Question 1

What is the relationship between marginal cost and marginal product?

Accepted Answer

A) The two are not related. 
B) When marginal product increases, marginal cost increases. 
C) When marginal product increases, marginal cost falls. 
D) When marginal product is negative, marginal costs are negative. 
E) When diminishing marginal returns set in, marginal costs fall. 
A) The two are not related. 
B) When marginal product increases, marginal cost increases. 
C) When marginal product increases, marginal cost falls. 
D) When marginal product is negative, marginal costs are negative. 
E) When diminishing marginal returns set in, marginal costs fall.

Question 2

Exhibit 7-14 Total Cost Curve   In Exhibit 7-14, what are variable costs at 8 units of output?

Accepted Answer

A) $0 
B) $23 
C) $26 
D) $30 
E) cannot be determined from the total cost curve 
A) $0 
B) $23 
C) $26 
D) $30 
E) cannot be determined from the total cost curve

Question 3

When marginal product is negative, the slope of the total product curve must be negative.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 7-13 The Total Product of Labor   Given the information in Exhibit 7-13, what is the average product when three 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) less than the average product when two units of labor are employed 
D) more than the average product when two units of labor are employed 
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) less than the average product when two units of labor are employed 
D) more than the average product when two units of labor are employed 
E) cannot be determined from the graph of total product

Question 5

The long-run average cost curve is tangent to the minimum point of every short-run average total cost curve.

Accepted Answer

A) True 
 B)False

Question 6

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his costs change?

Accepted Answer

A) explicit and implicit costs rise 
B) explicit costs rise; implicit costs fall 
C) explicit and implicit costs fall 
D) explicit costs fall; implicit costs rise 
E) not enough information is given 
A) explicit and implicit costs rise 
B) explicit costs rise; implicit costs fall 
C) explicit and implicit costs fall 
D) explicit costs fall; implicit costs rise 
E) not enough information is given

Question 7

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

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 8

If variable cost at each output level doubles,

Accepted Answer

A) ATC doubles 
B) AFC doubles 
C) MC remains unchanged 
D) MC doubles 
E) MC less than doubles 
A) ATC doubles 
B) AFC doubles 
C) MC remains unchanged 
D) MC doubles 
E) MC less than doubles

Question 9

Marginal product is defined as

Accepted Answer

A) the increase in revenue that occurs when an additional unit of a resource is added 
B) the increase in output that occurs when all resources are increased by the same proportion 
C) the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant 
D) the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount 
E) the amount of additional money needed to increase output by one unit when all resources are held constant 
A) the increase in revenue that occurs when an additional unit of a resource is added 
B) the increase in output that occurs when all resources are increased by the same proportion 
C) the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant 
D) the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount 
E) the amount of additional money needed to increase output by one unit when all resources are held constant

Question 10

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers   If the firm represented in Exhibit 7-15 wants to produce output level Q3, then in the long run it should build a plant size with average total cost curve of

Accepted Answer

A) A 
B) B 
C) C 
D) A or B 
E) the question cannot be answered with the information given 
A) A 
B) B 
C) C 
D) A or B 
E) the question cannot be answered with the information given

Question 11

The marginal cost curve intersects the average variable cost curve (AVC)

Accepted Answer

A) only when the AVC is rising 
B) at the AVC curve's maximum point 
C) at the AVC curve's minimum point 
D) only when the AVC is sloping downward 
E) when the AVC intersects the fixed cost curve 
A) only when the AVC is rising 
B) at the AVC curve's maximum point 
C) at the AVC curve's minimum point 
D) only when the AVC is sloping downward 
E) when the AVC intersects the fixed cost curve

Question 12

Which of the following would not appear on a firm's accounting statement?

