Question 1

The law of diminishing marginal returns explains the general shape of the firm's

Accepted Answer

A)  long-run cost curves. 
B)  short-run cost curves. 
C)  both short-run and long-run cost curves. 
D)  The law of diminishing returns has nothing to do with cost curves. 
A)  long-run cost curves. 
B)  short-run cost curves. 
C)  both short-run and long-run cost curves. 
D)  The law of diminishing returns has nothing to do with cost curves.

Question 2

The owners of a business

Accepted Answer

A)  are paid the market rate of return for resources they supply to the firm. 
B)  are residual income claimants. 
C)  have little incentive to monitor shirking on the part of employees. 
D)  have little incentive to provide their employees with an incentive system that encourages operational efficiency. 
A)  are paid the market rate of return for resources they supply to the firm. 
B)  are residual income claimants. 
C)  have little incentive to monitor shirking on the part of employees. 
D)  have little incentive to provide their employees with an incentive system that encourages operational efficiency.

Question 3

The short run is a time period such that

Accepted Answer

A)  the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B)  the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C)  the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D)  new firms may build plants and enter the industry. 
A)  the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B)  the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C)  the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D)  new firms may build plants and enter the industry.

Question 4

The increase in total output that results from a unit increase in the employment of a variable input is equal to the input's

Accepted Answer

A)  total product. 
B)  marginal product. 
C)  average product. 
D)  marginal cost. 
A)  total product. 
B)  marginal product. 
C)  average product. 
D)  marginal cost.

Question 5

When the marginal product of labor diminishes,

Accepted Answer

A)  average fixed cost rises. 
B)  average variable cost is constant. 
C)  marginal cost rises. 
D)  average total cost must rise. 
E)  total cost rises at a diminishing rate. 
A)  average fixed cost rises. 
B)  average variable cost is constant. 
C)  marginal cost rises. 
D)  average total cost must rise. 
E)  total cost rises at a diminishing rate.

Question 6

In the short run, which are most important in determining changes in output?

Accepted Answer

A)  marginal costs and marginal revenue. 
B)  total costs and total revenue. 
C)  average costs and total revenue. 
D)  fixed costs. 
A)  marginal costs and marginal revenue. 
B)  total costs and total revenue. 
C)  average costs and total revenue. 
D)  fixed costs.

Question 7

"If it were not for employment discrimination against women, the average earnings of men and women would be equal." Is this statement true or false?

Accepted Answer

Earnings differences between men and wom

Question 8

Figure 8-12  
-In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC1 to ATC2?

Accepted Answer

A)  an increase in demand for plastic chairs 
B)  an increase in the market price of plastic chairs 
C)  an increase in the price of the plastic used to produce the chairs 
D)  a reduction in corporate income taxes 
A)  an increase in demand for plastic chairs 
B)  an increase in the market price of plastic chairs 
C)  an increase in the price of the plastic used to produce the chairs 
D)  a reduction in corporate income taxes

Question 9

A family has decided to go away for the summer. The monthly mortgage payment on the family's house is $1,000. Water, electricity, natural gas, and maintenance bills, to be paid by the family, will be $700 per month if the house is occupied and zero otherwise. If the family wishes to minimize losses from being away, it should rent the house for as much as the market will bear, as long as the monthly rent is above which of the following? (Assume wear and tear to be the same whether or not the house is occupied.)

Accepted Answer

A)  $300 
B)  $700 
C)  $1,000 
D)  $1,700 
A)  $300 
B)  $700 
C)  $1,000 
D)  $1,700

Question 10

Use the figure to answer the following question(s).
Figure 8-11  
-Which of the following is true for a firm with the costs illustrated in Figure 8-11?

Accepted Answer

A)  Marginal costs exceed average total cost when output is 15. 
B)  Marginal costs exceed average total cost when output is 20. 
C)  Marginal costs exceed average total cost when output is 25. 
D)  The firm's total fixed cost exceeds 40. 
A)  Marginal costs exceed average total cost when output is 15. 
B)  Marginal costs exceed average total cost when output is 20. 
C)  Marginal costs exceed average total cost when output is 25. 
D)  The firm's total fixed cost exceeds 40.

Question 11

Liam notes that if he produces 10 pairs of shoes per day, his average fixed cost (AFC) is $14 and his marginal cost (MC) is $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day?

Accepted Answer

A)  $5 
B)  $7 
C)  $8 
D)  $15 
A)  $5 
B)  $7 
C)  $8 
D)  $15

Question 12

Which of the following must be true if average total costs are declining?

Accepted Answer

A)  Marginal cost is less than average total cost. 
B)  Marginal cost is less than average variable cost. 
C)  Marginal cost is greater than average total cost. 
D)  Marginal cost equals average total cost. 
A)  Marginal cost is less than average total cost. 
B)  Marginal cost is less than average variable cost. 
C)  Marginal cost is greater than average total cost. 
D)  Marginal cost equals average total cost.

Question 13

Which of the following provides the best explanation for diseconomies of scale?

Accepted Answer

A)  the firm is too small to take advantage of specialization. 
B)  large management structures may be bureaucratic and inefficient. 
C)  if there are too many employees, the work place becomes crowded and people become less productive. 
D)  average fixed costs are rising. 
A)  the firm is too small to take advantage of specialization. 
B)  large management structures may be bureaucratic and inefficient. 
C)  if there are too many employees, the work place becomes crowded and people become less productive. 
D)  average fixed costs are rising.

Question 14

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

Accepted Answer

A)  $5. 
B)  $500. 
C)  $1,000. 
D)  $5,000. 
A)  $5. 
B)  $500. 
C)  $1,000. 
D)  $5,000.

