Question 1

The short run is a period of time:

Accepted Answer

A)  in which a firm uses at least one fixed input. 
B)  that is long enough to permit changes in the firm's plant size. 
C)  in which production occurs within one year. 
D)  in which production occurs within six months. 
A)  in which a firm uses at least one fixed input. 
B)  that is long enough to permit changes in the firm's plant size. 
C)  in which production occurs within one year. 
D)  in which production occurs within six months.

Question 2

Exhibit 7-11 Short-run cost curves schedule for pizzeria's hourly production $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Total } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Variable Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} \
\hline 0 \text { pizzas } & \$ 0 & \$ 20 \
10 & 50 & 70 \
20 & 80 & 100 \
30 & 130 & 150 \
40 & 230 & 250 \
\hline
\end{array}$$
-In Exhibit 7-11, the pizzeria's fixed cost is equal to:

Accepted Answer

A)  $20. 
B)  $30. 
C)  $50. 
D)  $70. 
A)  $20. 
B)  $30. 
C)  $50. 
D)  $70.

Question 3

A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:

Accepted Answer

A)  6,000 bushels per acre per year. 
B)  5,000 bushels per acre per year. 
C)  1,000 bushels per acre per year. 
D)  11,000 bushels per acre per year. 
A)  6,000 bushels per acre per year. 
B)  5,000 bushels per acre per year. 
C)  1,000 bushels per acre per year. 
D)  11,000 bushels per acre per year.

Question 4

If a firm enlarges its factory size and realizes higher average (per unit) 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 5

Paul's Plumbing is a small business that employs 12 people. Which of the following is most likely to be a fixed cost for Paul's Plumbing?

Accepted Answer

A)  The tax and insurance payments on the property owned by the firm. 
B)  The wages paid to the 12 employees. 
C)  The payroll taxes on the wages of the 12 employees. 
D)  The salary paid to Paul, who is the manager of the firm. 
A)  The tax and insurance payments on the property owned by the firm. 
B)  The wages paid to the 12 employees. 
C)  The payroll taxes on the wages of the 12 employees. 
D)  The salary paid to Paul, who is the manager of the firm.

Question 6

A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day, is:

Accepted Answer

A)  35. 
B)  50. 
C)  70. 
D)  350. 
A)  35. 
B)  50. 
C)  70. 
D)  350.

Question 7

Which of the following best describes marginal cost?

Accepted Answer

A)  The change in total cost when one additional unit of output is produced. 
B)  Total cost divided by the quantity of output produced. 
C)  Total variable cost divided by the quantity of output produced. 
D)  Total fixed cost divided by the quantity of output produced. 
E)  Costs that do not vary as output varies, and that must be paid even if output is zero. 
A)  The change in total cost when one additional unit of output is produced. 
B)  Total cost divided by the quantity of output produced. 
C)  Total variable cost divided by the quantity of output produced. 
D)  Total fixed cost divided by the quantity of output produced. 
E)  Costs that do not vary as output varies, and that must be paid even if output is zero.

Question 8

Exhibit 7-14 Cost curves  
-In Exhibit 7-14, a firm finds that it is experiencing numerous managerial and information problems. The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Accepted Answer

A)  between 0 and 1,000. 
B)  between 1,000 and 2,000. 
C)  between 2,000 and 3,000. 
D)  between 3,000 and 4,000. 
E)  where it should shut down immediately. 
A)  between 0 and 1,000. 
B)  between 1,000 and 2,000. 
C)  between 2,000 and 3,000. 
D)  between 3,000 and 4,000. 
E)  where it should shut down immediately.

Question 9

Economic profit is:

Accepted Answer

A)  total revenues minus variable costs. 
B)  total revenues minus private costs. 
C)  total revenues minus explicit costs. 
D)  total revenues minus total costs. 
A)  total revenues minus variable costs. 
B)  total revenues minus private costs. 
C)  total revenues minus explicit costs. 
D)  total revenues minus total costs.

Question 10

If a firm increases output and its average total cost rises, then the firm is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 11

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 4 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
E)  $78. 
A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
E)  $78.

Question 12

Cash payments to a steel mill for steel used in production would be an example of:

Accepted Answer

A)  sunk costs. 
B)  fixed costs. 
C)  explicit costs. 
D)  implicit costs. 
E)  entrepreneurial costs. 
A)  sunk costs. 
B)  fixed costs. 
C)  explicit costs. 
D)  implicit costs. 
E)  entrepreneurial costs.

Question 13

An economist left his $100,000-a-year teaching position to work full-time in his own consulting business. In the first year, he had total revenue of $200,000 and business expenses of $150,000. He made a(n):

Accepted Answer

A)  implicit profit. 
B)  economic loss. 
C)  economic profit. 
D)  accounting loss but not an economic loss. 
E)  zero economic profit. 
A)  implicit profit. 
B)  economic loss. 
C)  economic profit. 
D)  accounting loss but not an economic loss. 
E)  zero economic profit.

Question 14

If economic profit is zero, then a normal profit is earned.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following represents the key difference between the short run and the long run?

Accepted Answer

A)  In the long run, the firm makes commitments to a certain type of production technology which are represented as fixed costs in the long run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the short run. 
B)  In the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run. 
C)  The short run refers to less than two years and the long run in over two years. 
D)  None of the above are correct. 
A)  In the long run, the firm makes commitments to a certain type of production technology which are represented as fixed costs in the long run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the short run. 
B)  In the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run. 
C)  The short run refers to less than two years and the long run in over two years. 
D)  None of the above are correct.

Question 16

Which of the following factors of production is not variable in the long run?

Accepted Answer

A)  the size of the firm's plant. 
B)  property taxes on the assets of the firm. 
C)  highly trained labor. 
D)  All factors of production are variable in the long run. 
A)  the size of the firm's plant. 
B)  property taxes on the assets of the firm. 
C)  highly trained labor. 
D)  All factors of production are variable in the long run.

Question 17

When a total output curve is falling, its corresponding marginal product curve is:

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  rising. 
D)  falling. 
A)  vertical. 
B)  horizontal. 
C)  rising. 
D)  falling.

Question 18

A firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10 percent interest rate per year. The firm's economic profit is:

Accepted Answer

A)  $400 million. 
B)  $100 million. 
C)  $80 million. 
D)  zero. 
A)  $400 million. 
B)  $100 million. 
C)  $80 million. 
D)  zero.

Question 19

The long run is a period of:

Accepted Answer

A)  at least one year. 
B)  sufficient length to allow a firm to expand output by hiring additional workers. 
C)  sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D)  sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers. 
A)  at least one year. 
B)  sufficient length to allow a firm to expand output by hiring additional workers. 
C)  sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D)  sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers.

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 short run is a period of time:

Exhibit 7-11 Short-run cost curves schedule for pizzeria's hourly production Total Product Total Variable Cost Total Cost 0 pizzas \ 0 \ 20 10 50 70 20 80 100 30 130 150 40 230 250 -In Exhibit 7-11, the pizzeria's fixed cost is equal to:

A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:

If a firm enlarges its factory size and realizes higher average (per unit) costs of production then:

Paul's Plumbing is a small business that employs 12 people. Which of the following is most likely to be a fixed cost for Paul's Plumbing?

A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day, is:

Which of the following best describes marginal cost?

Exhibit 7-14 Cost curves -In Exhibit 7-14, a firm finds that it is experiencing numerous managerial and information problems. The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Economic profit is:

If a firm increases output and its average total cost rises, then the firm is experiencing economies of scale.

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 4 pizzas is shown to be equal to:

Cash payments to a steel mill for steel used in production would be an example of:

An economist left his $100,000-a-year teaching position to work full-time in his own consulting business. In the first year, he had total revenue of $200,000 and business expenses of $150,000. He made a(n):

If economic profit is zero, then a normal profit is earned.

Which of the following represents the key difference between the short run and the long run?

Which of the following factors of production is not variable in the long run?

When a total output curve is falling, its corresponding marginal product curve is:

A firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10 percent interest rate per year. The firm's economic profit is:

The long run is a period of:

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

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

Exam 7: Production Costs

The short run is a period of time:

Exhibit 7-11 Short-run cost curves schedule for pizzeria's hourly production Total Product Total Variable Cost Total Cost 0 pizzas \ 0 \ 20 10 50 70 20 80 100 30 130 150 40 230 250 -In Exhibit 7-11, the pizzeria's fixed cost is equal to:

A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:

If a firm enlarges its factory size and realizes higher average (per unit) costs of production then:

Paul's Plumbing is a small business that employs 12 people. Which of the following is most likely to be a fixed cost for Paul's Plumbing?

A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day, is:

Which of the following best describes marginal cost?

Exhibit 7-14 Cost curves -In Exhibit 7-14, a firm finds that it is experiencing numerous managerial and information problems. The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Economic profit is:

If a firm increases output and its average total cost rises, then the firm is experiencing economies of scale.

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 4 pizzas is shown to be equal to:

Cash payments to a steel mill for steel used in production would be an example of:

An economist left his $100,000-a-year teaching position to work full-time in his own consulting business. In the first year, he had total revenue of $200,000 and business expenses of $150,000. He made a(n):

If economic profit is zero, then a normal profit is earned.

Which of the following represents the key difference between the short run and the long run?

Which of the following factors of production is not variable in the long run?

When a total output curve is falling, its corresponding marginal product curve is:

A firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10 percent interest rate per year. The firm's economic profit is:

The long run is a period of:

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

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