Question 1

Exhibit 7-6 Total cost curves  
-In Exhibit 7-6, the total cost of producing 6,000 units of output is:

Accepted Answer

A)  1,000. 
B)  3,000. 
C)  5,000. 
D)  6,000. 
E)  8,000. 
A)  1,000. 
B)  3,000. 
C)  5,000. 
D)  6,000. 
E)  8,000.

Question 2

Exhibit 7-13 Cost curves  
-In Exhibit 7-13, ATC is shown by the graph labeled:

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
E)  V. 
A)  I. 
B)  II. 
C)  III. 
D)  IV. 
E)  V.

Question 3

If total cost is $1,000 when output is zero, and total cost is $1,200 when output is one, and total cost is $1,500 when output is two, then which of the following is true?

Accepted Answer

A)  Total fixed cost is $1,500. 
B)  The marginal cost of producing the first unit of output is $1,200. 
C)  The marginal cost of producing the second unit of output is $300. 
D)  The average fixed cost is $750 when two units of output are produced. 
A)  Total fixed cost is $1,500. 
B)  The marginal cost of producing the first unit of output is $1,200. 
C)  The marginal cost of producing the second unit of output is $300. 
D)  The average fixed cost is $750 when two units of output are produced.

Question 4

Constant returns to scale exist over the range of output for which the long-run average cost is:

Accepted Answer

A)  neither rising or falling. 
B)  falling. 
C)  rising. 
D)  none of these. 
A)  neither rising or falling. 
B)  falling. 
C)  rising. 
D)  none of these.

Question 5

Implicit costs are best thought of as:

Accepted Answer

A)  variable costs. 
B)  marginal costs. 
C)  accounting costs. 
D)  opportunity costs. 
E)  sunk costs. 
A)  variable costs. 
B)  marginal costs. 
C)  accounting costs. 
D)  opportunity costs. 
E)  sunk costs.

Question 6

Which of the following is true if the total variable cost curve is rising?

Accepted Answer

A)  Average fixed cost is increasing. 
B)  Marginal cost is decreasing. 
C)  Marginal cost is increasing. 
D)  Average fixed cost is constant. 
A)  Average fixed cost is increasing. 
B)  Marginal cost is decreasing. 
C)  Marginal cost is increasing. 
D)  Average fixed cost is constant.

Question 7

A firm's marginal product curve slopes downward throughout its length.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is true?

Accepted Answer

A)  Economic profit equals accounting profit minus implicit costs. 
B)  The short run is any period of time in which there is at least one fixed input. 
C)  A fixed input is any resource for which the quantity cannot change during the period under consideration. 
D)  In the long run there are no fixed costs. 
E)  All of these. 
A)  Economic profit equals accounting profit minus implicit costs. 
B)  The short run is any period of time in which there is at least one fixed input. 
C)  A fixed input is any resource for which the quantity cannot change during the period under consideration. 
D)  In the long run there are no fixed costs. 
E)  All of these.

Question 9

Which of the following will become smaller and smaller as the firm expands output?

Accepted Answer

A)  average total cost. 
B)  average fixed cost . 
C)  marginal cost. 
D)  total fixed cost. 
A)  average total cost. 
B)  average fixed cost . 
C)  marginal cost. 
D)  total fixed cost.

Question 10

Which of the following is true at the point where diminishing returns set in?

Accepted Answer

A)  Both marginal product and marginal cost are at a maximum. 
B)  Both marginal product and marginal cost are at a minimum. 
C)  Marginal product is at a maximum and marginal cost at a minimum. 
D)  Marginal product is at a minimum and marginal cost at a maximum. 
A)  Both marginal product and marginal cost are at a maximum. 
B)  Both marginal product and marginal cost are at a minimum. 
C)  Marginal product is at a maximum and marginal cost at a minimum. 
D)  Marginal product is at a minimum and marginal cost at a maximum.

Question 11

Each potential short-run average total cost curve is tangent to the long-run average cost curve at:

Accepted Answer

A)  the level of output that minimizes short-run average total cost. 
B)  the minimum point of the average total cost curve. 
C)  the minimum point of the long-run average cost curve. 
D)  a single point on the short-run average total cost curve. 
A)  the level of output that minimizes short-run average total cost. 
B)  the minimum point of the average total cost curve. 
C)  the minimum point of the long-run average cost curve. 
D)  a single point on the short-run average total cost curve.

Question 12

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?