Question 15

If a firm increases its output and finds that its average total cost decreases as a result, this implies that

Accepted Answer

A)  marginal cost exceeds average total cost. 
B)  the cost of producing an additional unit of output is more than the average total cost. 
C)  average fixed cost is increasing. 
D)  average total cost exceeds marginal cost. 
A)  marginal cost exceeds average total cost. 
B)  the cost of producing an additional unit of output is more than the average total cost. 
C)  average fixed cost is increasing. 
D)  average total cost exceeds marginal cost.

Question 16

Which of the following would most likely cause a firm's cost curve to shift downward?

Accepted Answer

A)  an increase in resource prices 
B)  an increase in government regulations 
C)  a decrease in taxes 
D)  an increase in demand for the firm's product 
A)  an increase in resource prices 
B)  an increase in government regulations 
C)  a decrease in taxes 
D)  an increase in demand for the firm's product

Question 17

Which of the following explains most clearly why business owners have a strong incentive to strive for operational efficiency?

Accepted Answer

A)  They recognize that operational efficiency promotes the public interest. 
B)  As residual claimants, owners will receive a higher income from increased efficiency. 
C)  The owners will be able to keep production costs low by providing free managerial services to the firm. 
D)  The owners will be able to gain by paying employees below market wages, which will improve the overall efficiency of the economy. 
A)  They recognize that operational efficiency promotes the public interest. 
B)  As residual claimants, owners will receive a higher income from increased efficiency. 
C)  The owners will be able to keep production costs low by providing free managerial services to the firm. 
D)  The owners will be able to gain by paying employees below market wages, which will improve the overall efficiency of the economy.

Question 18

Before entry into an industry, a profit-maximizing decision maker will compare the expected market price with the expected

Accepted Answer

A)  long-run average total cost. 
B)  short-run marginal cost. 
C)  long-run average variable cost. 
D)  short-run average total cost. 
A)  long-run average total cost. 
B)  short-run marginal cost. 
C)  long-run average variable cost. 
D)  short-run average total cost.

Question 19

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

Accepted Answer

A)  You pay to have your car towed back to the repair shop because it was not fixed properly the first time. 
B)  You decide to get a master's degree because you cannot find a job in the field in which you majored. 
C)  You decide to purchase a piece of machinery for your business that will eliminate three employees' positions. 
D)  You study eight hours for a final exam even though there is no way now that you can pass the course. 
A)  You pay to have your car towed back to the repair shop because it was not fixed properly the first time. 
B)  You decide to get a master's degree because you cannot find a job in the field in which you majored. 
C)  You decide to purchase a piece of machinery for your business that will eliminate three employees' positions. 
D)  You study eight hours for a final exam even though there is no way now that you can pass the course.

Question 20

Which of the following is an implication of the law of diminishing returns?

Accepted Answer

A)  Total output will decline as more workers are hired. 
B)  In the long run, average total cost will eventually decline as output is expanded. 
C)  In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. 
D)  A doubling of all inputs will lead to more than a doubling of output. 
A)  Total output will decline as more workers are hired. 
B)  In the long run, average total cost will eventually decline as output is expanded. 
C)  In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. 
D)  A doubling of all inputs will lead to more than a doubling of output.

The law of diminishing marginal returns explains the general shape of the firm's

The owners of a business

The short run is a time period such that

The increase in total output that results from a unit increase in the employment of a variable input is equal to the input's

When the marginal product of labor diminishes,

In the short run, which are most important in determining changes in output?

"If it were not for employment discrimination against women, the average earnings of men and women would be equal." Is this statement true or false?

Figure 8-12 -In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC₁ to ATC₂?

Use the figure to answer the following question(s). Figure 8-11 -Which of the following is true for a firm with the costs illustrated in Figure 8-11?

Liam notes that if he produces 10 pairs of shoes per day, his average fixed cost (AFC) is $14 and his marginal cost (MC) is $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day?

Which of the following must be true if average total costs are declining?

Which of the following provides the best explanation for diseconomies of scale?

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

If a firm increases its output and finds that its average total cost decreases as a result, this implies that

Which of the following would most likely cause a firm's cost curve to shift downward?

Which of the following explains most clearly why business owners have a strong incentive to strive for operational efficiency?

Before entry into an industry, a profit-maximizing decision maker will compare the expected market price with the expected

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

Which of the following is an implication of the law of diminishing returns?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 8: Costs and the Supply of Goods

The law of diminishing marginal returns explains the general shape of the firm's

The owners of a business

The short run is a time period such that

The increase in total output that results from a unit increase in the employment of a variable input is equal to the input's

When the marginal product of labor diminishes,

In the short run, which are most important in determining changes in output?

"If it were not for employment discrimination against women, the average earnings of men and women would be equal." Is this statement true or false?

Figure 8-12 -In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC1 to ATC2?

Use the figure to answer the following question(s). Figure 8-11 -Which of the following is true for a firm with the costs illustrated in Figure 8-11?

Liam notes that if he produces 10 pairs of shoes per day, his average fixed cost (AFC) is $14 and his marginal cost (MC) is $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day?

Which of the following must be true if average total costs are declining?

Which of the following provides the best explanation for diseconomies of scale?

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

If a firm increases its output and finds that its average total cost decreases as a result, this implies that

Which of the following would most likely cause a firm's cost curve to shift downward?

Which of the following explains most clearly why business owners have a strong incentive to strive for operational efficiency?

Before entry into an industry, a profit-maximizing decision maker will compare the expected market price with the expected

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

Which of the following is an implication of the law of diminishing returns?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Figure 8-12 -In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC₁ to ATC₂?