Question 1

Situation 22-3
  
-Refer to Situation 22-3.What are the total variable costs?

Accepted Answer

A)  $140 
B)  $240 
C)  $250 
D)  $260 
E)  There is not enough information to answer the question. 
A)  $140 
B)  $240 
C)  $250 
D)  $260 
E)  There is not enough information to answer the question.

Question 2

An economist might say,"The market guides and coordinates individuals' actions." Which of the following is an example of this happening?

Accepted Answer

A)  An employer tells an employee to get to work early. 
B)  As the price of oranges rises, more individuals begin to produce oranges. 
C)  The manager of a plant issues a directive that there will be no more smoking in the cafeteria. 
D)  a and c 
E)  a, b, and c 
A)  An employer tells an employee to get to work early. 
B)  As the price of oranges rises, more individuals begin to produce oranges. 
C)  The manager of a plant issues a directive that there will be no more smoking in the cafeteria. 
D)  a and c 
E)  a, b, and c

Question 3

Exhibit 22-8
  
-Exhibit 22-8 shows how output varies with the only variable input used in its production.The table indicates that diminishing marginal returns set in with the hiring of which unit of labor?

Accepted Answer

A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth 
A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth

Question 4

A rise in variable input prices will affect

Accepted Answer

A)  fixed costs. 
B)  variable costs. 
C)  marginal costs. 
D)  a, b, and c 
E)  b and c 
A)  fixed costs. 
B)  variable costs. 
C)  marginal costs. 
D)  a, b, and c 
E)  b and c

Question 5

Which of the following statements is true?

Accepted Answer

A)  If the marginal cost curve is above the AFC curve, the AFC curve must be rising. 
B)  Average total cost equals average variable cost minus average fixed cost. 
C)  As output increases, the average variable cost curve gets closer to the average total cost curve. 
D)  The AFC curve is horizontal as output increases. 
A)  If the marginal cost curve is above the AFC curve, the AFC curve must be rising. 
B)  Average total cost equals average variable cost minus average fixed cost. 
C)  As output increases, the average variable cost curve gets closer to the average total cost curve. 
D)  The AFC curve is horizontal as output increases.

Question 6

Exhibit 22-3
  
-Refer to Exhibit 22-3.What is the average total cost of producing 60 units of output?

Accepted Answer

A)  $21.67 
B)  $1.33 
C)  $24.17 
D)  $12.50 
A)  $21.67 
B)  $1.33 
C)  $24.17 
D)  $12.50

Question 7

Exhibit 22-3
  
-Refer to Exhibit 22-3.What is the average total cost of producing 45 units of output?

Accepted Answer

A)  $25.11 
B)  $24.44 
C)  $21.11 
D)  $21.33 
A)  $25.11 
B)  $24.44 
C)  $21.11 
D)  $21.33

Question 8

Exhibit 22-9
  
-Refer to Exhibit 22-9.Let MC1and ATC1 represent the initial cost curves of an aluminum can producer.In which of the following cases is it most likely that the curves will shift rightward from MC1,and ATC1to MC3 and ATC3?

Accepted Answer

A)  A new tax of $0.03 per can is imposed on the producer. 
B)  There is an increase in energy costs. 
C)  A new supplier offers to supply aluminum to the firm at a lower price. 
D)  a and b 
A)  A new tax of $0.03 per can is imposed on the producer. 
B)  There is an increase in energy costs. 
C)  A new supplier offers to supply aluminum to the firm at a lower price. 
D)  a and b

Question 9

Exhibit 22-14
   
Assume that labor is the only variable input.
-Refer to Exhibit 22-14.What is the level of output with 2 and 3 laborers working [blanks (A)and (B)]?

Accepted Answer

A)  175 units; 225 units 
B)  100 units; 175 units 
C)  100 units; 225 units 
D)  50 units; 175 units 
E)  none of the above 
A)  175 units; 225 units 
B)  100 units; 175 units 
C)  100 units; 225 units 
D)  50 units; 175 units 
E)  none of the above

Question 10

Exhibit 22-10
  
-Refer to Exhibit 22-10.Professor Jones,who is encouraging the three students to work together in order to be "more productive," is implicitly assuming that by working together they will be able to

Accepted Answer

A)  solve more problems in the same amount of time than they would by studying separately. 
B)  solve the same number of problems in less time than they would by studying separately. 
C)  decrease their marginal products through joint efforts. 
D)  all of the above 
E)  a and b 
A)  solve more problems in the same amount of time than they would by studying separately. 
B)  solve the same number of problems in less time than they would by studying separately. 
C)  decrease their marginal products through joint efforts. 
D)  all of the above 
E)  a and b

Question 11

If the wage rate is constant and diminishing marginal returns have already set in,then

Accepted Answer

A)  the wage rate must increase. 
B)  marginal cost increases. 
C)  marginal cost decreases. 
D)  the wage rate must decrease. 
A)  the wage rate must increase. 
B)  marginal cost increases. 
C)  marginal cost decreases. 
D)  the wage rate must decrease.

Question 12

Implicit cost is a

Accepted Answer

A)  cost that is incurred when a monetary payment is made. 
B)  cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered. 
C)  cost that represents the value of resources used in production for which no monetary payment is made. 
D)  sunk cost. 
E)  b and d 
A)  cost that is incurred when a monetary payment is made. 
B)  cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered. 
C)  cost that represents the value of resources used in production for which no monetary payment is made. 
D)  sunk cost. 
E)  b and d

Question 13

The change in output that results from changing a variable input by one unit,holding all other inputs fixed,is called the marginal __________ product of the variable input.

