Question 1

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 2

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

Accepted Answer

A)  8 units. 
B)  10 units. 
C)  22 units. 
D)  30 units. 
A)  8 units. 
B)  10 units. 
C)  22 units. 
D)  30 units.

Question 3

If fixed cost at quantity (Q) = 100 is $130, then

Accepted Answer

A)  fixed cost at Q = 0 is $0. 
B)  fixed cost at Q = 0 is less than $130. 
C)  fixed cost at Q = 200 is $260. 
D)  fixed cost at Q = 200 is $130. 
E)  it is impossible to calculate fixed costs at any other quantity. 
A)  fixed cost at Q = 0 is $0. 
B)  fixed cost at Q = 0 is less than $130. 
C)  fixed cost at Q = 200 is $260. 
D)  fixed cost at Q = 200 is $130. 
E)  it is impossible to calculate fixed costs at any other quantity.

Question 4

If a firm produces nothing, which of the following costs will be zero?

Accepted Answer

A)  total cost 
B)  fixed cost 
C)  opportunity cost 
D)  variable cost 
A)  total cost 
B)  fixed cost 
C)  opportunity cost 
D)  variable cost

Question 5

Kim used to work at "The Big One" accounting firm, and she earned $50,000 a year. She saved her money and has now invested $100,000 in her own firm. Profit is $20,000 a year, which Kim receives as her only compensation. She concludes that this is great because a 20 percent return is much better than the 8 percent she could get in another investment (the opportunity cost of the funds). What is wrong with this line of thinking?

Accepted Answer

While Kim is correct in understanding th

Question 6

Andy wants to maximize his grade-point average. Having spent six hours studying for his final exam in economics, Andy calculates his grade and discovers that even with a perfect score on the final, he will not pass the course. He decides to study two more hours so he will not have wasted the first six hours. Is this a good decision? Why or why not?

Accepted Answer

The six hours spent studying for the exa

Question 7

Why is it NOT surprising that men make up the minority of college graduates?

Accepted Answer

A)  Because of discrimination against women, men are able to get good jobs with only a high school degree. 
B)  Men are smarter than women and they do not need a higher education to be attractive to employers. 
C)  Given their greater physical strength, many men accept high-paying but physically demanding jobs instead of going to college. 
D)  Many men decide to pursue jobs in professional sports and this significantly reduces the number of males who go to college. 
A)  Because of discrimination against women, men are able to get good jobs with only a high school degree. 
B)  Men are smarter than women and they do not need a higher education to be attractive to employers. 
C)  Given their greater physical strength, many men accept high-paying but physically demanding jobs instead of going to college. 
D)  Many men decide to pursue jobs in professional sports and this significantly reduces the number of males who go to college.

Question 8

In the long run, a firm might experience rising average total costs due to

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of supply. 
D)  the law of diminishing marginal returns. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of supply. 
D)  the law of diminishing marginal returns.

Question 9

Marginal cost is best defined as

Accepted Answer

A)  a cost that does not vary with the rate of output. 
B)  the difference between fixed and variable cost at any level of output. 
C)  the amount added to total cost when one more unit of output is produced. 
D)  the difference between price and average total cost at the profit-maximizing level of output. 
A)  a cost that does not vary with the rate of output. 
B)  the difference between fixed and variable cost at any level of output. 
C)  the amount added to total cost when one more unit of output is produced. 
D)  the difference between price and average total cost at the profit-maximizing level of output.

Question 10

Which of the following is most likely to reduce the incidence of employee shirking?

Accepted Answer

A)  use of the corporate business structure, rather than an individual proprietorship 
B)  closely relating the pay of workers to their productive contribution 
C)  payment of identical wage rates to all workers 
D)  providing workers with a year-end bonus if the business firm loses money during the year 
A)  use of the corporate business structure, rather than an individual proprietorship 
B)  closely relating the pay of workers to their productive contribution 
C)  payment of identical wage rates to all workers 
D)  providing workers with a year-end bonus if the business firm loses money during the year

Question 11

The difference between zero accounting profit and zero economic profit is that

Accepted Answer

A)  economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit. 
B)  economists do not include opportunity cost in zero economic profit, while accountants do include opportunity cost in zero accounting profit. 
C)  economists include opportunity cost in zero accounting profit, while accountants do not include opportunity cost in zero economic profit. 
D)  economists do not include opportunity cost in zero accounting profit, while accountants do include opportunity cost in zero economic profit. 
A)  economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit. 
B)  economists do not include opportunity cost in zero economic profit, while accountants do include opportunity cost in zero accounting profit. 
C)  economists include opportunity cost in zero accounting profit, while accountants do not include opportunity cost in zero economic profit. 
D)  economists do not include opportunity cost in zero accounting profit, while accountants do include opportunity cost in zero economic profit.

