Question 1

Exhibit 22-11
  
-Refer to Exhibit 22-11.Average fixed cost at two units of output is

Accepted Answer

A)  $50. 
B)  $60. 
C)  $100. 
D)  $110. 
E)  There is not enough information provided to answer this question. 
A)  $50. 
B)  $60. 
C)  $100. 
D)  $110. 
E)  There is not enough information provided to answer this question.

Question 2

What is the relationship between the average fixed cost (AFC)curve and the marginal cost (MC)curve?

Accepted Answer

A)  The MC curve intersects the AFC curve at its minimum point. 
B)  When the MC curve is above the AFC curve, AFC must be increasing. 
C)  Both a and b are true. 
D)  There is no relationship between the AFC curve and the MC curve.. 
A)  The MC curve intersects the AFC curve at its minimum point. 
B)  When the MC curve is above the AFC curve, AFC must be increasing. 
C)  Both a and b are true. 
D)  There is no relationship between the AFC curve and the MC curve..

Question 3

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

Accepted Answer

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

Question 4

Situation 22-3
  
-Refer to Situation 22-3.What are the total 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 5

If implicit costs equal accounting profit,economic profit must be

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  higher in the short run than in the long run. 
E)  higher in the long run than in the short run. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  higher in the short run than in the long run. 
E)  higher in the long run than in the short run.

Question 6

Minimum efficient scale refers to the output level where short-run average total cost is lowest.

Accepted Answer

A) True 
 B)False

Question 7

The short run is

Accepted Answer

A)  a period of time in which all inputs are fixed. 
B)  a period of time in which all inputs are variable. 
C)  a period of time in which some inputs are fixed. 
D)  always less than a year. 
E)  a and d 
A)  a period of time in which all inputs are fixed. 
B)  a period of time in which all inputs are variable. 
C)  a period of time in which some inputs are fixed. 
D)  always less than a year. 
E)  a and d

Question 8

If the average variable cost curve is falling,

Accepted Answer

A)  the MC curve must be below it. 
B)  marginal cost is greater than average variable cost. 
C)  the MC curve is necessarily falling. 
D)  the MC curve is necessarily horizontal (neither rising nor falling). 
E)  the MC curve is necessarily rising. 
A)  the MC curve must be below it. 
B)  marginal cost is greater than average variable cost. 
C)  the MC curve is necessarily falling. 
D)  the MC curve is necessarily horizontal (neither rising nor falling). 
E)  the MC curve is necessarily rising.

Question 9

An example of an implicit cost is the foregone income that a business owner-manager could have earned working for someone else.

Accepted Answer

A) True 
 B)False

Question 10

A rising marginal cost curve is a reflection of a

Accepted Answer

A)  rising marginal physical product curve. 
B)  falling marginal physical product curve. 
C)  falling average fixed cost curve. 
D)  rising average variable cost curve. 
A)  rising marginal physical product curve. 
B)  falling marginal physical product curve. 
C)  falling average fixed cost curve. 
D)  rising average variable cost curve.

Question 11

Situation 22-4
  
-Refer to Situation 22-4. Is Joe earning a normal profit?

Accepted Answer

A)  No, he is earning an above-normal profit. 
B)  No, but he is earning an accounting profit and that is all that matters. 
C)  Yes, but his economic profit is $0 and that is not good. 
D)  We cannot be sure, because "normal" profit is a subjective judgment. 
E)  No, his economic profit is negative. 
A)  No, he is earning an above-normal profit. 
B)  No, but he is earning an accounting profit and that is all that matters. 
C)  Yes, but his economic profit is $0 and that is not good. 
D)  We cannot be sure, because "normal" profit is a subjective judgment. 
E)  No, his economic profit is negative.

Question 12

If the government places a $2 tax on each unit of good X that is produced by Firm A,it follows that the tax will not affect __________ cost,but will affect __________ cost.

Accepted Answer

A)  variable; fixed 
B)  fixed; variable 
C)  average fixed; average variable 
D)  marginal; fixed 
E)  b and c 
A)  variable; fixed 
B)  fixed; variable 
C)  average fixed; average variable 
D)  marginal; fixed 
E)  b and c

Question 13

Exhibit 22-2
  
-Refer to Exhibit 22-2.What is the average total cost of producing 90 units of output?

Accepted Answer

A)  $4.75 
B)  $1.17 
C)  $1.07 
D)  $2.11 
E)  There is not enough information provided to answer the question. 
A)  $4.75 
B)  $1.17 
C)  $1.07 
D)  $2.11 
E)  There is not enough information provided to answer the question.

