
D) variable cost; fixed cost 
E) fixed cost; variable cost

Question 10

Marginal cost indicates how much total cost increases if one more unit is produced or how much total cost drops if production declines by one unit.

Accepted Answer

A) True 
 B)False

Question 11

Suppose Ben buys out Jerry's ownership in the firm but retains him as a salaried employee.If so,

Accepted Answer

A) economic profit increases 
B) economic profit decreases 
C) there is no change in economic profit 
D) there is no change in accounting profit 
E) accounting profit increases 
A) economic profit increases 
B) economic profit decreases 
C) there is no change in economic profit 
D) there is no change in accounting profit 
E) accounting profit increases

Question 12

Which of the following is most likely to be a fixed resource for the City Slicker's Dude Ranch?

Accepted Answer

A) the lodge where the guests stay 
B) food for the guests 
C) stable hands to take care of the horses 
D) hay for the horses 
E) water for the horses 
A) the lodge where the guests stay 
B) food for the guests 
C) stable hands to take care of the horses 
D) hay for the horses 
E) water for the horses

Question 13

Exhibit 7-12   For the total product curve in Exhibit 7-12, the average product at point c is:

Accepted Answer

A) 6 
B) 10 
C) 25 
D) 60 
E) unable to be determined 
A) 6 
B) 10 
C) 25 
D) 60 
E) unable to be determined

Question 14

If total cost at Q = 0 is $100 and total cost at Q = 10 is $500, then average variable cost at Q = 10 is

Accepted Answer

A) $500 
B) $400 
C) $50 
D) $40 
E) $10 
A) $500 
B) $400 
C) $50 
D) $40 
E) $10

Question 15

Exhibit 7-14 Total Cost Curve   In Exhibit 7-14, what is fixed cost of producing output?

Accepted Answer

A) $0 
B) $3 
C) $10 
D) $46 
E) cannot be determined from the total cost curve 
A) $0 
B) $3 
C) $10 
D) $46 
E) cannot be determined from the total cost curve

Question 16

Suppose Bob leaves his $50, 000-a-year job as a financial advisor to P.E.T.S.and starts his own business selling spot remover for Dalmatians.In the first year his accounting profit is $70, 000.Based on this level of success, Bob should

Accepted Answer

A) return to his old job because his economic profit is negative 
B) return to his old job because his economic profit is smaller than his accounting profit 
C) return to his old job because his economic profit is less than his old salary 
D) stay with his new firm because his economic profit is positive 
E) stay with his new firm because accounting profit is positive 
A) return to his old job because his economic profit is negative 
B) return to his old job because his economic profit is smaller than his accounting profit 
C) return to his old job because his economic profit is less than his old salary 
D) stay with his new firm because his economic profit is positive 
E) stay with his new firm because accounting profit is positive

Question 17

Exhibit 7-2   Given the information in Exhibit 7-2, at what point do diminishing marginal returns set in?

Accepted Answer

A) before the first unit of labor 
B) between the first and second units of labor 
C) between the second and third units of labor 
D) between the third and fourth units of labor 
E) between the fourth and fifth units of labor 
A) before the first unit of labor 
B) between the first and second units of labor 
C) between the second and third units of labor 
D) between the third and fourth units of labor 
E) between the fourth and fifth units of labor

Question 18

If total product for each of five units of labor is 10, 16, 20, 30, and 34, respectively, the marginal product of the third unit is

Accepted Answer

A) 20 
B) 10 
C) 4 
D) 0 
E) 6 
A) 20 
B) 10 
C) 4 
D) 0 
E) 6

Question 19

Which of the following is true of the MC curve?

Accepted Answer

A) It intersects the ATC curve at its minimum, but it does not intersect the AVC curve at its minimum. 
B) It intersects the AVC curve at its minimum, but it does not intersect the ATC curve at its minimum. 
C) It intersects both the ATC and the AVC curves at their minimums. 
D) It intersects both the ATC and the AFC curves at their minimums. 
E) It intersects both the AVC and the AFC curves at their minimums. 
A) It intersects the ATC curve at its minimum, but it does not intersect the AVC curve at its minimum. 
B) It intersects the AVC curve at its minimum, but it does not intersect the ATC curve at its minimum. 
C) It intersects both the ATC and the AVC curves at their minimums. 
D) It intersects both the ATC and the AFC curves at their minimums. 
E) It intersects both the AVC and the AFC curves at their minimums.

Question 20

If marginal product is negative, total product must be negative.

Accepted Answer

A) True 
 B)False

Exam 7: Production and Cost in the Firm

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

Which of the following is a fixed cost of driving a car?

Cash payments for steel to be used in production would be an example of

The fact that since 1990 the number of movie screens in the United States has grown faster than the number of theaters illustrates the benefits of

Economic profit is defined as

All other things constant, higher implicit cost results in lower accounting profit.

When diminishing marginal returns set in, total product

When marginal cost is decreasing, total cost is rising.

For a person who owns and operates an automobile, insurance premiums are a __________ and maintenance and repairs are a __________.

Marginal cost indicates how much total cost increases if one more unit is produced or how much total cost drops if production declines by one unit.

Suppose Ben buys out Jerry's ownership in the firm but retains him as a salaried employee.If so,

Which of the following is most likely to be a fixed resource for the City Slicker's Dude Ranch?

Exhibit 7-12 For the total product curve in Exhibit 7-12, the average product at point c is:

If total cost at Q = 0 is $100 and total cost at Q = 10 is $500, then average variable cost at Q = 10 is

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, what is fixed cost of producing output?

Suppose Bob leaves his $50, 000-a-year job as a financial advisor to P.E.T.S.and starts his own business selling spot remover for Dalmatians.In the first year his accounting profit is $70, 000.Based on this level of success, Bob should

Exhibit 7-2 Given the information in Exhibit 7-2, at what point do diminishing marginal returns set in?

If total product for each of five units of labor is 10, 16, 20, 30, and 34, respectively, the marginal product of the third unit is

Which of the following is true of the MC curve?

If marginal product is negative, total product must be negative.

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters

For a person who owns and operates an automobile, insurance premiums are a and maintenance and repairs are a .