Question 1

The __________ hand is the metaphor used to refer to market coordination,whereas the __________ hand is the metaphor used to refer to managerial coordination.

Accepted Answer

A)  visible; fast 
B)  invisible; visible 
C)  fast; lazy 
D)  lazy; fast 
E)  none of the above 
A)  visible; fast 
B)  invisible; visible 
C)  fast; lazy 
D)  lazy; fast 
E)  none of the above

Question 2

Which of the following statements is true?

Accepted Answer

A)  Costs are always explicit, never implicit. 
B)  Costs are always implicit, never explicit. 
C)  George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop. The $5,000 for carpet is an implicit cost. 
D)  An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made. 
E)  none of the above 
A)  Costs are always explicit, never implicit. 
B)  Costs are always implicit, never explicit. 
C)  George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop. The $5,000 for carpet is an implicit cost. 
D)  An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made. 
E)  none of the above

Question 3

A firm that earns zero accounting profit is earning a normal profit.

Accepted Answer

A) True 
 B)False

Question 4

Shirking,being a form of __________,is a good that individuals may consume more of the __________ its cost.

Accepted Answer

A)  work; higher 
B)  work; lower 
C)  leisure; higher 
D)  leisure; lower 
A)  work; higher 
B)  work; lower 
C)  leisure; higher 
D)  leisure; lower

Question 5

Accounting profit is always greater than or equal to economic profit.

Accepted Answer

A) True 
 B)False

Question 6

If inputs are increased by 10 percent and output increases by 20 percent,then __________ are said to exist.

Accepted Answer

A)  economies of scale 
B)  constant returns to scale 
C)  diseconomies of scale 
D)  diminishing marginal returns 
A)  economies of scale 
B)  constant returns to scale 
C)  diseconomies of scale 
D)  diminishing marginal returns

Question 7

In the theory of the firm (as put forth by Alchian and Demsetz),trade or exchange pops up in the following situation:

Accepted Answer

A)  when individuals choose to form a team 
B)  when the monitor fires an employee 
C)  when individuals in a team shirk 
D)  a and c 
A)  when individuals choose to form a team 
B)  when the monitor fires an employee 
C)  when individuals in a team shirk 
D)  a and c

Question 8

If the owners of a firm earn accounting profit,it follows that

Accepted Answer

A)  they will earn economic profit, too. 
B)  their explicit costs are greater than their implicit costs. 
C)  their implicit costs are greater than their explicit costs. 
D)  they will not earn economic profit. 
E)  none of the above 
A)  they will earn economic profit, too. 
B)  their explicit costs are greater than their implicit costs. 
C)  their implicit costs are greater than their explicit costs. 
D)  they will not earn economic profit. 
E)  none of the above

Question 9

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

Accepted Answer

A)  70 units 
B)  60 units 
C)  100 units 
D)  15 units 
A)  70 units 
B)  60 units 
C)  100 units 
D)  15 units

Question 10

Exhibit 22-2
  
-Refer to Exhibit 22-2.What is the average variable cost of producing 120 units of output?

Accepted Answer

A)  $0.67 
B)  $1.17 
C)  $1.00 
D)  $1.44 
E)  There is not enough information provided to answer the question. 
A)  $0.67 
B)  $1.17 
C)  $1.00 
D)  $1.44 
E)  There is not enough information provided to answer the question.

Question 11

A cost that is incurred when an actual monetary payment is made is a(n)__________ cost.

Accepted Answer

A)  explicit 
B)  implicit 
C)  positive 
D)  expressed 
A)  explicit 
B)  implicit 
C)  positive 
D)  expressed

Question 12

Exhibit 22-5
  
-Refer to Exhibit 22-5.Economies of scale are present between

Accepted Answer

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

Question 13

Carol says the following to an economist: "I hate playing the guitar,but I have taken lessons for 10 years,so I might as well continue.There is a chance I will become a professional guitarist one day." An economist would probably make which of the following statements?

Accepted Answer

A)  In a world of scarcity and unhappy alternatives, guitar playing may be your best bet. 
B)  You're right; it is better not to let all that time, energy, and money on guitar lessons go to waste. That would be uneconomical and irrational. 
C)  The music made by a guitar is nice; maybe you should stay with it, you may come to like it. 
D)  The cost you have incurred for guitar lessons is sunk. You should not allow something that can't be undone to influence a current decision. 
A)  In a world of scarcity and unhappy alternatives, guitar playing may be your best bet. 
B)  You're right; it is better not to let all that time, energy, and money on guitar lessons go to waste. That would be uneconomical and irrational. 
C)  The music made by a guitar is nice; maybe you should stay with it, you may come to like it. 
D)  The cost you have incurred for guitar lessons is sunk. You should not allow something that can't be undone to influence a current decision.

Question 14

Exhibit 22-4
  
-Refer to Exhibit 22-4.Curve B is a(n)__________ cost curve.