Accepted Answer

A)  physical 
B)  value 
C)  average 
D)  explicit 
A)  physical 
B)  value 
C)  average 
D)  explicit

Question 14

Describe the law of diminishing marginal returns.How does it relate to the shape of the marginal cost (MC)curve?

Accepted Answer

The law of diminishing marginal returns

Question 15

Exhibit 22-3
  
-Refer to Exhibit 22-3.The marginal physical product figures in blanks (B)and (C)are,respectively,

Accepted Answer

A)  10 and 15. 
B)  15 and 20. 
C)  20 and 15. 
D)  15 and 10. 
E)  10 and 10. 
A)  10 and 15. 
B)  15 and 20. 
C)  20 and 15. 
D)  15 and 10. 
E)  10 and 10.

Question 16

Situation 22-2
  
-Refer to Situation 22-2.What are Alejandro's average variable costs at the present level of production?

Accepted Answer

A)  $60 
B)  $150 
C)  $100 
D)  $200 
E)  There is not enough information to answer the question. 
A)  $60 
B)  $150 
C)  $100 
D)  $200 
E)  There is not enough information to answer the question.

Question 17

At any output of both 100 units and 120 units,unit costs are the same.Unit costs are higher at output levels lower than 100 units and at output levels higher than 120 units.It follows that minimum efficient scale exists

Accepted Answer

A)  somewhere between 100 and 120 units. 
B)  at 100 units. 
C)  at 120 units. 
D)  below 100 units. 
E)  above 100 units. 
A)  somewhere between 100 and 120 units. 
B)  at 100 units. 
C)  at 120 units. 
D)  below 100 units. 
E)  above 100 units.

Question 18

Situation 22-2
  
-Refer to Situation 22-2.What is Alejandro's marginal cost at the present level of production?

Accepted Answer

A)  $60 
B)  $80 
C)  $100 
D)  $200 
E)  There is not enough information to answer the question. 
A)  $60 
B)  $80 
C)  $100 
D)  $200 
E)  There is not enough information to answer the question.

Question 19

Situation 22-3
  
-Refer to Situation 22-3.How many gizmos does Gizmos,Inc.produce?

Accepted Answer

A)  7 
B)  8 
C)  20 
D)  25 
E)  There is not enough information to answer the question. 
A)  7 
B)  8 
C)  20 
D)  25 
E)  There is not enough information to answer the question.

Question 20

Exhibit 22-5
  
-Refer to Exhibit 22-5.The minimum efficient scale is at

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  point D. 
E)  points B and C. 
A)  point A. 
B)  point B. 
C)  point C. 
D)  point D. 
E)  points B and C.

Exam 22: Production and Costs

Situation 22-3 -Refer to Situation 22-3.What are the total variable costs?

An economist might say,"The market guides and coordinates individuals' actions." Which of the following is an example of this happening?

Exhibit 22-8 -Exhibit 22-8 shows how output varies with the only variable input used in its production.The table indicates that diminishing marginal returns set in with the hiring of which unit of labor?

A rise in variable input prices will affect

Which of the following statements is true?

Exhibit 22-3 -Refer to Exhibit 22-3.What is the average total cost of producing 60 units of output?

Exhibit 22-3 -Refer to Exhibit 22-3.What is the average total cost of producing 45 units of output?

Exhibit 22-9 -Refer to Exhibit 22-9.Let MC1and ATC1 represent the initial cost curves of an aluminum can producer.In which of the following cases is it most likely that the curves will shift rightward from MC1,and ATC1to MC3 and ATC3?

Exhibit 22-14 Assume that labor is the only variable input. -Refer to Exhibit 22-14.What is the level of output with 2 and 3 laborers working [blanks (A)and (B)]?

Exhibit 22-10 -Refer to Exhibit 22-10.Professor Jones,who is encouraging the three students to work together in order to be "more productive," is implicitly assuming that by working together they will be able to

If the wage rate is constant and diminishing marginal returns have already set in,then

Implicit cost is a

The change in output that results from changing a variable input by one unit,holding all other inputs fixed,is called the marginal __________ product of the variable input.

Describe the law of diminishing marginal returns.How does it relate to the shape of the marginal cost (MC)curve?

Exhibit 22-3 -Refer to Exhibit 22-3.The marginal physical product figures in blanks (B)and (C)are,respectively,

Situation 22-2 -Refer to Situation 22-2.What are Alejandro's average variable costs at the present level of production?

At any output of both 100 units and 120 units,unit costs are the same.Unit costs are higher at output levels lower than 100 units and at output levels higher than 120 units.It follows that minimum efficient scale exists

Situation 22-2 -Refer to Situation 22-2.What is Alejandro's marginal cost at the present level of production?

Situation 22-3 -Refer to Situation 22-3.How many gizmos does Gizmos,Inc.produce?

Exhibit 22-5 -Refer to Exhibit 22-5.The minimum efficient scale is at

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Exhibit 22-9 -Refer to Exhibit 22-9.Let MC₁and ATC₁ represent the initial cost curves of an aluminum can producer.In which of the following cases is it most likely that the curves will shift rightward from MC₁,and ATC₁to MC₃ and ATC₃?