Question 1

The minimum point on the marginal cost curve corresponds to the:

Accepted Answer

A)  maximum point on the total cost curve. 
B)  minimum point on the total cost curve. 
C)  inflection point on the total variable cost curve. 
D)  midpoint of the total cost curve. 
A)  maximum point on the total cost curve. 
B)  minimum point on the total cost curve. 
C)  inflection point on the total variable cost curve. 
D)  midpoint of the total cost curve.

Question 2

Exhibit 7-17 Long-run average cost curve  
-In Exhibit 7-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units.

Question 3

In the long run, total fixed cost:

Accepted Answer

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

Question 4

The total fixed cost curve:

Accepted Answer

A)  varies with the quantity of inputs used. 
B)  decreases with output. 
C)  increases with output. 
D)  remains constant regardless of output. 
A)  varies with the quantity of inputs used. 
B)  decreases with output. 
C)  increases with output. 
D)  remains constant regardless of output.

Question 5

Exhibit 7-1 Production of pizza data $$\begin{array} { | c | c | } 
\hline \text { Workers } & \text { Pizzas } \
\hline 0 & 0 \
1 & 4 \
2 & 10 \
3 & 15 \
4 & 18 \
5 & 19 \
\hline
\end{array}$$
-Exhibit 7-1 shows the change in the short-run production of pizzas as more workers are hired. The table shows the marginal product of the labor input is decreasing with the hiring of the third worker. A possible reason for this diminishing marginal product is:

Accepted Answer

A)  decreased wages. 
B)  increases in plant size. 
C)  decreases in fixed cost. 
D)  increased division of labor as additional workers are hired. 
E)  decreases in labor productivity. 
A)  decreased wages. 
B)  increases in plant size. 
C)  decreases in fixed cost. 
D)  increased division of labor as additional workers are hired. 
E)  decreases in labor productivity.

Question 6

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

Accepted Answer

A)  the firm should try to produce less output. 
B)  total fixed costs are constant along the LRAC curve. 
C)  there are economies of scale. 
D)  the firm is probably having significant management problems. 
E)  when output is doubled, total costs are doubled. 
A)  the firm should try to produce less output. 
B)  total fixed costs are constant along the LRAC curve. 
C)  there are economies of scale. 
D)  the firm is probably having significant management problems. 
E)  when output is doubled, total costs are doubled.

Question 7

Which of the following best describes the law of diminishing returns?

Accepted Answer

A)  The principle that beyond some point the marginal product decreases as additional units of a variable factor (ex: labor) are added to a fixed factor (ex: a restaurant kitchen). 
B)  The concept that as a person consumes more and more of a good, such as pizza slices, that the marginal utility from each additional slice will decline. 
C)  The empirical fact that the profitability of firms declines in the long run due to increasing competition. 
D)  None of the above. 
A)  The principle that beyond some point the marginal product decreases as additional units of a variable factor (ex: labor) are added to a fixed factor (ex: a restaurant kitchen). 
B)  The concept that as a person consumes more and more of a good, such as pizza slices, that the marginal utility from each additional slice will decline. 
C)  The empirical fact that the profitability of firms declines in the long run due to increasing competition. 
D)  None of the above.

Question 8

The long run is a period of time:

Accepted Answer

A)  that is too short to change the size of a firm's plant. 
B)  that is long enough to permit changes in all the firm's inputs, both fixed and variable. 
C)  in which production occurs beyond one year. 
D)  in which production occurs beyond five years. 
A)  that is too short to change the size of a firm's plant. 
B)  that is long enough to permit changes in all the firm's inputs, both fixed and variable. 
C)  in which production occurs beyond one year. 
D)  in which production occurs beyond five years.

Question 9

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Accepted Answer

A)  The tax payments on property owned by the firm. 
B)  The wages paid to the 12 employees. 
C)  The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees. 
D)  The accounting services provided free of charge to the firm by Paul's wife, who is an accountant. 
A)  The tax payments on property owned by the firm. 
B)  The wages paid to the 12 employees. 
C)  The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees. 
D)  The accounting services provided free of charge to the firm by Paul's wife, who is an accountant.

Question 10

Exhibit 7-12 Cost schedule for producing pizza $$\begin{array} { | c | c | c | c | } 
\hline \text { Pizzas } & \begin{array} { c } 
\text { Fixed } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Variable } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} \
\hline 0 & \$ & \$ & \$ \
1 &&&48 \
2 &&17  \
3 &&27 \
4 &&&78  \
5 &40 \
6 &&64 \
7 &&80\
\hline
\end{array}$$
-By filling in the blanks in Exhibit 7-12, the ATC of 3 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40. 
A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40.

Question 11

Explicit costs would include:

Accepted Answer

A)  rent. 
B)  the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business. 
C)  the loss of rent on a building the business owner owns and uses in his/her business. 
D)  the opportunity costs of the business owner's time. 
E)  the use of tools owned by the business owner and dedicated to the business. 
A)  rent. 
B)  the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business. 
C)  the loss of rent on a building the business owner owns and uses in his/her business. 
D)  the opportunity costs of the business owner's time. 
E)  the use of tools owned by the business owner and dedicated to the business.

Question 12

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

Accepted Answer

A)  negative response. 
B)  inverse return to labor. 
C)  diminishing returns. 
D)  demand. 
A)  negative response. 
B)  inverse return to labor. 
C)  diminishing returns. 
D)  demand.

Question 13

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing a sixth unit is $5.

Accepted Answer

A) True 
 B)False

Question 14

Payments to nonowners of a firm are called:

Accepted Answer

A)  implicit costs. 
B)  accounting costs. 
C)  explicit costs. 
D)  economic costs. 
A)  implicit costs. 
B)  accounting costs. 
C)  explicit costs. 
D)  economic costs.