Accepted Answer

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

Question 15

At 100 units of output,total cost is $22,000 and total variable cost is $14,000.At 100 units of output,what is the value of average total cost,average variable cost,and average fixed cost,respectively?

Accepted Answer

A)  $22; $14; $8 
B)  $220; $140; $80 
C)  $740; $340; $400 
D)  $340; $740; $60 
E)  $400; $340: There is not enough information provided to determine the average fixed cost. 
A)  $22; $14; $8 
B)  $220; $140; $80 
C)  $740; $340; $400 
D)  $340; $740; $60 
E)  $400; $340: There is not enough information provided to determine the average fixed cost.

Question 16

The law of diminishing marginal returns is

Accepted Answer

A)  the same concept as economies of scale. 
B)  another name for the law of diminishing marginal utility. 
C)  important for long-run economic analysis. 
D)  relevant to the production of goods, but not services. 
E)  none of the above 
A)  the same concept as economies of scale. 
B)  another name for the law of diminishing marginal utility. 
C)  important for long-run economic analysis. 
D)  relevant to the production of goods, but not services. 
E)  none of the above

Question 17

Constant returns to scale are said to exist when inputs are increased by some percentage and output increases by a(n)__________ percentage,causing unit costs to __________.

Accepted Answer

A)  greater; fall 
B)  smaller; fall 
C)  greater; rise 
D)  smaller; rise 
E)  equal; remain constant 
A)  greater; fall 
B)  smaller; fall 
C)  greater; rise 
D)  smaller; rise 
E)  equal; remain constant

Question 18

"As additional units of a variable input are added to a fixed input,eventually the marginal physical product of the variable input will decline." This is a statement of the

Accepted Answer

A)  law of supply. 
B)  average-marginal rule. 
C)  law of diminishing marginal utility. 
D)  law of diminishing marginal returns. 
A)  law of supply. 
B)  average-marginal rule. 
C)  law of diminishing marginal utility. 
D)  law of diminishing marginal returns.

Question 19

A fixed input is an input whose quantity

Accepted Answer

A)  can be changed as output changes in the short run. 
B)  cannot be changed as output changes in the short run. 
C)  cannot be changed as output changes in the long run. 
D)  a and c 
E)  b and c 
A)  can be changed as output changes in the short run. 
B)  cannot be changed as output changes in the short run. 
C)  cannot be changed as output changes in the long run. 
D)  a and c 
E)  b and c

Question 20

Average productivity of labor equals

Accepted Answer

A)  the change in output divided by the change in labor. 
B)  output divided by the MPP of labor. 
C)  output divided by marginal cost. 
D)  output divided by the quantity of labor. 
E)  the quantity of labor divided by output. 
A)  the change in output divided by the change in labor. 
B)  output divided by the MPP of labor. 
C)  output divided by marginal cost. 
D)  output divided by the quantity of labor. 
E)  the quantity of labor divided by output.

Exam 22: Production and Costs

The __________ hand is the metaphor used to refer to market coordination,whereas the __________ hand is the metaphor used to refer to managerial coordination.

Which of the following statements is true?

A firm that earns zero accounting profit is earning a normal profit.

Shirking,being a form of __________,is a good that individuals may consume more of the __________ its cost.

Accounting profit is always greater than or equal to economic profit.

If inputs are increased by 10 percent and output increases by 20 percent,then __________ are said to exist.

In the theory of the firm (as put forth by Alchian and Demsetz),trade or exchange pops up in the following situation:

If the owners of a firm earn accounting profit,it follows that

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

Exhibit 22-2 -Refer to Exhibit 22-2.What is the average variable cost of producing 120 units of output?

A cost that is incurred when an actual monetary payment is made is a(n)__________ cost.

Exhibit 22-5 -Refer to Exhibit 22-5.Economies of scale are present between

Carol says the following to an economist: "I hate playing the guitar,but I have taken lessons for 10 years,so I might as well continue.There is a chance I will become a professional guitarist one day." An economist would probably make which of the following statements?

Exhibit 22-4 -Refer to Exhibit 22-4.Curve B is a(n)__________ cost curve.

At 100 units of output,total cost is $22,000 and total variable cost is $14,000.At 100 units of output,what is the value of average total cost,average variable cost,and average fixed cost,respectively?

The law of diminishing marginal returns is

Constant returns to scale are said to exist when inputs are increased by some percentage and output increases by a(n)__________ percentage,causing unit costs to __________.

"As additional units of a variable input are added to a fixed input,eventually the marginal physical product of the variable input will decline." This is a statement of the

A fixed input is an input whose quantity

Average productivity of labor equals

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

The hand is the metaphor used to refer to market coordination,whereas the hand is the metaphor used to refer to managerial coordination.

Shirking,being a form of ,is a good that individuals may consume more of the its cost.

Constant returns to scale are said to exist when inputs are increased by some percentage and output increases by a(n) percentage,causing unit costs to .