Question 1

Average fixed costs

Accepted Answer

A)  will remain unchanged as output expands. 
B)  are defined as the change in total costs divided by the change in output. 
C)  will always increase as output increases. 
D)  will always decrease as output expands. 
A)  will remain unchanged as output expands. 
B)  are defined as the change in total costs divided by the change in output. 
C)  will always increase as output increases. 
D)  will always decrease as output expands.

Question 2

Which of the following about costs is true?

Accepted Answer

A)  The difference between the ATC and AVC curves will decline as output expands. 
B)  The AFC will remain constant as output increases. 
C)  If ATC is increasing, then AVC must be greater than ATC. 
D)  Implicit costs and fixed costs are always the same. 
A)  The difference between the ATC and AVC curves will decline as output expands. 
B)  The AFC will remain constant as output increases. 
C)  If ATC is increasing, then AVC must be greater than ATC. 
D)  Implicit costs and fixed costs are always the same.

Question 3

Use the figure to answer the following question(s).
Figure 8-1  
-According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

Accepted Answer

A)  10 
B)  16 
C)  48 
D)  60 
A)  10 
B)  16 
C)  48 
D)  60

Question 4

If a firm refuses to hire any females due to a personal prejudice, its profits will

Accepted Answer

A)  increase markedly. 
B)  decrease. 
C)  not be affected. 
D)  increase slightly. 
A)  increase markedly. 
B)  decrease. 
C)  not be affected. 
D)  increase slightly.

Question 5

A downward-sloping portion of a long-run average total cost curve is the result of

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing returns. 
D)  the existence of fixed resources. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing returns. 
D)  the existence of fixed resources.

Question 6

If you paid $100 for a truckload of cabbage on Monday, how much should you be willing to sell it for on Friday, the day before it spoils?

Accepted Answer

A)  $100 
B)  $100 plus normal accounting profit 
C)  $50 because it has lost value since Monday 
D)  whatever you can get for it 
A)  $100 
B)  $100 plus normal accounting profit 
C)  $50 because it has lost value since Monday 
D)  whatever you can get for it

Question 7

The minimum points of the average variable cost and average total cost curves occur where

Accepted Answer

A)  the marginal cost curve lies below the average variable cost and average total cost curves. 
B)  the marginal cost curve intersects those curves. 
C)  the average variable cost and average total cost curves intersect. 
D)  the slope of total cost is the smallest. 
A)  the marginal cost curve lies below the average variable cost and average total cost curves. 
B)  the marginal cost curve intersects those curves. 
C)  the average variable cost and average total cost curves intersect. 
D)  the slope of total cost is the smallest.

Question 8

Sunk costs

Accepted Answer

A)  are expenditures made in the past that cannot be regained no matter what is done now or in the future. 
B)  are a component of variable costs, but not fixed costs. 
C)  represent foregone opportunities, and therefore the firm's managers should consider these costs when they are making current decisions. 
D)  can be avoided if the firm goes out of business. 
A)  are expenditures made in the past that cannot be regained no matter what is done now or in the future. 
B)  are a component of variable costs, but not fixed costs. 
C)  represent foregone opportunities, and therefore the firm's managers should consider these costs when they are making current decisions. 
D)  can be avoided if the firm goes out of business.

Question 9

Where marginal cost is less than average total cost,

Accepted Answer

A)  opportunity cost must have been excluded from the calculation of marginal cost. 
B)  marginal cost must be falling. 
C)  marginal cost must be rising. 
D)  marginal cost may be rising, falling, or constant. 
A)  opportunity cost must have been excluded from the calculation of marginal cost. 
B)  marginal cost must be falling. 
C)  marginal cost must be rising. 
D)  marginal cost may be rising, falling, or constant.

Question 10

A fruit packing plant usually shuts down for three months each year. During that period, what happens to its costs?

Accepted Answer

A)  Its fixed costs are greater than zero. 
B)  Its variable costs are greater than zero. 
C)  Its total costs are zero. 
D)  Its fixed costs are zero. 
A)  Its fixed costs are greater than zero. 
B)  Its variable costs are greater than zero. 
C)  Its total costs are zero. 
D)  Its fixed costs are zero.

Question 11

Use the figure to answer the following question(s).
Figure 8-3  
-The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 12

The marginal cost of a good is

Accepted Answer

A)  lower for competitive firms than for monopolists. 
B)  the cost of an additional unit. 
C)  equal to fixed cost at high output levels. 
D)  equal to variable cost when the firm is maximizing profit. 
A)  lower for competitive firms than for monopolists. 
B)  the cost of an additional unit. 
C)  equal to fixed cost at high output levels. 
D)  equal to variable cost when the firm is maximizing profit.

Question 13

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

Accepted Answer

A)  competitive forces will tend to reduce discrimination. 
B)  the wages of employees who are discriminated against will rise. 
C)  an employer who discriminates will have the same costs as those who do not discriminate. 
D)  discrimination by an employer will reduce production costs since the employer can pay lower wages. 
A)  competitive forces will tend to reduce discrimination. 
B)  the wages of employees who are discriminated against will rise. 
C)  an employer who discriminates will have the same costs as those who do not discriminate. 
D)  discrimination by an employer will reduce production costs since the employer can pay lower wages.

Question 14

Takeover bids (and the potential for such bids)

Accepted Answer

A)  increase the incentive of corporate managers to perform efficiently. 
B)  increase the likelihood that managers will be able to gain at the expense of stockholders. 
C)  are more likely to occur when a company is producing efficiently and operating profitably. 
D)  serve no useful economic purpose. 
A)  increase the incentive of corporate managers to perform efficiently. 
B)  increase the likelihood that managers will be able to gain at the expense of stockholders. 
C)  are more likely to occur when a company is producing efficiently and operating profitably. 
D)  serve no useful economic purpose.

Question 15

Normal profit is a term for

Accepted Answer

A)  explicit profit. 
B)  the competitive rate of return. 
C)  the accounting profit forgone. 
D)  pure economic profit. 
A)  explicit profit. 
B)  the competitive rate of return. 
C)  the accounting profit forgone. 
D)  pure economic profit.

Question 16

Whenever average total cost exceeds marginal cost,

Accepted Answer

A)  average total cost is rising. 
B)  average total cost is falling. 
C)  marginal cost is rising. 
D)  marginal cost is falling. 
A)  average total cost is rising. 
B)  average total cost is falling. 
C)  marginal cost is rising. 
D)  marginal cost is falling.

Question 17

When female/male earnings differentials are adjusted for age, education, language, and locational characteristics, the

Accepted Answer

A)  differential between the earnings of males and those of females increases substantially. 
B)  differential between the earnings of males and those of females does not change much. 
C)  corrected earnings of males are equal to those of similar females. 
D)  corrected earnings of females are greater than those of similar males. 
A)  differential between the earnings of males and those of females increases substantially. 
B)  differential between the earnings of males and those of females does not change much. 
C)  corrected earnings of males are equal to those of similar females. 
D)  corrected earnings of females are greater than those of similar males.

Question 18

The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?

Accepted Answer

The company should remain operating. Ear

Question 19

In the long run, firms in many industries often experience falling average total costs as a result of

Accepted Answer

A)  gains through trade. 
B)  increasing marginal returns. 
C)  economies of scale. 
D)  lower fixed costs. 
A)  gains through trade. 
B)  increasing marginal returns. 
C)  economies of scale. 
D)  lower fixed costs.

Question 20

Which of the following is most likely to be true of economic and accounting profits?

Accepted Answer

A)  Economic profits are less than accounting profits. 
B)  Accounting profits are less than economic profits. 
C)  Economic profits plus accounting profits equal zero. 
D)  Accounting profits minus economic profits equal zero. 
A)  Economic profits are less than accounting profits. 
B)  Accounting profits are less than economic profits. 
C)  Economic profits plus accounting profits equal zero. 
D)  Accounting profits minus economic profits equal zero.

Average fixed costs

Which of the following about costs is true?

Use the figure to answer the following question(s). Figure 8-1 -According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

If a firm refuses to hire any females due to a personal prejudice, its profits will

A downward-sloping portion of a long-run average total cost curve is the result of

If you paid $100 for a truckload of cabbage on Monday, how much should you be willing to sell it for on Friday, the day before it spoils?

The minimum points of the average variable cost and average total cost curves occur where

Sunk costs

Where marginal cost is less than average total cost,

A fruit packing plant usually shuts down for three months each year. During that period, what happens to its costs?

Use the figure to answer the following question(s). Figure 8-3 -The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

The marginal cost of a good is

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

Takeover bids (and the potential for such bids)

Normal profit is a term for

Whenever average total cost exceeds marginal cost,

When female/male earnings differentials are adjusted for age, education, language, and locational characteristics, the

The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?

In the long run, firms in many industries often experience falling average total costs as a result of

Which of the following is most likely to be true of economic and accounting profits?

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

Average fixed costs

Which of the following about costs is true?

Use the figure to answer the following question(s). Figure 8-1 -According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

If a firm refuses to hire any females due to a personal prejudice, its profits will

A downward-sloping portion of a long-run average total cost curve is the result of

If you paid $100 for a truckload of cabbage on Monday, how much should you be willing to sell it for on Friday, the day before it spoils?

The minimum points of the average variable cost and average total cost curves occur where

Sunk costs

Where marginal cost is less than average total cost,

A fruit packing plant usually shuts down for three months each year. During that period, what happens to its costs?

Use the figure to answer the following question(s). Figure 8-3 -The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

The marginal cost of a good is

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

Takeover bids (and the potential for such bids)

Normal profit is a term for

Whenever average total cost exceeds marginal cost,

When female/male earnings differentials are adjusted for age, education, language, and locational characteristics, the

The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?

In the long run, firms in many industries often experience falling average total costs as a result of

Which of the following is most likely to be true of economic and accounting profits?

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