Question 14

If the marginal physical product (MPP)of the variable input is constant over a range of output,then it follows that __________ cost will be constant over the same range of output.

Accepted Answer

A)  marginal 
B)  average fixed 
C)  average total 
D)  a and b 
E)  a, b, and c 
A)  marginal 
B)  average fixed 
C)  average total 
D)  a and b 
E)  a, b, and c

Question 15

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

Accepted Answer

A)  $100; $30 
B)  $400; $50 
C)  $200; $30 
D)  $40; $20 
E)  There is not enough information to answer this question. 
A)  $100; $30 
B)  $400; $50 
C)  $200; $30 
D)  $40; $20 
E)  There is not enough information to answer this question.

Question 16

The law of diminishing marginal returns

Accepted Answer

A)  is a short run concept. 
B)  is a long run concept. 
C)  is both a short run and a long run concept. 
D)  does not hold in the real world. 
A)  is a short run concept. 
B)  is a long run concept. 
C)  is both a short run and a long run concept. 
D)  does not hold in the real world.

Question 17

The Alchian and Demsetz theory of why business firms exist suggests that

Accepted Answer

A)  there are only advantages to team production. 
B)  disadvantages of team production may outweigh the disadvantages of individual production. 
C)  individual production is more efficient than team production. 
D)  the sum of team production is sometimes greater than the sum of individual production. 
A)  there are only advantages to team production. 
B)  disadvantages of team production may outweigh the disadvantages of individual production. 
C)  individual production is more efficient than team production. 
D)  the sum of team production is sometimes greater than the sum of individual production.

Question 18

There are 30 students in a class.The average grade for the first 29 students is 87.The grade of the remaining student is 84.Given this student's grade,the average grade of the 30-student class will be

Accepted Answer

A)  87. 
B)  higher than 87. 
C)  lower than 87. 
D)  84. 
A)  87. 
B)  higher than 87. 
C)  lower than 87. 
D)  84.

Question 19

Exhibit 22-1
  
-Refer to Exhibit 22-l.The numbers that go in blanks (E)and (F)are,respectively,

Accepted Answer

A)  25 and 20. 
B)  20 and 22. 
C)  15 and 10. 
D)  22 and 20. 
E)  none of the above 
A)  25 and 20. 
B)  20 and 22. 
C)  15 and 10. 
D)  22 and 20. 
E)  none of the above

Question 20

Exhibit 22-7
  
-Refer to Exhibit 22-7.The average fixed cost of producing 5 units of output is

Accepted Answer

A)  $16.25. 
B)  $4.00. 
C)  $11.15. 
D)  $6.00. 
E)  There is not enough information to answer this question. 
A)  $16.25. 
B)  $4.00. 
C)  $11.15. 
D)  $6.00. 
E)  There is not enough information to answer this question.

Exam 22: Production and Costs

Exhibit 22-11 -Refer to Exhibit 22-11.Average fixed cost at two units of output is

What is the relationship between the average fixed cost (AFC)curve and the marginal cost (MC)curve?

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

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

If implicit costs equal accounting profit,economic profit must be

Minimum efficient scale refers to the output level where short-run average total cost is lowest.

The short run is

If the average variable cost curve is falling,

An example of an implicit cost is the foregone income that a business owner-manager could have earned working for someone else.

A rising marginal cost curve is a reflection of a

Situation 22-4 -Refer to Situation 22-4. Is Joe earning a normal profit?

If the government places a $2 tax on each unit of good X that is produced by Firm A,it follows that the tax will not affect __________ cost,but will affect __________ cost.

Exhibit 22-2 -Refer to Exhibit 22-2.What is the average total cost of producing 90 units of output?

If the marginal physical product (MPP)of the variable input is constant over a range of output,then it follows that __________ cost will be constant over the same range of output.

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

The law of diminishing marginal returns

The Alchian and Demsetz theory of why business firms exist suggests that

There are 30 students in a class.The average grade for the first 29 students is 87.The grade of the remaining student is 84.Given this student's grade,the average grade of the 30-student class will be

Exhibit 22-1 -Refer to Exhibit 22-l.The numbers that go in blanks (E)and (F)are,respectively,

Exhibit 22-7 -Refer to Exhibit 22-7.The average fixed cost of producing 5 units of output is

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 the government places a $2 tax on each unit of good X that is produced by Firm A,it follows that the tax will not affect cost,but will affect cost.