Question 1

Total variable cost:

Accepted Answer

A) increases as output increases. 
B) is constant as output increases. 
C) decreases as output increases. 
D) is lowest for labor-intensive technologies. 
A) increases as output increases. 
B) is constant as output increases. 
C) decreases as output increases. 
D) is lowest for labor-intensive technologies.

Question 2

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

Accepted Answer

Initially,there are economies

Question 3

Additional Application
Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand.
"Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70.
-Which of the following would be an implicit cost of operating a golf course?

Accepted Answer

A) the cost of fertilizers and water 
B) the cost of groundskeepers 
C) the cost of property insurance 
D) the cost of not developing houses on the property 
A) the cost of fertilizers and water 
B) the cost of groundskeepers 
C) the cost of property insurance 
D) the cost of not developing houses on the property

Question 4

All of the following are possible reasons for diseconomies of scale EXCEPT:

Accepted Answer

A) bureaucratic inefficiency. 
B) a top-heavy management structure. 
C) indivisible inputs. 
D) All of the above are possible reasons for diseconomies of scale. 
A) bureaucratic inefficiency. 
B) a top-heavy management structure. 
C) indivisible inputs. 
D) All of the above are possible reasons for diseconomies of scale.

Question 5

-Refer to Figure 8.8.Curve 3 is Outdoor Equipment's:

Accepted Answer

A) marginal cost curve. 
B) average variable cost curve. 
C) average total cost curve. 
D) average fixed cost curve. 
A) marginal cost curve. 
B) average variable cost curve. 
C) average total cost curve. 
D) average fixed cost curve.

Question 6

-Refer to Figure 8.8.The vertical distance AB is Outdoor Equipment's:

Accepted Answer

A) marginal cost. 
B) average fixed cost. 
C) total fixed cost. 
D) total cost. 
A) marginal cost. 
B) average fixed cost. 
C) total fixed cost. 
D) total cost.

Question 7

The long run is when at least one cost is fixed.

Accepted Answer

A) True 
 B)False

Question 8

Your friend Harry has quit his $20,000-a-year job to start a business that rents fishing boats.He asks you to lend him $50,000 and agrees to pay you a 10% return on your $50,000 if he earns a profit.During the first year Harry's total revenue is $120,000 and his total cost for equipment and supplies are $100,000.Harry tells you that he cannot pay you any interest this year because he did not earn a profit.Is your friend Harry trying to cheat you?

Accepted Answer

Harry has made an accounting profit of $

Question 9

Table 8.4
-Refer to Table 8.4.Three workers can produce ________ cakes per day at a total cost of ________.

Accepted Answer

A) 90;350 
B) 90;$50 
C) 90;$550 
D) 90;$750 
A) 90;350 
B) 90;$50 
C) 90;$550 
D) 90;$750

Question 10

Table 8.4
-Refer to Table 8.4.When the fifth worker is employed,the marginal cost is:

Accepted Answer

A) $150. 
B) $100. 
C) $15. 
D) $10. 
A) $150. 
B) $100. 
C) $15. 
D) $10.

Question 11

Describe the relationship between marginal cost and average cost.

Accepted Answer

If marginal cost is greater than average

Question 12

If marginal cost is above average variable cost,then:

Accepted Answer

A) average variable cost is increasing. 
B) marginal cost must be decreasing. 
C) average variable cost is constant. 
D) average variable cost is decreasing. 
A) average variable cost is increasing. 
B) marginal cost must be decreasing. 
C) average variable cost is constant. 
D) average variable cost is decreasing.

Question 13

Table 8.1
-Which of the following situations describes a short-run adjustment of a firm to changing business conditions?

Accepted Answer

A) A doctor increases the size of his waiting room. 
B) A manager calls in two part-time workers to prepare for the holiday rush. 
C) A rancher sells some of his land. 
D) A manufacturing firm expands its production facility. 
A) A doctor increases the size of his waiting room. 
B) A manager calls in two part-time workers to prepare for the holiday rush. 
C) A rancher sells some of his land. 
D) A manufacturing firm expands its production facility.

Question 14

The manager of HDG Computers reports that if output expands in the long run then average costs will rise.This is an example of:

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) minimum efficient scale 
D) constant returns to scale. 
A) economies of scale. 
B) diseconomies of scale. 
C) minimum efficient scale 
D) constant returns to scale.

Question 15

-Refer to Figure 8.5.The marginal cost of the third oven is:

Accepted Answer

A) $100. 
B) $150. 
C) $50. 
D) indeterminate from this information. 
A) $100. 
B) $150. 
C) $50. 
D) indeterminate from this information.

Question 16

If a firm is operating in the long run the firm is flexible in the following:

Accepted Answer

A) altering all inputs. 
B) building a new production facility. 
C) modifying an existing facility. 
D) all of the above 
A) altering all inputs. 
B) building a new production facility. 
C) modifying an existing facility. 
D) all of the above

Question 17

Recent innovations in photovoltaic technology have reduced the unit cost of solar power.

Accepted Answer

A) True 
 B)False

Question 18

Total economic costs include:

Accepted Answer

A) a normal rate of return. 
B) out-of-pocket costs. 
C) opportunity costs of all inputs. 
D) all of the above 
A) a normal rate of return. 
B) out-of-pocket costs. 
C) opportunity costs of all inputs. 
D) all of the above

Question 19

Suppose marginal cost is $5.Average variable costs are $10.For the next unit of output produced,average variable costs will be:

Accepted Answer

A) less than $10. 
B) more than $10. 
C) equal to $10. 
D) It is impossible to say. 
A) less than $10. 
B) more than $10. 
C) equal to $10. 
D) It is impossible to say.

Question 20

Table 8.1
-Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals:

Accepted Answer

A) $100,000. 
B) $45,000. 
C) $0. 
D) -$45,000. 
A) $100,000. 
B) $45,000. 
C) $0. 
D) -$45,000.

Total variable cost:

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

All of the following are possible reasons for diseconomies of scale EXCEPT:

-Refer to Figure 8.8.Curve 3 is Outdoor Equipment's:

-Refer to Figure 8.8.The vertical distance AB is Outdoor Equipment's:

The long run is when at least one cost is fixed.

Table 8.4 -Refer to Table 8.4.Three workers can produce cakes per day at a total cost of .

Table 8.4 -Refer to Table 8.4.When the fifth worker is employed,the marginal cost is:

Describe the relationship between marginal cost and average cost.

If marginal cost is above average variable cost,then:

Table 8.1 -Which of the following situations describes a short-run adjustment of a firm to changing business conditions?

The manager of HDG Computers reports that if output expands in the long run then average costs will rise.This is an example of:

-Refer to Figure 8.5.The marginal cost of the third oven is:

If a firm is operating in the long run the firm is flexible in the following:

Recent innovations in photovoltaic technology have reduced the unit cost of solar power.

Total economic costs include:

Suppose marginal cost is $5.Average variable costs are $10.For the next unit of output produced,average variable costs will be:

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 8: Production Technology and Cost

Total variable cost:

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

All of the following are possible reasons for diseconomies of scale EXCEPT:

-Refer to Figure 8.8.Curve 3 is Outdoor Equipment's:

-Refer to Figure 8.8.The vertical distance AB is Outdoor Equipment's:

The long run is when at least one cost is fixed.

Table 8.4 -Refer to Table 8.4.Three workers can produce ________ cakes per day at a total cost of ________.

Table 8.4 -Refer to Table 8.4.When the fifth worker is employed,the marginal cost is:

Describe the relationship between marginal cost and average cost.

If marginal cost is above average variable cost,then:

Table 8.1 -Which of the following situations describes a short-run adjustment of a firm to changing business conditions?

The manager of HDG Computers reports that if output expands in the long run then average costs will rise.This is an example of:

-Refer to Figure 8.5.The marginal cost of the third oven is:

If a firm is operating in the long run the firm is flexible in the following:

Recent innovations in photovoltaic technology have reduced the unit cost of solar power.

Total economic costs include:

Suppose marginal cost is $5.Average variable costs are $10.For the next unit of output produced,average variable costs will be:

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Table 8.4 -Refer to Table 8.4.Three workers can produce cakes per day at a total cost of .