Question 1

Refer to Figure 21.5.Diseconomies of scale begin to occur

Accepted Answer

A) At the minimum points on all five ATC curves. 
B) After the third factory. 
C) After the fourth factory. 
D) After the first factory. 
A) At the minimum points on all five ATC curves. 
B) After the third factory. 
C) After the fourth factory. 
D) After the first factory. B

Question 2

If MPP declines with greater output,then MC must increase.

Accepted Answer

A) True 
 B)False  True

Question 3

When the average total cost curve is rising,the marginal cost curve will be

Accepted Answer

A) Below the average fixed cost curve. 
B) Falling with greater output. 
C) Above the average total cost curve. 
D) Below the average total cost curve. 
A) Below the average fixed cost curve. 
B) Falling with greater output. 
C) Above the average total cost curve. 
D) Below the average total cost curve. C

Question 4

In the short run,when a firm produces zero output,variable cost equals

Accepted Answer

A) Zero. 
B) Total cost. 
C) Fixed cost. 
D) Marginal cost. 
A) Zero. 
B) Total cost. 
C) Fixed cost. 
D) Marginal cost.

Question 5

Actual output will always equal the limit described in the production function.

Accepted Answer

A) True 
 B)False

Question 6

Table 21.2 $\begin{array}{|l|r|r|r|r|}
\hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \
\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80\
\hline
\end{array}$

The marginal cost per unit between 20 and 30 units of output in Table 21.2 is

Accepted Answer

A) $1.60. 
B) $4.00. 
C) $1.80. 
D) $18.00. 
A) $1.60. 
B) $4.00. 
C) $1.80. 
D) $18.00.

Question 7

Total output may continue to rise even though marginal physical product is negative.

Accepted Answer

A) True 
 B)False

Question 8

Explain the concepts of explicit costs and implicit costs.Why do economists include implicit costs in their calculation of profits?

Accepted Answer

Explicit costs equal the financial costs

Question 9

Table 21.2 $\begin{array}{|l|r|r|r|r|}
\hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \
\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80\
\hline
\end{array}$

For the output levels in Table 21.2,the minimum of the average variable cost curve occurs at a production rate of

Accepted Answer

A) Zero units per day. 
B) 10 units per day. 
C) 20 units per day. 
D) 30 units per day. 
A) Zero units per day. 
B) 10 units per day. 
C) 20 units per day. 
D) 30 units per day.

Question 10

A U-shaped average total cost curve implies

Accepted Answer

A) First diminishing returns,and then increasing returns. 
B) First marginal cost below average total cost,and then marginal cost above average total cost. 
C) That total costs are at a minimum at the minimum of the average cost curve. 
D) A linear total cost curve. 
A) First diminishing returns,and then increasing returns. 
B) First marginal cost below average total cost,and then marginal cost above average total cost. 
C) That total costs are at a minimum at the minimum of the average cost curve. 
D) A linear total cost curve.

Question 11

Table 21.4 $\begin{array}{|c|r|}
\hline \text { Output (Units per Day) } & \text { Total Cost (Dollars per Day) } \
\hline 0 & 16 \
\hline 1 & 30 \
\hline 2 & 42 \
\hline 3 & 58 \
\hline 4 & 78 \
\hline
\end{array}$
 For the output levels in Table 21.4,the minimum of the average variable cost curve occurs at a production rate of

Accepted Answer

A) 3 units per day. 
B) 2 units per day. 
C) 4 units per day. 
D) Zero units per day. 
A) 3 units per day. 
B) 2 units per day. 
C) 4 units per day. 
D) Zero units per day.

Question 12

Table 21.4 $\begin{array}{|c|r|}
\hline \text { Output (Units per Day) } & \text { Total Cost (Dollars per Day) } \
\hline 0 & 16 \
\hline 1 & 30 \
\hline 2 & 42 \
\hline 3 & 58 \
\hline 4 & 78 \
\hline
\end{array}$
 The marginal cost of the fourth unit of output in Table 21.4 is

Accepted Answer

A) $4.00. 
B) $20.00. 
C) $16.00. 
D) $19.50. 
A) $4.00. 
B) $20.00. 
C) $16.00. 
D) $19.50.

Question 13

Marginal cost

Accepted Answer

A) Is the change in total output from hiring one more factor of production. 
B) Is the change in total cost associated with a one-unit increase in production. 
C) Falls when there are diminishing returns. 
D) Is the change in the total cost when hiring one more factor of production. 
A) Is the change in total output from hiring one more factor of production. 
B) Is the change in total cost associated with a one-unit increase in production. 
C) Falls when there are diminishing returns. 
D) Is the change in the total cost when hiring one more factor of production.

Question 14

If a firm could hire all the workers it wanted at a zero wage (i.e. ,the workers are volunteers),the firm should hire

Accepted Answer

A) Enough workers to produce the output where diminishing returns begin. 
B) Enough workers to produce the output where worker productivity is the highest. 
C) Enough workers to produce where the MPP equals zero. 
D) All the workers that can fit into the factory. 
A) Enough workers to produce the output where diminishing returns begin. 
B) Enough workers to produce the output where worker productivity is the highest. 
C) Enough workers to produce where the MPP equals zero. 
D) All the workers that can fit into the factory.

Question 15

In the long run,which of the following is likely to be a variable cost?

Accepted Answer

A) Factory rental but not wage costs. 
B) Wage costs but not costs for equipment. 
C) Interest payments on borrowed funds but not utilities. 
D) Rent,wages,and all other costs are variable in the long run. 
A) Factory rental but not wage costs. 
B) Wage costs but not costs for equipment. 
C) Interest payments on borrowed funds but not utilities. 
D) Rent,wages,and all other costs are variable in the long run.

Question 16

Table 21.4 $\begin{array}{|c|r|}
\hline \text { Output (Units per Day) } & \text { Total Cost (Dollars per Day) } \
\hline 0 & 16 \
\hline 1 & 30 \
\hline 2 & 42 \
\hline 3 & 58 \
\hline 4 & 78 \
\hline
\end{array}$
 At 2 units of output in Table 21.4,the average variable cost is

Accepted Answer

A) $13. 
B) $6. 
C) $12. 
D) $21. 
A) $13. 
B) $6. 
C) $12. 
D) $21.

Question 17

The most desired goods and services that are foregone in order to obtain something else are the

Accepted Answer

A) Average total cost. 
B) Variable cost. 
C) Marginal cost. 
D) Opportunity cost. 
A) Average total cost. 
B) Variable cost. 
C) Marginal cost. 
D) Opportunity cost.

Question 18

The average fixed cost (AFC)curve

Accepted Answer

A) Is U-shaped as a result of diminishing returns. 
B) Declines as long as output increases. 
C) Is intersected at its minimum point by marginal cost. 
D) Intersects the marginal cost curve at its minimum point. 
A) Is U-shaped as a result of diminishing returns. 
B) Declines as long as output increases. 
C) Is intersected at its minimum point by marginal cost. 
D) Intersects the marginal cost curve at its minimum point.

Question 19

Unit labor cost represents the increase in output because an additional worker is hired.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the best explanation of why the law of diminishing returns does not apply in the long run?

Accepted Answer

A) In the long run,firms can increase the availability of space and equipment to keep up with the increase in variable inputs. 
B) The MPP does not change in the long run. 
C) In the long run,firms have enough time to find the most qualified workers. 
D) All factors of production are fixed in the long run. 
A) In the long run,firms can increase the availability of space and equipment to keep up with the increase in variable inputs. 
B) The MPP does not change in the long run. 
C) In the long run,firms have enough time to find the most qualified workers. 
D) All factors of production are fixed in the long run.

Exam 21: The Costs of Production

Refer to Figure 21.5.Diseconomies of scale begin to occur

If MPP declines with greater output,then MC must increase.

When the average total cost curve is rising,the marginal cost curve will be

In the short run,when a firm produces zero output,variable cost equals

Actual output will always equal the limit described in the production function.

Table 21.2 Output (units per day) 0 10 20 30 Total cost (dollars per day) \ 40 \ 54 \ 62 \ 80 The marginal cost per unit between 20 and 30 units of output in Table 21.2 is

Total output may continue to rise even though marginal physical product is negative.

Explain the concepts of explicit costs and implicit costs.Why do economists include implicit costs in their calculation of profits?

Table 21.2 Output (units per day) 0 10 20 30 Total cost (dollars per day) \ 40 \ 54 \ 62 \ 80 For the output levels in Table 21.2,the minimum of the average variable cost curve occurs at a production rate of

A U-shaped average total cost curve implies

Table 21.4 Output (Units per Day) Total Cost (Dollars per Day) 0 16 1 30 2 42 3 58 4 78 For the output levels in Table 21.4,the minimum of the average variable cost curve occurs at a production rate of

Table 21.4 Output (Units per Day) Total Cost (Dollars per Day) 0 16 1 30 2 42 3 58 4 78 The marginal cost of the fourth unit of output in Table 21.4 is

Marginal cost

If a firm could hire all the workers it wanted at a zero wage (i.e. ,the workers are volunteers),the firm should hire

In the long run,which of the following is likely to be a variable cost?

Table 21.4 Output (Units per Day) Total Cost (Dollars per Day) 0 16 1 30 2 42 3 58 4 78 At 2 units of output in Table 21.4,the average variable cost is

The most desired goods and services that are foregone in order to obtain something else are the

The average fixed cost (AFC)curve

Unit labor cost represents the increase in output because an additional worker is hired.

Which of the following is the best explanation of why the law of diminishing returns does not apply in the long run?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters