Question 1

Economies of scale refer to

Accepted Answer

A)  the minimum point on the short-run average total cost curve. 
B)  the flat portion of the long-run average total cost curve. 
C)  a decrease in the long-run average total cost of production as output increases. 
D)  a and b 
E)  none of the above 
A)  the minimum point on the short-run average total cost curve. 
B)  the flat portion of the long-run average total cost curve. 
C)  a decrease in the long-run average total cost of production as output increases. 
D)  a and b 
E)  none of the above

Question 2

Exhibit 22-7
  
-Refer to Exhibit 22-7.The total variable cost of producing 3 units is

Accepted Answer

A)  $31.00. 
B)  $51.00. 
C)  $17.00. 
D)  $60.00. 
E)  There is not enough information to answer this question. 
A)  $31.00. 
B)  $51.00. 
C)  $17.00. 
D)  $60.00. 
E)  There is not enough information to answer this question.

Question 3

Exhibit 22-11
  
-Refer to Exhibit 22-11.Marginal cost of the sixth unit of output is

Accepted Answer

A)  $100. 
B)  $150. 
C)  $90. 
D)  $90.83. 
A)  $100. 
B)  $150. 
C)  $90. 
D)  $90.83.

Question 4

Exhibit 22-11
  
-Refer to Exhibit 22-11.Average variable cost at three units of output is

Accepted Answer

A)  $50. 
B)  $60. 
C)  $93.33. 
D)  $110. 
E)  There is not enough information provided to answer this question. 
A)  $50. 
B)  $60. 
C)  $93.33. 
D)  $110. 
E)  There is not enough information provided to answer this question.

Question 5

Exhibit 22-13
  
-Refer to Exhibit 22-13. What dollar amounts go in blanks (A)and (B)?

Accepted Answer

A)  $200; $100 
B)  $200; $200 
C)  $50; $100 
D)  $10; $100 
E)  There is not enough information to answer this question. 
A)  $200; $100 
B)  $200; $200 
C)  $50; $100 
D)  $10; $100 
E)  There is not enough information to answer this question.

Question 6

According to economists Alchian and Demsetz,firms are formed when

Accepted Answer

A)  the sum of what individuals can produce as a team is greater than the sum of what individuals can produce working alone. 
B)  the sum of what individuals can produce working alone is greater than the sum of what individuals can produce as a team. 
C)  what each individual can produce as a member of a team is less than what each individual can produce working alone. 
D)  the sum of what individuals can produce as a team is equal to the sum of what individuals can produce working alone. 
E)  none of the above 
A)  the sum of what individuals can produce as a team is greater than the sum of what individuals can produce working alone. 
B)  the sum of what individuals can produce working alone is greater than the sum of what individuals can produce as a team. 
C)  what each individual can produce as a member of a team is less than what each individual can produce working alone. 
D)  the sum of what individuals can produce as a team is equal to the sum of what individuals can produce working alone. 
E)  none of the above

Question 7

Economists Alchian and Demsetz suggest that firms are formed when

Accepted Answer

A)  the sum of what individuals can produce alone is greater than what they can produce as a team. 
B)  someone wants to earn profits. 
C)  someone comes up with the idea that customers will buy a new product. 
D)  the sum of what individuals can produce as a team is greater than the sum of what they can produce alone. 
A)  the sum of what individuals can produce alone is greater than what they can produce as a team. 
B)  someone wants to earn profits. 
C)  someone comes up with the idea that customers will buy a new product. 
D)  the sum of what individuals can produce as a team is greater than the sum of what they can produce alone.

Question 8

Situation 22-4
  
-Refer to Situation 22-4. What are Joe's implicit costs?

Accepted Answer

A)  $150,000 
B)  $175,000 
C)  $35,000 
D)  $200,000 
E)  $50,000 
A)  $150,000 
B)  $175,000 
C)  $35,000 
D)  $200,000 
E)  $50,000

Question 9

John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000.Instead,John decides to give the card to his sister (an avid baseball-card collector)as a birthday present.The opportunity cost of John's generosity is

Accepted Answer

A)  $10, the purchase price. 
B)  $0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away. 
C)  $2,000, the amount offered by the collector. 
D)  $1,005, the average of $10 and $2,000. 
A)  $10, the purchase price. 
B)  $0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away. 
C)  $2,000, the amount offered by the collector. 
D)  $1,005, the average of $10 and $2,000.

Question 10

If explicit costs equal $40,000,implicit costs equal $95,000,and accounting profit equals $23,000,it follows that total revenue equals __________ and economic profit equals __________.

Accepted Answer

A)  $75,000; $17,000 
B)  $63,000; -$72,000 
C)  $68,000; $25,000 
D)  $22,000; -$68,000 
E)  There is not enough information given to answer this question. 
A)  $75,000; $17,000 
B)  $63,000; -$72,000 
C)  $68,000; $25,000 
D)  $22,000; -$68,000 
E)  There is not enough information given to answer this question.

Question 11

Exhibit 22-6
  
-Refer to Exhibit 22-6.The curve labeled "L" represents the firm's __________ cost curve.