Accepted Answer

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

Question 13

If Ripco owns the building where it operates, then if

Accepted Answer

A) the firm pays no rent, there is no opportunity cost 
B) the firm does not rent the building to anyone else, there is no opportunity cost 
C) the firm pays no rent, there is an opportunity cost 
D) its usage of the building precludes it from renting to anyone else, there is an opportunity cost 
E) the firm could use the building for other things, there is no opportunity cost 
A) the firm pays no rent, there is no opportunity cost 
B) the firm does not rent the building to anyone else, there is no opportunity cost 
C) the firm pays no rent, there is an opportunity cost 
D) its usage of the building precludes it from renting to anyone else, there is an opportunity cost 
E) the firm could use the building for other things, there is no opportunity cost

Question 14

Which of the following reflects diseconomies of scale?

Accepted Answer

A) Marginal product decreases as output increases. 
B) Short-run marginal cost increases as output increases. 
C) Long-run marginal cost increases as output increases. 
D) Short-run average cost increases as output increases. 
E) As output doubles, long-run total cost more than doubles. 
A) Marginal product decreases as output increases. 
B) Short-run marginal cost increases as output increases. 
C) Long-run marginal cost increases as output increases. 
D) Short-run average cost increases as output increases. 
E) As output doubles, long-run total cost more than doubles.

Question 15

Unlike implicit costs, explicit costs

Accepted Answer

A) reflect opportunity costs 
B) include the value of the owner's time 
C) are not included in a firm's accounting statements 
D) are actual cash payments 
E) do not change as a firm's output changes 
A) reflect opportunity costs 
B) include the value of the owner's time 
C) are not included in a firm's accounting statements 
D) are actual cash payments 
E) do not change as a firm's output changes

Question 16

Which of the following is most likely to be a fixed resource for the Speedy Word Processing and Résumé Company?

Accepted Answer

A) floppy disks 
B) typists 
C) computer terminals 
D) electricity 
E) paper 
A) floppy disks 
B) typists 
C) computer terminals 
D) electricity 
E) paper

Question 17

Opportunity cost usually

Accepted Answer

A) cannot be measured 
B) applies to labor but not to capital 
C) is involved in calculating economic profit 
D) is greater than the cash payment made to a resource 
E) is less than the cash payment made to a resource 
A) cannot be measured 
B) applies to labor but not to capital 
C) is involved in calculating economic profit 
D) is greater than the cash payment made to a resource 
E) is less than the cash payment made to a resource

Question 18

Exhibit 7-6   In Exhibit 7-6, the average total cost of producing 20 units is

Accepted Answer

A) $2 
B) $20 
C) $30 
D) $100 
E) $1, 100 
A) $2 
B) $20 
C) $30 
D) $100 
E) $1, 100

Question 19

Total cost is calculated as

Accepted Answer

A) FC + MC 
B) FC / MC 
C) (VC + F
C) / MC 
D) VC + FC 
E) VC ´ output 
A) FC + MC 
B) FC / MC 
C) (VC + F
C) / MC 
D) VC + FC 
E) VC ´ output

Question 20

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

Accepted Answer

A) the average is increasing 
B) the average is decreasing 
C) the marginal is increasing 
D) the marginal is decreasing 
E) the total is decreasing 
A) the average is increasing 
B) the average is decreasing 
C) the marginal is increasing 
D) the marginal is decreasing 
E) the total is decreasing

Exam 7: Production and Cost in the Firm

What is the relationship between marginal cost and marginal product?

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, what are variable costs at 8 units of output?

When marginal product is negative, the slope of the total product curve must be negative.

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

The long-run average cost curve is tangent to the minimum point of every short-run average total cost curve.

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his costs change?

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

If variable cost at each output level doubles,

Marginal product is defined as

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers If the firm represented in Exhibit 7-15 wants to produce output level Q3, then in the long run it should build a plant size with average total cost curve of

The marginal cost curve intersects the average variable cost curve (AVC)

Which of the following would not appear on a firm's accounting statement?

If Ripco owns the building where it operates, then if

Which of the following reflects diseconomies of scale?

Unlike implicit costs, explicit costs

Which of the following is most likely to be a fixed resource for the Speedy Word Processing and Résumé Company?

Opportunity cost usually

Exhibit 7-6 In Exhibit 7-6, the average total cost of producing 20 units is

Total cost is calculated as

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

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

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers If the firm represented in Exhibit 7-15 wants to produce output level Q₃, then in the long run it should build a plant size with average total cost curve of