Question 1

The marginal product of labor is the

Accepted Answer

A) cost of one worker 
B) average output per worker 
C) change in revenue from selling one more unit of output 
D) change in revenue from using one more unit of labor 
E) change in output from using one more unit of labor 
A) cost of one worker 
B) average output per worker 
C) change in revenue from selling one more unit of output 
D) change in revenue from using one more unit of labor 
E) change in output from using one more unit of labor

Question 2

For each size of plant a manufacturer could build, there is a different

Accepted Answer

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

Question 3

If a firm is experiencing diminishing marginal returns, its marginal product is declining.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 7-1   Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's normal profit is

Accepted Answer

A) $80, 000 
B) $41, 000 
C) $65, 000 
D) $35, 000 
E) $24, 000 
A) $80, 000 
B) $41, 000 
C) $65, 000 
D) $35, 000 
E) $24, 000

Question 5

Exhibit 7-1   Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's economic profit is

Accepted Answer

A) $80, 000 
B) $50, 000 
C) $65, 000 
D) $35, 000 
E) $24, 000 
A) $80, 000 
B) $50, 000 
C) $65, 000 
D) $35, 000 
E) $24, 000

Question 6

If the Baloney Store earns more than a normal profit, its

Accepted Answer

A) economic profit must be greater than its accounting profit 
B) economic profit is positive 
C) economic profit is, therefore, equal to its accounting profit 
D) accounting profit is zero 
E) accounting profit is less than its economic profit 
A) economic profit must be greater than its accounting profit 
B) economic profit is positive 
C) economic profit is, therefore, equal to its accounting profit 
D) accounting profit is zero 
E) accounting profit is less than its economic profit

Question 7

To maximize profit in the long run, a firm must

Accepted Answer

A) charge the highest price possible 
B) produce where demand is unit elastic 
C) sell the most output possible 
D) minimize the cost of producing any given amount of output 
E) produce at minimum long-run total cost 
A) charge the highest price possible 
B) produce where demand is unit elastic 
C) sell the most output possible 
D) minimize the cost of producing any given amount of output 
E) produce at minimum long-run total cost

Question 8

If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twentieth unit

Accepted Answer

A) is $100 
B) is $5 
C) is $40 
D) is $8 
E) cannot be determined without total cost 
A) is $100 
B) is $5 
C) is $40 
D) is $8 
E) cannot be determined without total cost

Question 9

Suppose Toyota produces 100, 000 cars per year at its California plant at an average cost of $6, 000 and it doubles output and total costs by building an identical plant in Kentucky.Toyota has exhibited

Accepted Answer

A) diminishing marginal returns 
B) economies of scale 
C) constant average costs 
D) an upward-sloping planning curve 
E) production inefficiency 
A) diminishing marginal returns 
B) economies of scale 
C) constant average costs 
D) an upward-sloping planning curve 
E) production inefficiency

Question 10

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers   The firm represented in Exhibit 7-15 experiences economies of scale from

Accepted Answer

A) Q1 to Q3 only 
B) Q2 to Q3 only 
C) Q2 to Q4 only 
D) Q3 to Q5 only 
E) the question cannot be answered with the information given 
A) Q1 to Q3 only 
B) Q2 to Q3 only 
C) Q2 to Q4 only 
D) Q3 to Q5 only 
E) the question cannot be answered with the information given

Question 11

A firm's opportunity costs of using resources provided by the firm's owners are called

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 12

When a firm is experiencing diminishing marginal returns, marginal cost is

Accepted Answer

A) rising 
B) falling 
C) constant 
D) rising at first, then falling 
E) zero 
A) rising 
B) falling 
C) constant 
D) rising at first, then falling 
E) zero

Question 13

A variable cost is one that changes

Accepted Answer

A) in the long run only 
B) in the short run only 
C) year to year 
D) month to month 
E) as output changes 
A) in the long run only 
B) in the short run only 
C) year to year 
D) month to month 
E) as output changes

Question 14

Suppose Joan uses her savings to purchase computer equipment for her new consulting business.Soon after this, the market interest rate rises.As a result, her

Accepted Answer

A) explicit costs rise immediately 
B) accounting profit falls immediately 
C) accounting profit rises immediately 
D) economic profit rises immediately 
E) economic profit falls immediately 
A) explicit costs rise immediately 
B) accounting profit falls immediately 
C) accounting profit rises immediately 
D) economic profit rises immediately 
E) economic profit falls immediately

Question 15

Which of the following probably has the shortest long run?

Accepted Answer

A) a law firm 
B) a steel mill 
C) an automobile plant 
D) a tire factory 
E) an aircraft engine factory 
A) a law firm 
B) a steel mill 
C) an automobile plant 
D) a tire factory 
E) an aircraft engine factory

Question 16

An implicit cost is

Accepted Answer

A) any cost a firm cannot avoid in the short run 
B) any expenditure a firm makes 
C) an opportunity cost 
D) accurately measured in accounting statements 
E) ignored by economists 
A) any cost a firm cannot avoid in the short run 
B) any expenditure a firm makes 
C) an opportunity cost 
D) accurately measured in accounting statements 
E) ignored by economists

Question 17

Exhibit 7-2   Given the information in Exhibit 7-2, at what point do negative 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

Which of the following is a fixed cost for Wendy's Hamburgers?

Accepted Answer

A) the cost of beef 
B) electricity to light up the Wendy's sign 
C) gasoline for the trucks that deliver supplies to the various franchises 
D) interest on funds borrowed to build new facilities 
E) expenditures on paper and plastic for packaging 
A) the cost of beef 
B) electricity to light up the Wendy's sign 
C) gasoline for the trucks that deliver supplies to the various franchises 
D) interest on funds borrowed to build new facilities 
E) expenditures on paper and plastic for packaging

Question 19

Inputs that can be increased or decreased in the short run are called

Accepted Answer

A) fixed inputs 
B) variable inputs 
C) economic inputs 
D) accounting inputs 
E) normal inputs 
A) fixed inputs 
B) variable inputs 
C) economic inputs 
D) accounting inputs 
E) normal inputs

Question 20

The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1, 400.If the variable cost of producing 500 water pistols is $1, 300, then

Accepted Answer

A) fixed cost must be $100 
B) marginal cost must be $1, 300 
C) marginal cost must be increasing 
D) average variable cost must be decreasing 
E) average fixed cost must be constant 
A) fixed cost must be $100 
B) marginal cost must be $1, 300 
C) marginal cost must be increasing 
D) average variable cost must be decreasing 
E) average fixed cost must be constant

Exam 7: Production and Cost in the Firm

The marginal product of labor is the

For each size of plant a manufacturer could build, there is a different

If a firm is experiencing diminishing marginal returns, its marginal product is declining.

Exhibit 7-1 Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's normal profit is

Exhibit 7-1 Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's economic profit is

If the Baloney Store earns more than a normal profit, its

To maximize profit in the long run, a firm must

If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twentieth unit

Suppose Toyota produces 100, 000 cars per year at its California plant at an average cost of $6, 000 and it doubles output and total costs by building an identical plant in Kentucky.Toyota has exhibited

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers The firm represented in Exhibit 7-15 experiences economies of scale from

A firm's opportunity costs of using resources provided by the firm's owners are called

When a firm is experiencing diminishing marginal returns, marginal cost is

A variable cost is one that changes

Suppose Joan uses her savings to purchase computer equipment for her new consulting business.Soon after this, the market interest rate rises.As a result, her

Which of the following probably has the shortest long run?

An implicit cost is

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

Which of the following is a fixed cost for Wendy's Hamburgers?

Inputs that can be increased or decreased in the short run are called

The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1, 400.If the variable cost of producing 500 water pistols is $1, 300, then

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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