Question 1

If variable cost at each output level doubles,

Accepted Answer

A)  ATC doubles. 
B)  AFC doubles. 
C)  MC remains unchanged. 
D)  MC doubles. 
E)  MC less than doubles. 
A)  ATC doubles. 
B)  AFC doubles. 
C)  MC remains unchanged. 
D)  MC doubles. 
E)  MC less than doubles.

Question 2

Fixed costs are best defined as

Accepted Answer

A)  costs that do not vary with output. 
B)  costs that are at a minimum when output approaches the firm's capacity. 
C)  the amount that one more unit of output adds to total costs. 
D)  costs that decline as output increases. 
A)  costs that do not vary with output. 
B)  costs that are at a minimum when output approaches the firm's capacity. 
C)  the amount that one more unit of output adds to total costs. 
D)  costs that decline as output increases.

Question 3

When costs that vary with the level of output are divided by the output, you have calculated

Accepted Answer

A)  total changing cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  average variable cost. 
A)  total changing cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  average variable cost.

Question 4

Long-run diseconomies of scale exist over the range of output for which the long-run average total cost curve

Accepted Answer

A)  rises. 
B)  remains constant. 
C)  falls. 
D)  does not exist. 
A)  rises. 
B)  remains constant. 
C)  falls. 
D)  does not exist.

Question 5

During the last two or three decades, the educational and career choices of women have become

Accepted Answer

A)  more like those of men, and the earnings of women have declined relative to those of men. 
B)  more like those of men, and the earnings of women have increased relative to those of men. 
C)  less like those of men, and the earnings of women have increased relative to those of men. 
D)  less like those of men, and the earnings of women have declined relative to those of men. 
A)  more like those of men, and the earnings of women have declined relative to those of men. 
B)  more like those of men, and the earnings of women have increased relative to those of men. 
C)  less like those of men, and the earnings of women have increased relative to those of men. 
D)  less like those of men, and the earnings of women have declined relative to those of men.

Question 6

Economists refer to historical costs (irreversible costs already incurred) as

Accepted Answer

A)  implicit costs. 
B)  sunk costs. 
C)  opportunity costs. 
D)  variable costs. 
A)  implicit costs. 
B)  sunk costs. 
C)  opportunity costs. 
D)  variable costs.

Question 7

Which of the following would shift a firm's short-run cost curves downward?

Accepted Answer

A)  an advance in technology 
B)  an increase in employees' wages 
C)  an increase in the demand for the firm's product 
D)  an increase in excise taxes levied on the firm's product 
A)  an advance in technology 
B)  an increase in employees' wages 
C)  an increase in the demand for the firm's product 
D)  an increase in excise taxes levied on the firm's product

Question 8

Automobile companies typically make some of the parts for cars (for example, the body and engine) but not others (for example, the tires). Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

Accepted Answer

A)  when the specifications (size, style, etc.) of the inputs change frequently 
B)  when the inputs being produced have little value 
C)  when market prices have not been established for the inputs 
D)  when it is relatively easy to measure the quantity and quality of the input 
A)  when the specifications (size, style, etc.) of the inputs change frequently 
B)  when the inputs being produced have little value 
C)  when market prices have not been established for the inputs 
D)  when it is relatively easy to measure the quantity and quality of the input

Question 9

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's

Accepted Answer

A)  economic profit. 
B)  accounting profit. 
C)  opportunity cost of capital. 
D)  long-run average total cost. 
A)  economic profit. 
B)  accounting profit. 
C)  opportunity cost of capital. 
D)  long-run average total cost.

Question 10

Use the figure to answer the following question(s).
Figure 8-8  
-In Figure 8-8, which output level would be most closely associated with the point where diminishing marginal returns have begun?

Accepted Answer

A)  4 
B)  5 
C)  6 
D)  8 
A)  4 
B)  5 
C)  6 
D)  8

Question 11

A local doughnut shop produces about 600 dozen doughnuts daily. If flour prices increase 20 percent

Accepted Answer

A)  only marginal cost will shift up. 
B)  only marginal cost and average total cost will shift up. 
C)  marginal cost, average variable cost, and average total cost will shift up. 
D)  marginal cost, average total cost, and average fixed cost will shift up. 
A)  only marginal cost will shift up. 
B)  only marginal cost and average total cost will shift up. 
C)  marginal cost, average variable cost, and average total cost will shift up. 
D)  marginal cost, average total cost, and average fixed cost will shift up.

Question 12

If a firm enlarges its factory size and realizes higher average costs of production then

Accepted Answer

A)  it has experienced economies of scale. 
B)  it has experienced diseconomies of scale. 
C)  it has experienced constant returns to scale. 
D)  the long-run average cost curve slopes downward. 
E)  the long-run average cost curve shifts upward. 
A)  it has experienced economies of scale. 
B)  it has experienced diseconomies of scale. 
C)  it has experienced constant returns to scale. 
D)  the long-run average cost curve slopes downward. 
E)  the long-run average cost curve shifts upward.

Question 13

Which of the following provides the strongest evidence that the corporate form of business structure is relatively cost efficient in many industries?

Accepted Answer

A)  the ability of the corporate business structure to compete effectively in most industries with other forms of business structure 
B)  the fact that nearly three of every four businesses in the United States is an individual proprietorship 
C)  the fact that economic theory indicates corporate managers have some leeway to pursue their own interests at the expense of greedy capitalists 
D)  the ability of some corporate managers to achieve high salaries even though the firms they are directing are not earning economic profit 
A)  the ability of the corporate business structure to compete effectively in most industries with other forms of business structure 
B)  the fact that nearly three of every four businesses in the United States is an individual proprietorship 
C)  the fact that economic theory indicates corporate managers have some leeway to pursue their own interests at the expense of greedy capitalists 
D)  the ability of some corporate managers to achieve high salaries even though the firms they are directing are not earning economic profit

Question 14

When employment discrimination results from the personal prejudices of employers, economic theory suggests that

Accepted Answer

A)  employers who discriminate will have lower production costs. 
B)  the wages of employees who are discriminated against will rise. 
C)  employers who discriminate will have the same production costs as those who do not discriminate. 
D)  employers who discriminate will have lower profits. 
A)  employers who discriminate will have lower production costs. 
B)  the wages of employees who are discriminated against will rise. 
C)  employers who discriminate will have the same production costs as those who do not discriminate. 
D)  employers who discriminate will have lower profits.

Question 15

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Accepted Answer

The obvious explicit costs would include

Question 16

Which of the following about costs is always true?

Accepted Answer

A)  When marginal costs are less than average total costs, average total costs will be decreasing. 
B)  When average fixed costs are falling, marginal costs must be less than average fixed costs. 
C)  When average fixed costs are rising, marginal costs must be greater than average total costs. 
D)  When marginal costs are greater than average total costs, average total costs will be decreasing. 
A)  When marginal costs are less than average total costs, average total costs will be decreasing. 
B)  When average fixed costs are falling, marginal costs must be less than average fixed costs. 
C)  When average fixed costs are rising, marginal costs must be greater than average total costs. 
D)  When marginal costs are greater than average total costs, average total costs will be decreasing.

Question 17

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing costs per unit of output. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing costs per unit of output.

Question 18

Use the figure to answer the following question(s).
Figure 8-2  
-Using Figure 8-2, calculate the firm's total cost of producing 30 units of output.

Accepted Answer

A)  $8 
B)  $120 
C)  $180 
D)  $240 
A)  $8 
B)  $120 
C)  $180 
D)  $240

Question 19

Mr. Capps recently built a dental floss factory in Montana. It cost $500,000 and is expected to last ten years. The plant can only be used to produce dental floss and will have no scrap value. When a recession occurs, the yearly revenue from the plant declines to $35,000, compared to costs of $25,000 just for the variable resources required to produce the current rate of output. Mr. Capps should

Accepted Answer

A)  shut down since he is experiencing economic losses (in other words, he will not get his $500,000 back). 
B)  reduce the price of dental floss if his demand is inelastic in order to increase his revenue. 
C)  raise the price of dental floss if his demand is elastic in order to increase his revenue. 
D)  continue to operate since he is covering his variable costs and the cost of the plant is a sunk cost. 
A)  shut down since he is experiencing economic losses (in other words, he will not get his $500,000 back). 
B)  reduce the price of dental floss if his demand is inelastic in order to increase his revenue. 
C)  raise the price of dental floss if his demand is elastic in order to increase his revenue. 
D)  continue to operate since he is covering his variable costs and the cost of the plant is a sunk cost.

Question 20

Use the figure to answer the following question(s).
Figure 8-3  
-According to Figure 8-3, at what output would a properly constructed marginal cost curve cross the ATC curve?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

If variable cost at each output level doubles,

Fixed costs are best defined as

When costs that vary with the level of output are divided by the output, you have calculated

Long-run diseconomies of scale exist over the range of output for which the long-run average total cost curve

During the last two or three decades, the educational and career choices of women have become

Economists refer to historical costs (irreversible costs already incurred) as

Which of the following would shift a firm's short-run cost curves downward?

Automobile companies typically make some of the parts for cars (for example, the body and engine) but not others (for example, the tires). Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's

Use the figure to answer the following question(s). Figure 8-8 -In Figure 8-8, which output level would be most closely associated with the point where diminishing marginal returns have begun?

A local doughnut shop produces about 600 dozen doughnuts daily. If flour prices increase 20 percent

If a firm enlarges its factory size and realizes higher average costs of production then

Which of the following provides the strongest evidence that the corporate form of business structure is relatively cost efficient in many industries?

When employment discrimination results from the personal prejudices of employers, economic theory suggests that

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Which of the following about costs is always true?

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Use the figure to answer the following question(s). Figure 8-2 -Using Figure 8-2, calculate the firm's total cost of producing 30 units of output.

Use the figure to answer the following question(s). Figure 8-3 -According to Figure 8-3, at what output would a properly constructed marginal cost curve cross the ATC curve?

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

If variable cost at each output level doubles,

Fixed costs are best defined as

When costs that vary with the level of output are divided by the output, you have calculated

Long-run diseconomies of scale exist over the range of output for which the long-run average total cost curve

During the last two or three decades, the educational and career choices of women have become

Economists refer to historical costs (irreversible costs already incurred) as

Which of the following would shift a firm's short-run cost curves downward?

Automobile companies typically make some of the parts for cars (for example, the body and engine) but not others (for example, the tires). Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's

Use the figure to answer the following question(s). Figure 8-8 -In Figure 8-8, which output level would be most closely associated with the point where diminishing marginal returns have begun?

A local doughnut shop produces about 600 dozen doughnuts daily. If flour prices increase 20 percent

If a firm enlarges its factory size and realizes higher average costs of production then

Which of the following provides the strongest evidence that the corporate form of business structure is relatively cost efficient in many industries?

When employment discrimination results from the personal prejudices of employers, economic theory suggests that

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Which of the following about costs is always true?

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Use the figure to answer the following question(s). Figure 8-2 -Using Figure 8-2, calculate the firm's total cost of producing 30 units of output.

Use the figure to answer the following question(s). Figure 8-3 -According to Figure 8-3, at what output would a properly constructed marginal cost curve cross the ATC curve?

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