Question 1

Describe the relationship between average variable cost and marginal cost.

Accepted Answer

If marginal cost (MC) is greater than av

Question 2

At what level of output will average variable cost equal average total cost?

Accepted Answer

A) when marginal cost equals average total cost 
B) for all levels of output in which average variable cost is falling 
C) when marginal cost equals average variable cost 
D) There is no level of output where this occurs, as long as fixed costs are positive. 
A) when marginal cost equals average total cost 
B) for all levels of output in which average variable cost is falling 
C) when marginal cost equals average variable cost 
D) There is no level of output where this occurs, as long as fixed costs are positive.

Question 3

If the marginal-cost curve is rising, then so is the average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 4

The cost of producing the typical unit of output is the firm's

Accepted Answer

A) average total cost. 
B) opportunity cost. 
C) variable cost. 
D) marginal cost. 
A) average total cost. 
B) opportunity cost. 
C) variable cost. 
D) marginal cost.

Question 5

Figure 13-2  
-Refer to Figure 13-2. As the number of workers increases,

Accepted Answer

A) total output increases but at a decreasing rate. 
B) marginal product increases but at a decreasing rate. 
C) marginal product increases at an increasing rate. 
D) total output decreases. 
A) total output increases but at a decreasing rate. 
B) marginal product increases but at a decreasing rate. 
C) marginal product increases at an increasing rate. 
D) total output decreases.

Question 6

Figure 13-10  
-Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

Accepted Answer

A) Q1 to Q2. 
B) Q2 to Q3. 
C) Q3 to Q4. 
D) Q4 to Q5. 
A) Q1 to Q2. 
B) Q2 to Q3. 
C) Q3 to Q4. 
D) Q4 to Q5.

Question 7

Scenario 13-9
Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-9. Ellie's annual implicit costs will equal

Accepted Answer

A) $55,200. 
B) $75,200. 
C) $80,500. 
D) $165,700. 
A) $55,200. 
B) $75,200. 
C) $80,500. 
D) $165,700.

Question 8

If marginal cost is below average total cost, then average total cost

Accepted Answer

A) is constant. 
B) is falling. 
C) is rising. 
D) may rise or fall depending on the size of fixed costs. 
A) is constant. 
B) is falling. 
C) is rising. 
D) may rise or fall depending on the size of fixed costs.

Question 9

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Accepted Answer

A) True 
 B)False

Question 10

Which is greater -- economic profit or accounting profit?

Accepted Answer

Economic profit = Accounting profit - Im

Question 11

Scenario 13-7
Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business.
-Refer to Scenario 13-7. Julia's accounting profits are

Accepted Answer

A) $160,000. 
B) $150,000. 
C) $135,000. 
D) $125,000. 
A) $160,000. 
B) $150,000. 
C) $135,000. 
D) $125,000.

Question 12

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

Accepted Answer

A) $250 
B) $275 
C) $340.91 
D) $350 
A) $250 
B) $275 
C) $340.91 
D) $350

Question 13

Table 13-10  
-Refer to Table 13-10. What is the marginal cost of producing 280 units of output?

Accepted Answer

A) $0.48 
B) $0.75 
C) $30 
D) $40 
A) $0.48 
B) $0.75 
C) $30 
D) $40

Question 14

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Accepted Answer

A) True 
 B)False

Question 15

Table 13-19  
-Refer to Table 13-19. What is the shape of the average-variable-cost curve?

Accepted Answer

AVC = VC/Q, where VC is graphed on the v

Question 16

Which of the following expressions is correct?

Accepted Answer

A) accounting profit = total revenue - explicit costs 
B) economic profit = total revenue - implicit costs 
C) economic profit = total revenue - explicit costs 
D) Both a and b are correct. 
A) accounting profit = total revenue - explicit costs 
B) economic profit = total revenue - implicit costs 
C) economic profit = total revenue - explicit costs 
D) Both a and b are correct.

Question 17

Table 13-7
The Flying Elvis Copter Rides  
-Refer to Table 13-7. What is the value of H?

Accepted Answer

A) $0 
B) $50 
C) $220 
D) $270 
A) $0 
B) $50 
C) $220 
D) $270

Question 18

Scenario 13-5
Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
-Refer to Scenario 13-5. Emily's annual explicit cost of capital is

Accepted Answer

A) $2,000. 
B) $4,000. 
C) $12,000. 
D) $14,000. 
A) $2,000. 
B) $4,000. 
C) $12,000. 
D) $14,000.

Question 19

Explicit costs

Accepted Answer

A) do not require an outlay of money by the firm. 
B) enter into the accountant's measurement of a firm's profit. 
C) enter into the economist's measurement of a firm's profit. 
D) Both b and c are correct. 
A) do not require an outlay of money by the firm. 
B) enter into the accountant's measurement of a firm's profit. 
C) enter into the economist's measurement of a firm's profit. 
D) Both b and c are correct.

Question 20

Table 13-12
Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs.  
-Refer to Table 13-12. Eileen has received an order for 3,000 boxes of earrings for next week. If she expects that the trend in the marginal product of labor will continue in the same direction, it is most likely that her best decision will be to

Accepted Answer

A) not commit to meeting the order until she can move to a larger room and hire more workers to produce the earrings. 
B) close her business until she is able to hire more productive workers. 
C) hire about 12 new workers and hope she can satisfy the order. 
D) commit to meeting the order and then take three weeks to complete the job. 
A) not commit to meeting the order until she can move to a larger room and hire more workers to produce the earrings. 
B) close her business until she is able to hire more productive workers. 
C) hire about 12 new workers and hope she can satisfy the order. 
D) commit to meeting the order and then take three weeks to complete the job.

Describe the relationship between average variable cost and marginal cost.

At what level of output will average variable cost equal average total cost?

If the marginal-cost curve is rising, then so is the average-total-cost curve.

The cost of producing the typical unit of output is the firm's

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

Figure 13-10 -Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

If marginal cost is below average total cost, then average total cost

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Which is greater -- economic profit or accounting profit?

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

Table 13-10 -Refer to Table 13-10. What is the marginal cost of producing 280 units of output?

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Table 13-19 -Refer to Table 13-19. What is the shape of the average-variable-cost curve?

Which of the following expressions is correct?

Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7. What is the value of H?

Explicit costs

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

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Exam 13: The Costs of Production

Describe the relationship between average variable cost and marginal cost.

At what level of output will average variable cost equal average total cost?

If the marginal-cost curve is rising, then so is the average-total-cost curve.

The cost of producing the typical unit of output is the firm's

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

Figure 13-10 -Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

If marginal cost is below average total cost, then average total cost

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Which is greater -- economic profit or accounting profit?

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

Table 13-10 -Refer to Table 13-10. What is the marginal cost of producing 280 units of output?

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Table 13-19 -Refer to Table 13-19. What is the shape of the average-variable-cost curve?

Which of the following expressions is correct?

Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7. What is the value of H?

Explicit costs

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters