Question 1

Figure 13-5  
-Refer to Figure 13-5. Curve A represents which type of cost curve?

Accepted Answer

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

Question 2

Figure 13-3  
-Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Accepted Answer

A) Producing an additional cookie is always more costly than producing the previous cookie. 
B) Total production of cookies decreases with additional units of input. 
C) Producing additional cookies is equally costly, regardless of how many cookies are already being produced. 
D) Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large. 
A) Producing an additional cookie is always more costly than producing the previous cookie. 
B) Total production of cookies decreases with additional units of input. 
C) Producing additional cookies is equally costly, regardless of how many cookies are already being produced. 
D) Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large.

Question 3

Table 13-1  
-Refer to Table 13-1. What is total output when 4 workers are hired?

Accepted Answer

A) -10 
B) 50 
C) 135 
D) 185 
A) -10 
B) 50 
C) 135 
D) 185

Question 4

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 5

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

Accepted Answer

A) $30 
B) $120 
C) $220 
D) $270 
A) $30 
B) $120 
C) $220 
D) $270

Question 6

Economic profit

Accepted Answer

A) will never exceed accounting profit. 
B) is most often equal to accounting profit. 
C) is always at least as large as accounting profit. 
D) is a less complete measure of profitability than accounting profit. 
A) will never exceed accounting profit. 
B) is most often equal to accounting profit. 
C) is always at least as large as accounting profit. 
D) is a less complete measure of profitability than accounting profit.

Question 7

Variable costs equal fixed costs when nothing is produced.

Accepted Answer

A) True 
 B)False

Question 8

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

Accepted Answer

A) True 
 B)False

Question 9

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. What is the marginal product of the second worker?

Accepted Answer

A) 110 
B) 200 
C) 260 
D) 300 
A) 110 
B) 200 
C) 260 
D) 300

Question 10

Total revenue minus only explicit costs is called

Accepted Answer

A) accounting profit. 
B) economic profit. 
C) average total cost. 
D) implicit profit. 
A) accounting profit. 
B) economic profit. 
C) average total cost. 
D) implicit profit.

Question 11

Table 13-20
Listed in the table are the long-run total costs for three different firms.  
-Refer to Table 13-20. Firm A is experiencing constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 12

Average total cost is equal to

Accepted Answer

A) output/total cost. 
B) total cost - total quantity of output. 
C) average variable cost + total fixed cost. 
D) total cost/output. 
A) output/total cost. 
B) total cost - total quantity of output. 
C) average variable cost + total fixed cost. 
D) total cost/output.

Question 13

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company exhibits

Accepted Answer

A) diseconomies of scale because total cost is rising as output rises. 
B) diseconomies of scale because average total cost is rising as output rises. 
C) economies of scale because total cost is rising as output rises. 
D) economies of scale because average total cost is falling as output rises. 
A) diseconomies of scale because total cost is rising as output rises. 
B) diseconomies of scale because average total cost is rising as output rises. 
C) economies of scale because total cost is rising as output rises. 
D) economies of scale because average total cost is falling as output rises.

Question 14

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total profit is

Accepted Answer

A) $8,000. 
B) $12,000. 
C) $20,000. 
D) $32,000. 
A) $8,000. 
B) $12,000. 
C) $20,000. 
D) $32,000.

Question 15

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?

Accepted Answer

A) $4 
B) $10 
C) $40 
D) $135 
A) $4 
B) $10 
C) $40 
D) $135

Question 16

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Accepted Answer

A) diseconomies of scale because total cost is rising as output rises. 
B) constant returns to scale because average total cost is constant as output rises. 
C) diseconomies of scale because average total cost is rising as output rises. 
D) economies of scale because average total cost is falling as output rises. 
A) diseconomies of scale because total cost is rising as output rises. 
B) constant returns to scale because average total cost is constant as output rises. 
C) diseconomies of scale because average total cost is rising as output rises. 
D) economies of scale because average total cost is falling as output rises.

Question 17

When a firm is able to put idle equipment to use by hiring another worker,

Accepted Answer

A) variable costs will rise. 
B) variable costs will fall. 
C) fixed costs will fall. 
D) both fixed costs and variable costs will rise. 
A) variable costs will rise. 
B) variable costs will fall. 
C) fixed costs will fall. 
D) both fixed costs and variable costs will rise.

Question 18

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1,000 on materials and supplies. Which of the following statements is correct?

Accepted Answer

A) Bev's total explicit costs are $26,300. 
B) Bev's total implicit costs are $300. 
C) Bev's accounting profits exceed her economic profits by $300. 
D) Bev's economic profit is $3,700. 
A) Bev's total explicit costs are $26,300. 
B) Bev's total implicit costs are $300. 
C) Bev's accounting profits exceed her economic profits by $300. 
D) Bev's economic profit is $3,700.

Question 19

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

Accepted Answer

A) $60 
B) $135 
C) $240 
D) $270 
A) $60 
B) $135 
C) $240 
D) $270

Question 20

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.  
-Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

Accepted Answer

A) ATCA 
B) ATCB 
C) ATCC 
D) ATCD 
A) ATCA 
B) ATCB 
C) ATCC 
D) ATCD

Exam 13: The Costs of Production

Figure 13-5 -Refer to Figure 13-5. Curve A represents which type of cost curve?

Figure 13-3 -Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Table 13-1 -Refer to Table 13-1. What is total output when 4 workers are hired?

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

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

Economic profit

Variable costs equal fixed costs when nothing is produced.

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

Total revenue minus only explicit costs is called

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing constant returns to scale.

Average total cost is equal to

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company exhibits

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total profit is

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

When a firm is able to put idle equipment to use by hiring another worker,

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

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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