Accepted Answer

A)  Average total cost is declining. 
B)  Average total cost is constant. 
C)  Average total cost is rising. 
D)  Average total cost is less than average fixed cost. 
A)  Average total cost is declining. 
B)  Average total cost is constant. 
C)  Average total cost is rising. 
D)  Average total cost is less than average fixed cost.

Question 13

What is the difference between economic and accounting profit? Why is a distinction between them important?

Accepted Answer

An economic profit includes implicit cos

Question 14

Which of the following are implicit costs for a typical firm?

Accepted Answer

A)  Insurance costs. 
B)  Electricity costs. 
C)  Opportunity costs of capital owned and used by the firm. 
D)  Cost of labor hired by the firm. 
E)  The cost of raw materials. 
A)  Insurance costs. 
B)  Electricity costs. 
C)  Opportunity costs of capital owned and used by the firm. 
D)  Cost of labor hired by the firm. 
E)  The cost of raw materials.

Question 15

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 16

Exhibit 7-7 Cost schedule for a firm $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Total Cost } & \text { Marginal Cost } \
\hline 0 & \$ 200 & \
1 & 900 & \
2 & & \$ 900 \
3 & 3,000 & \
\hline
\end{array}$$
-In Exhibit 7-7, by filling in the blanks it can be determined that the fixed costs are:

Accepted Answer

A)  0. 
B)  200. 
C)  900. 
D)  1,000. 
E)  3,000. 
A)  0. 
B)  200. 
C)  900. 
D)  1,000. 
E)  3,000.

Question 17

Which of the following is an example of a fixed cost for a fishing company?

Accepted Answer

A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
E)  Bait. 
A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
E)  Bait.

Question 18

All of a firm's inputs are considered to be variable in the long run.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 7-17 Long-run average cost curve  
-If the firm represented in Exhibit 7-17 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

Accepted Answer

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

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.

Exhibit 7-6 Total cost curves -In Exhibit 7-6, the total cost of producing 6,000 units of output is:

Exhibit 7-13 Cost curves -In Exhibit 7-13, ATC is shown by the graph labeled:

If total cost is $1,000 when output is zero, and total cost is $1,200 when output is one, and total cost is $1,500 when output is two, then which of the following is true?

Constant returns to scale exist over the range of output for which the long-run average cost is:

Implicit costs are best thought of as:

Which of the following is true if the total variable cost curve is rising?

A firm's marginal product curve slopes downward throughout its length.

Which of the following statements is true?

Which of the following will become smaller and smaller as the firm expands output?

Which of the following is true at the point where diminishing returns set in?

Each potential short-run average total cost curve is tangent to the long-run average cost curve at:

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?

What is the difference between economic and accounting profit? Why is a distinction between them important?

Which of the following are implicit costs for a typical firm?

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

Exhibit 7-7 Cost schedule for a firm Quantity Total Cost Marginal Cost 0 \ 200 1 900 2 \ 900 3 3,000 -In Exhibit 7-7, by filling in the blanks it can be determined that the fixed costs are:

Which of the following is an example of a fixed cost for a fishing company?

All of a firm's inputs are considered to be variable in the long run.

Exhibit 7-17 Long-run average cost curve -If the firm represented in Exhibit 7-17 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

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

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

Exhibit 7-6 Total cost curves -In Exhibit 7-6, the total cost of producing 6,000 units of output is:

Exhibit 7-13 Cost curves -In Exhibit 7-13, ATC is shown by the graph labeled:

If total cost is $1,000 when output is zero, and total cost is $1,200 when output is one, and total cost is $1,500 when output is two, then which of the following is true?

Constant returns to scale exist over the range of output for which the long-run average cost is:

Implicit costs are best thought of as:

Which of the following is true if the total variable cost curve is rising?

A firm's marginal product curve slopes downward throughout its length.

Which of the following statements is true?

Which of the following will become smaller and smaller as the firm expands output?

Which of the following is true at the point where diminishing returns set in?

Each potential short-run average total cost curve is tangent to the long-run average cost curve at:

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?

What is the difference between economic and accounting profit? Why is a distinction between them important?

Which of the following are implicit costs for a typical firm?

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

Exhibit 7-7 Cost schedule for a firm Quantity Total Cost Marginal Cost 0 \ 200 1 900 2 \ 900 3 3,000 -In Exhibit 7-7, by filling in the blanks it can be determined that the fixed costs are:

Which of the following is an example of a fixed cost for a fishing company?

All of a firm's inputs are considered to be variable in the long run.

Exhibit 7-17 Long-run average cost curve -If the firm represented in Exhibit 7-17 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

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

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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