Accepted Answer

A)  average variable 
B)  total fixed 
C)  average fixed 
D)  total variable 
E)  marginal 
A)  average variable 
B)  total fixed 
C)  average fixed 
D)  total variable 
E)  marginal

Question 12

In the long run,

Accepted Answer

A)  all costs are variable costs. 
B)  all costs are fixed costs. 
C)  there are no variable costs. 
D)  b and c 
A)  all costs are variable costs. 
B)  all costs are fixed costs. 
C)  there are no variable costs. 
D)  b and c

Question 13

The vertical distance between the AVC and ATC curves is equal to

Accepted Answer

A)  marginal cost. 
B)  average fixed cost. 
C)  accounting profit. 
D)  economic profit. 
E)  none of the above 
A)  marginal cost. 
B)  average fixed cost. 
C)  accounting profit. 
D)  economic profit. 
E)  none of the above

Question 14

Diseconomies of scale are present when the __________ average total cost curve is __________.

Accepted Answer

A)  short-run; falling 
B)  short-run; rising 
C)  long-run; falling 
D)  long-run; rising 
E)  b and d 
A)  short-run; falling 
B)  short-run; rising 
C)  long-run; falling 
D)  long-run; rising 
E)  b and d

Question 15

A cost of resources used in production for which no actual monetary payment is made is a(n)__________ cost.

Accepted Answer

A)  tacit 
B)  implicit 
C)  covert 
D)  explicit 
A)  tacit 
B)  implicit 
C)  covert 
D)  explicit

Question 16

Consider the following information about a business Diane opened last year: price = $10,quantity sold = 25,000; implicit cost = $55,000; explicit cost = $160,000.What was Diane's economic profit?

Accepted Answer

A)  $35,000 
B)  $195,000 
C)  -$35,000 
D)  $90,000 
E)  There is not enough information provided to answer this question. 
A)  $35,000 
B)  $195,000 
C)  -$35,000 
D)  $90,000 
E)  There is not enough information provided to answer this question.

Question 17

Using the concept of marginal cost,explain how a parent could structure a teenager's punishment for misbehavior so as to achieve the parent's goal (for example,having the teen home by a certain time).

Accepted Answer

If the parent structures the punishment

Question 18

Exhibit 22-14
   
Assume that labor is the only variable input.
-Refer to Exhibit 22-14.What is the MPP of the first unit of labor [blank (C)]?

Accepted Answer

A)  700 units 
B)  600 units 
C)  100 units 
D)  50 units 
A)  700 units 
B)  600 units 
C)  100 units 
D)  50 units

Question 19

If the quantity of output rises as more of a variable input is added to a fixed input,

Accepted Answer

A)  the law of diminishing marginal returns does not hold. 
B)  total fixed cost must be declining. 
C)  marginal cost must be constant. 
D)  marginal physical product of the variable input is necessarily rising. 
E)  none of the above 
A)  the law of diminishing marginal returns does not hold. 
B)  total fixed cost must be declining. 
C)  marginal cost must be constant. 
D)  marginal physical product of the variable input is necessarily rising. 
E)  none of the above

Question 20

As the marginal physical product of a variable input increases,the marginal cost decreases.

Accepted Answer

A) True 
 B)False

Exam 22: Production and Costs

Economies of scale refer to

Exhibit 22-7 -Refer to Exhibit 22-7.The total variable cost of producing 3 units is

Exhibit 22-11 -Refer to Exhibit 22-11.Marginal cost of the sixth unit of output is

Exhibit 22-11 -Refer to Exhibit 22-11.Average variable cost at three units of output is

Exhibit 22-13 -Refer to Exhibit 22-13. What dollar amounts go in blanks (A)and (B)?

According to economists Alchian and Demsetz,firms are formed when

Economists Alchian and Demsetz suggest that firms are formed when

Situation 22-4 -Refer to Situation 22-4. What are Joe's implicit costs?

John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000.Instead,John decides to give the card to his sister (an avid baseball-card collector)as a birthday present.The opportunity cost of John's generosity is

If explicit costs equal $40,000,implicit costs equal $95,000,and accounting profit equals $23,000,it follows that total revenue equals __________ and economic profit equals __________.

Exhibit 22-6 -Refer to Exhibit 22-6.The curve labeled "L" represents the firm's __________ cost curve.

In the long run,

The vertical distance between the AVC and ATC curves is equal to

Diseconomies of scale are present when the __________ average total cost curve is __________.

A cost of resources used in production for which no actual monetary payment is made is a(n)__________ cost.

Consider the following information about a business Diane opened last year: price = $10,quantity sold = 25,000; implicit cost = $55,000; explicit cost = $160,000.What was Diane's economic profit?

Using the concept of marginal cost,explain how a parent could structure a teenager's punishment for misbehavior so as to achieve the parent's goal (for example,having the teen home by a certain time).

Exhibit 22-14 Assume that labor is the only variable input. -Refer to Exhibit 22-14.What is the MPP of the first unit of labor [blank (C)]?

If the quantity of output rises as more of a variable input is added to a fixed input,

As the marginal physical product of a variable input increases,the marginal cost decreases.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

If explicit costs equal $40,000,implicit costs equal $95,000,and accounting profit equals $23,000,it follows that total revenue equals and economic profit equals .

Diseconomies of scale are present when the average total cost curve is .