Question 1

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

Accepted Answer

A) $40 
B) $140 
C) $360 
D) $410 
A) $40 
B) $140 
C) $360 
D) $410

Question 2

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

Accepted Answer

A) True 
 B)False

Question 3

Implicit costs are costs that do not require an outlay of money by the firm.

Accepted Answer

A) True 
 B)False

Question 4

Scenario 13-18
Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 30 watermelons. If he plants 2 bags of seeds, he gets 50 watermelons. If he plants 3 bags of seeds he gets 60 watermelons. A bag of seeds costs $100, and the costs of seeds are his only costs.
-Refer to Scenario 13-18. Farmer Jack's marginal cost (i)
Curve is U-shaped.(ii)
Decreases with increased watermelon output.
(iii)
Reflects diminishing marginal product.

Accepted Answer

A) (ii) only 
B) (iii) only 
C) (i) and (iii) only 
D) (i) and (ii) only 
A) (ii) only 
B) (iii) only 
C) (i) and (iii) only 
D) (i) and (ii) only

Question 5

Scenario 13-20
Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level.
-Refer to Scenario 13-20. Average fixed cost will be

Accepted Answer

A) rising at all points. 
B) falling at all points. 
C) U-shaped. 
D) constant. 
A) rising at all points. 
B) falling at all points. 
C) U-shaped. 
D) constant.

Question 6

Economists normally assume that the goal of a firm is to earn (i)
Profits as large as possible, even if it means reducing output.
(ii)
Profits as large as possible, even if it means incurring a higher total cost.
(iii)
Revenues as large as possible, even if it reduces profits.

Accepted Answer

A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii) 
A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii)

Question 7

Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct? ​

Accepted Answer

A) ​Sebastian's total explicit costs are $15,400. 
B) ​Sebastian's total implicit costs are $55,600. 
C) ​Sebastian's accounting profit is $35,000. 
D) ​Sebastian's economic profit is $4,600. 
A) ​Sebastian's total explicit costs are $15,400. 
B) ​Sebastian's total implicit costs are $55,600. 
C) ​Sebastian's accounting profit is $35,000. 
D) ​Sebastian's economic profit is $4,600.

Question 8

Table 13-2  
-Refer to Table 13-2. What is the marginal product of the third worker?

Accepted Answer

A) 300 units 
B) 200 units 
C) 100 units 
D) 50 units 
A) 300 units 
B) 200 units 
C) 100 units 
D) 50 units

Question 9

Scenario 13-19
Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000.
-Refer to Scenario 13-19. Suppose the owner of the business had an offer to work for another firm for $25,000. The firm's economic profit for the year was

Accepted Answer

A) -$26,000. 
B) -$23,000. 
C) $2,000. 
D) $14,000. 
A) -$26,000. 
B) -$23,000. 
C) $2,000. 
D) $14,000.

Question 10

Scenario 13-16
Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse.
-Refer to Scenario 13-16. Barney's monthly total profit is

Accepted Answer

A) $1,500. 
B) $3,000. 
C) $4,500. 
D) $7,500. 
A) $1,500. 
B) $3,000. 
C) $4,500. 
D) $7,500.

Question 11

Average total cost equals

Accepted Answer

A) change in total costs divided by quantity produced. 
B) change in total costs divided by change in quantity produced. 
C) (fixed costs + variable costs) divided by quantity produced. 
D) (fixed costs + variable costs) divided by change in quantity produced. 
A) change in total costs divided by quantity produced. 
B) change in total costs divided by change in quantity produced. 
C) (fixed costs + variable costs) divided by quantity produced. 
D) (fixed costs + variable costs) divided by change in quantity produced.

Question 12

Scenario 13-16
Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse.
-Refer to Scenario 13-16. Barney's monthly total revenue is

Accepted Answer

A) $12,000. 
B) $7,500. 
C) $4,500. 
D) $1,500. 
A) $12,000. 
B) $7,500. 
C) $4,500. 
D) $1,500.

Question 13

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 accounting 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 14

Scenario 13-8
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
-Refer to Scenario 13-8. What are Wanda's implicit costs per glass?

Accepted Answer

A) $0.18 
B) $0.10 
C) $0.08 
D) $0.02 
A) $0.18 
B) $0.10 
C) $0.08 
D) $0.02

Question 15

Describe how an accounting firm could experience diseconomies of scale.

Accepted Answer

Problems with coordination can cause dis

Question 16

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

Accepted Answer

A) 7,000 pounds 
B) 3,500 pounds 
C) 3,000 pounds 
D) 1,000 pounds 
A) 7,000 pounds 
B) 3,500 pounds 
C) 3,000 pounds 
D) 1,000 pounds

Question 17

Scenario 13-8
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
-Refer to Scenario 13-8. What are Wanda's total economic profits?

Accepted Answer

A) $150 
B) $126 
C) $96 
D) $54 
A) $150 
B) $126 
C) $96 
D) $54

Question 18

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

Accepted Answer

A) $25 
B) $50 
C) $100 
D) $200 
A) $25 
B) $50 
C) $100 
D) $200

Question 19

Table 13-14  
-Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?

Accepted Answer

A) $10 
B) $15 
C) $24 
D) $38 
A) $10 
B) $15 
C) $24 
D) $38

Question 20

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are

Accepted Answer

A) $100, and her economic profits are $100. 
B) $100, and her economic profits are $0. 
C) $0, and her economic profits are $100. 
D) $0, and her economic profits are $-100. 
A) $100, and her economic profits are $100. 
B) $100, and her economic profits are $0. 
C) $0, and her economic profits are $100. 
D) $0, and her economic profits are $-100.

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

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

Implicit costs are costs that do not require an outlay of money by the firm.

Scenario 13-20 Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. -Refer to Scenario 13-20. Average fixed cost will be

Economists normally assume that the goal of a firm is to earn (i) Profits as large as possible, even if it means reducing output. (ii) Profits as large as possible, even if it means incurring a higher total cost. (iii) Revenues as large as possible, even if it reduces profits.

Table 13-2 -Refer to Table 13-2. What is the marginal product of the third worker?

Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. -Refer to Scenario 13-16. Barney's monthly total profit is

Average total cost equals

Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. -Refer to Scenario 13-16. Barney's monthly total revenue is

Describe how an accounting firm could experience diseconomies of scale.

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

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

Table 13-14 -Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?

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

Exam 13: The Costs of Production

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

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

Implicit costs are costs that do not require an outlay of money by the firm.

Scenario 13-20 Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. -Refer to Scenario 13-20. Average fixed cost will be

Economists normally assume that the goal of a firm is to earn (i) Profits as large as possible, even if it means reducing output. (ii) Profits as large as possible, even if it means incurring a higher total cost. (iii) Revenues as large as possible, even if it reduces profits.

Table 13-2 -Refer to Table 13-2. What is the marginal product of the third worker?

Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. -Refer to Scenario 13-16. Barney's monthly total profit is

Average total cost equals

Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. -Refer to Scenario 13-16. Barney's monthly total revenue is

Describe how an accounting firm could experience diseconomies of scale.

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

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

Table 13-14 -Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?

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