Question 1

The shape of short-run variable cost curve is determined by

Accepted Answer

A) the firm's effort to minimize cost 
B) the firm's effort to maximize profit 
C) competition in the industry 
D) the marginal productivity of the variable inputs the firm uses 
E) the money the firm spends 
A) the firm's effort to minimize cost 
B) the firm's effort to maximize profit 
C) competition in the industry 
D) the marginal productivity of the variable inputs the firm uses 
E) the money the firm spends

Question 2

Increasing marginal returns are generally the result of

Accepted Answer

A) diseconomies of scale 
B) increasing costs 
C) specialization and division of labor 
D) labor unions 
E) technology 
A) diseconomies of scale 
B) increasing costs 
C) specialization and division of labor 
D) labor unions 
E) technology

Question 3

Which of the following are implicit costs for a typical firm?

Accepted Answer

A) insurance costs 
B) electricity costs 
C) opportunity costs of capital owned and used by the firm 
D) cost of labor hired by the firm 
E) the cost of raw materials 
A) insurance costs 
B) electricity costs 
C) opportunity costs of capital owned and used by the firm 
D) cost of labor hired by the firm 
E) the cost of raw materials

Question 4

Exhibit 7-10   In Exhibit 7-10, lines H, J, and K represent, respectively,

Accepted Answer

A) marginal product, average product, and total product 
B) average fixed cost, average total cost, and average variable cost 
C) marginal cost, average total cost, and average variable cost 
D) average total cost, marginal cost, and average variable cost 
E) marginal cost, average product, average total cost 
A) marginal product, average product, and total product 
B) average fixed cost, average total cost, and average variable cost 
C) marginal cost, average total cost, and average variable cost 
D) average total cost, marginal cost, and average variable cost 
E) marginal cost, average product, average total cost

Question 5

The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the

Accepted Answer

A) total cost curve 
B) short-run average total cost curve 
C) average variable cost curve 
D) long-run average cost curve 
E) marginal cost curve 
A) total cost curve 
B) short-run average total cost curve 
C) average variable cost curve 
D) long-run average cost curve 
E) marginal cost curve

Question 6

As Product Co.adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43.Addition of the fifth worker will most likely lead to an output rate

Accepted Answer

A) greater than 51 
B) equal to 51 
C) less than 51 
D) greater than 51 if the firm experiences diseconomies of scale 
E) none of the above 
A) greater than 51 
B) equal to 51 
C) less than 51 
D) greater than 51 if the firm experiences diseconomies of scale 
E) none of the above

Question 7

In the long run, all of a firm's inputs are variable.

Accepted Answer

A) True 
 B)False

Question 8

What is true of marginal cost when marginal returns are increasing?

Accepted Answer

A) It is negative and increasing. 
B) It is negative and decreasing. 
C) It is positive and increasing. 
D) It is positive and decreasing. 
E) It is positive and has a constant slope. 
A) It is negative and increasing. 
B) It is negative and decreasing. 
C) It is positive and increasing. 
D) It is positive and decreasing. 
E) It is positive and has a constant slope.

Question 9

Bart operates a lemonade stand in front of his house.His father works at the Springfield Nuclear Power Plant.Which of the following is most likely to be true?

Accepted Answer

A) The long run is the same for the power plant as it is for the lemonade stand. 
B) The long run is longer for the power plant than it is for the lemonade stand. 
C) The long run is shorter for the power plant than it is for the lemonade stand. 
D) We cannot compare the long runs because these are different businesses. 
E) It's impossible for the power plant short run to be shorter than the lemonade stand's long run. 
A) The long run is the same for the power plant as it is for the lemonade stand. 
B) The long run is longer for the power plant than it is for the lemonade stand. 
C) The long run is shorter for the power plant than it is for the lemonade stand. 
D) We cannot compare the long runs because these are different businesses. 
E) It's impossible for the power plant short run to be shorter than the lemonade stand's long run.

Question 10

Suppose Guild produces 5, 000 guitars per year.Its average total cost is $90, and its fixed cost is $250, 000.What is its variable cost?

Accepted Answer

A) $250, 000 
B) $450, 000 
C) $25, 000 
D) $56, 000 
E) $200, 000 
A) $250, 000 
B) $450, 000 
C) $25, 000 
D) $56, 000 
E) $200, 000

Question 11

Total cost is calculated as

Accepted Answer

A) average fixed cost plus average variable cost 
B) fixed cost plus variable cost 
C) the additional cost of the last unit produced 
D) marginal cost plus variable cost 
E) marginal cost plus fixed cost 
A) average fixed cost plus average variable cost 
B) fixed cost plus variable cost 
C) the additional cost of the last unit produced 
D) marginal cost plus variable cost 
E) marginal cost plus fixed cost

Question 12

When diminishing marginal returns set in, marginal product is

Accepted Answer

A) positive and increasing 
B) positive and decreasing 
C) negative and increasing 
D) negative and decreasing 
E) zero 
A) positive and increasing 
B) positive and decreasing 
C) negative and increasing 
D) negative and decreasing 
E) zero

Question 13

If the Money Store earns a normal profit this year, its

Accepted Answer

A) economic profit is equal to its accounting profit 
B) economic profit is zero 
C) economic profit is equal to the average accounting profit in other industries 
D) accounting profit is zero 
E) accounting profit is less than its economic profit 
A) economic profit is equal to its accounting profit 
B) economic profit is zero 
C) economic profit is equal to the average accounting profit in other industries 
D) accounting profit is zero 
E) accounting profit is less than its economic profit

Question 14

The long run is a period of time

Accepted Answer

A) during which at least one resource is fixed 
B) during which all resources are variable 
C) during which all resources are fixed 
D) less than one year 
E) greater than one year 
A) during which at least one resource is fixed 
B) during which all resources are variable 
C) during which all resources are fixed 
D) less than one year 
E) greater than one year

Question 15

Exhibit 7-13 The Total Product of Labor   Given the information in Exhibit 7-13, what is the average product when eight units of labor are employed?

Accepted Answer

A) more than two-thirds units of output 
B) less than one-third of a unit of output 
C) one and one-fourth units of output 
D) two units of output 
E) cannot be determined from the graph of total product 
A) more than two-thirds units of output 
B) less than one-third of a unit of output 
C) one and one-fourth units of output 
D) two units of output 
E) cannot be determined from the graph of total product

Question 16

In the short run, all costs are fixed.

Accepted Answer

A) True 
 B)False

Question 17

The short-run average variable cost curve

Accepted Answer

A) is always downward-sloping 
B) starts at the origin and always slopes upward 
C) starts above the origin and always slopes upward 
D) is a horizontal line intersecting the vertical axis 
E) slopes downward at low rates of output, then slopes upward at higher rates of output 
A) is always downward-sloping 
B) starts at the origin and always slopes upward 
C) starts above the origin and always slopes upward 
D) is a horizontal line intersecting the vertical axis 
E) slopes downward at low rates of output, then slopes upward at higher rates of output

Question 18

In the range of increasing marginal returns, total product is

Accepted Answer

A) increasing at a constant rate 
B) increasing at an increasing rate 
C) increasing at a decreasing rate 
D) decreasing at an increasing rate 
E) decreasing at a decreasing rate 
A) increasing at a constant rate 
B) increasing at an increasing rate 
C) increasing at a decreasing rate 
D) decreasing at an increasing rate 
E) decreasing at a decreasing rate

Exam 7: Production and Cost in the Firm

The shape of short-run variable cost curve is determined by

Increasing marginal returns are generally the result of

Which of the following are implicit costs for a typical firm?

Exhibit 7-10 In Exhibit 7-10, lines H, J, and K represent, respectively,

The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the

As Product Co.adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43.Addition of the fifth worker will most likely lead to an output rate

In the long run, all of a firm's inputs are variable.

What is true of marginal cost when marginal returns are increasing?

Bart operates a lemonade stand in front of his house.His father works at the Springfield Nuclear Power Plant.Which of the following is most likely to be true?

Suppose Guild produces 5, 000 guitars per year.Its average total cost is $90, and its fixed cost is $250, 000.What is its variable cost?

Total cost is calculated as

When diminishing marginal returns set in, marginal product is

If the Money Store earns a normal profit this year, its

The long run is a period of time

Exhibit 7-13 The Total Product of Labor Given the information in Exhibit 7-13, what is the average product when eight units of labor are employed?

In the short run, all costs are fixed.

The short-run average variable cost curve

In the range of increasing marginal returns, total product is

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

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