Question 12

When total revenue minus total economic cost is equal to zero, the firm is

Accepted Answer

A)  earning above-average economic profit. 
B)  earning the normal profit rate. 
C)  losing too much money to stay in business. 
D)  earning abnormally low profits. 
A)  earning above-average economic profit. 
B)  earning the normal profit rate. 
C)  losing too much money to stay in business. 
D)  earning abnormally low profits.

Question 13

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

Accepted Answer

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

Question 14

Women earn less on average than men. Which of the following would be the logical conclusion?

Accepted Answer

A)  Women must be the victim of employment discrimination. 
B)  Women must be less productive. 
C)  Men must be more highly motivated and materialistic. 
D)  Without consideration of preferences and productivity factors, differences in unadjusted mean earnings do not necessarily reflect employment discrimination. 
A)  Women must be the victim of employment discrimination. 
B)  Women must be less productive. 
C)  Men must be more highly motivated and materialistic. 
D)  Without consideration of preferences and productivity factors, differences in unadjusted mean earnings do not necessarily reflect employment discrimination.

Question 15

Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?

Accepted Answer

Mr. Jones needs to do something that wou

Question 16

Which of the following explains 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)  since the owners are residual income claimants, increased efficiency will mean a higher income for the owners. 
C)  if production is not conducted efficiently, the firm will ship jobs and capital out of the domestic market in order to be able to compete effectively. 
D)  Increased operational efficiency allows the firm to receive government tax breaks. 
A)  they recognize that operational efficiency promotes the public interest. 
B)  since the owners are residual income claimants, increased efficiency will mean a higher income for the owners. 
C)  if production is not conducted efficiently, the firm will ship jobs and capital out of the domestic market in order to be able to compete effectively. 
D)  Increased operational efficiency allows the firm to receive government tax breaks.

Question 17

The normal rate of return on equity capital is also known as

Accepted Answer

A)  the explicit cost of capital. 
B)  the marginal cost of capital. 
C)  economic profit. 
D)  the opportunity cost of capital. 
A)  the explicit cost of capital. 
B)  the marginal cost of capital. 
C)  economic profit. 
D)  the opportunity cost of capital.

Question 18

Interest foregone on financial capital invested in a firm represents an economic cost

Accepted Answer

A)  only if the firm borrows to finance capital investments. 
B)  only when the funds are used to buy machinery. 
C)  because funds invested in the firm could be earning interest elsewhere. 
D)  because accountants have traditionally input an interest cost for this item. 
A)  only if the firm borrows to finance capital investments. 
B)  only when the funds are used to buy machinery. 
C)  because funds invested in the firm could be earning interest elsewhere. 
D)  because accountants have traditionally input an interest cost for this item.

Question 19

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

Accepted Answer

A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs. 
A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs.

Question 20

In the years ahead we can expect the female to male earnings ratio to

Accepted Answer

A)  remain constant. 
B)  continue to increase. 
C)  continue to increase until 2020, when the 'baby boom" generation retires" and then level off. 
D)  decline. 
A)  remain constant. 
B)  continue to increase. 
C)  continue to increase until 2020, when the 'baby boom" generation retires" and then level off. 
D)  decline.

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

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

If fixed cost at quantity (Q) = 100 is $130, then

If a firm produces nothing, which of the following costs will be zero?

Why is it NOT surprising that men make up the minority of college graduates?

In the long run, a firm might experience rising average total costs due to

Marginal cost is best defined as

Which of the following is most likely to reduce the incidence of employee shirking?

The difference between zero accounting profit and zero economic profit is that

When total revenue minus total economic cost is equal to zero, the firm is

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

Women earn less on average than men. Which of the following would be the logical conclusion?

Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?

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

The normal rate of return on equity capital is also known as

Interest foregone on financial capital invested in a firm represents an economic cost

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

In the years ahead we can expect the female to male earnings ratio to

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

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

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

If fixed cost at quantity (Q) = 100 is $130, then

If a firm produces nothing, which of the following costs will be zero?

Why is it NOT surprising that men make up the minority of college graduates?

In the long run, a firm might experience rising average total costs due to

Marginal cost is best defined as

Which of the following is most likely to reduce the incidence of employee shirking?

The difference between zero accounting profit and zero economic profit is that

When total revenue minus total economic cost is equal to zero, the firm is

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

Women earn less on average than men. Which of the following would be the logical conclusion?

Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?

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

The normal rate of return on equity capital is also known as

Interest foregone on financial capital invested in a firm represents an economic cost

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

In the years ahead we can expect the female to male earnings ratio to

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