Question 15

Exhibit 7-8 Costs schedules for producing pizza $\begin{array}{|c|c|c|c|c|}
\hline\text { Pizzas } & \begin{array}{c}
\text { Fixed } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ & \$ & \$ & \$ \
1 & & 5 & & \
2 & & 13 & & \
3 & & && 10 \
4 & 100 & &140 & \
5 & & &&20 \
6 & &85 & & \
7 & & & 215 \
\hline
\end{array}$
-By filling in the blanks in Exhibit 7-8, the average variable cost of producing 4 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $40. 
E)  $85. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $40. 
E)  $85.

Question 16

For a typical firm, the long-run average total cost curve:

Accepted Answer

A)  is tangent to the minimum point of each possible short-run average total cost curves. 
B)  is tangent to each possible short-run average total cost curve at one point. 
C)  intersects each possible short-run average total cost curve at two points. 
D)  passes through the minimum points of all possible short-run average total cost curves. 
A)  is tangent to the minimum point of each possible short-run average total cost curves. 
B)  is tangent to each possible short-run average total cost curve at one point. 
C)  intersects each possible short-run average total cost curve at two points. 
D)  passes through the minimum points of all possible short-run average total cost curves.

Question 17

Exhibit 7-14 Cost curves  
-In Exhibit 7-14, constant returns to scale only exist for output levels between:

Accepted Answer

A)  0 and 1,000. 
B)  1,000 and 2,000. 
C)  2,000 and 3,000. 
D)  3,000 and 4,000. 
E)  4,000 and infinity. 
A)  0 and 1,000. 
B)  1,000 and 2,000. 
C)  2,000 and 3,000. 
D)  3,000 and 4,000. 
E)  4,000 and infinity.

Question 18

The law of diminishing marginal returns implies that, in the short run:

Accepted Answer

A)  output must fall beyond a certain point. 
B)  price must fall beyond a certain point. 
C)  the marginal product of the variable input must eventually decrease. 
D)  wages of workers must eventually increase. 
E)  total cost must fall beyond a certain point. 
A)  output must fall beyond a certain point. 
B)  price must fall beyond a certain point. 
C)  the marginal product of the variable input must eventually decrease. 
D)  wages of workers must eventually increase. 
E)  total cost must fall beyond a certain point.

Question 19

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of: ​

Accepted Answer

A)  ​negative response. 
B)  ​inverse return to labor. 
C)  ​diminishing returns. 
D)  ​demand. 
A)  ​negative response. 
B)  ​inverse return to labor. 
C)  ​diminishing returns. 
D)  ​demand.

Question 20

Which of the following is an example of a fixed input?

Accepted Answer

A)  The acreage of a farmer's land. 
B)  Machinery. 
C)  The size of a firm's plant. 
D)  All of these. 
A)  The acreage of a farmer's land. 
B)  Machinery. 
C)  The size of a firm's plant. 
D)  All of these.

The minimum point on the marginal cost curve corresponds to the:

Exhibit 7-17 Long-run average cost curve -In Exhibit 7-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

In the long run, total fixed cost:

The total fixed cost curve:

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

Which of the following best describes the law of diminishing returns?

The long run is a period of time:

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Exhibit 7-12 Cost schedule for producing pizza Pizzas Fixed Cost Variable Cost Total Cost 0 \ \ \ 1 48 2 17 3 27 4 78 5 40 6 64 7 80 -By filling in the blanks in Exhibit 7-12, the ATC of 3 pizzas is shown to be equal to:

Explicit costs would include:

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing a sixth unit is $5.

Payments to nonowners of a firm are called:

Exhibit 7-8 Costs schedules for producing pizza Pizzas Fixed Cost Variable Cost Total Cost Marginal Cost 0 \ \ \ \ 1 5 2 13 3 10 4 100 140 5 20 6 85 7 215 -By filling in the blanks in Exhibit 7-8, the average variable cost of producing 4 pizzas is shown to be equal to:

For a typical firm, the long-run average total cost curve:

Exhibit 7-14 Cost curves -In Exhibit 7-14, constant returns to scale only exist for output levels between:

The law of diminishing marginal returns implies that, in the short run:

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

Which of the following is an example of a fixed input?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

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Exam 7: Production Costs

The minimum point on the marginal cost curve corresponds to the:

Exhibit 7-17 Long-run average cost curve -In Exhibit 7-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

In the long run, total fixed cost:

The total fixed cost curve:

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

Which of the following best describes the law of diminishing returns?

The long run is a period of time:

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Exhibit 7-12 Cost schedule for producing pizza Pizzas Fixed Cost Variable Cost Total Cost 0 \ \ \ 1 48 2 17 3 27 4 78 5 40 6 64 7 80 -By filling in the blanks in Exhibit 7-12, the ATC of 3 pizzas is shown to be equal to:

Explicit costs would include:

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing a sixth unit is $5.

Payments to nonowners of a firm are called:

Exhibit 7-8 Costs schedules for producing pizza Pizzas Fixed Cost Variable Cost Total Cost Marginal Cost 0 \ \ \ \ 1 5 2 13 3 10 4 100 140 5 20 6 85 7 215 -By filling in the blanks in Exhibit 7-8, the average variable cost of producing 4 pizzas is shown to be equal to:

For a typical firm, the long-run average total cost curve:

Exhibit 7-14 Cost curves -In Exhibit 7-14, constant returns to scale only exist for output levels between:

The law of diminishing marginal returns implies that, in the short run:

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of: ​

Which of the following is an example of a fixed input?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of: