Question 1

How can the average-fixed-cost curve be declining when fixed cost is constant?

Accepted Answer

Although fixed cost is unchang

Question 2

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

Accepted Answer

A) Tyler says his costs are $25,900, and Greg says his costs are $66,500. 
B) Tyler says his costs are $25,000, and Greg says his costs are $65,000. 
C) Tyler says his costs are $66,500, and Greg says his costs are $66,500. 
D) Tyler says his costs are $75,000, and Greg says his costs are $41,500. 
A) Tyler says his costs are $25,900, and Greg says his costs are $66,500. 
B) Tyler says his costs are $25,000, and Greg says his costs are $65,000. 
C) Tyler says his costs are $66,500, and Greg says his costs are $66,500. 
D) Tyler says his costs are $75,000, and Greg says his costs are $41,500.

Question 3

Figure 13-3  
-Refer to Figure 13-3. The changing slope of the total cost curve reflects

Accepted Answer

A) decreasing average variable cost. 
B) decreasing average total cost. 
C) decreasing marginal product. 
D) increasing fixed cost. 
A) decreasing average variable cost. 
B) decreasing average total cost. 
C) decreasing marginal product. 
D) increasing fixed cost.

Question 4

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A 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 5

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

Accepted Answer

A) -$39,000. 
B) $124,000. 
C) $163,000. 
D) $184,000. 
A) -$39,000. 
B) $124,000. 
C) $163,000. 
D) $184,000.

Question 6

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 production function will

Accepted Answer

A) decrease at a decreasing rate. 
B) decrease at an increasing rate. 
C) increase at a decreasing rate. 
D) increase at an increasing rate. 
A) decrease at a decreasing rate. 
B) decrease at an increasing rate. 
C) increase at a decreasing rate. 
D) increase at an increasing rate.

Question 7

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers?

Accepted Answer

A) $10.06 
B) $9.64 
C) 81 cents 
D) 70 cents 
A) $10.06 
B) $9.64 
C) 81 cents 
D) 70 cents

Question 8

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

Accepted Answer

A) $50 
B) $140 
C) $360 
D) $410 
A) $50 
B) $140 
C) $360 
D) $410

Question 9

Scenario 13-13
Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000.
-Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. What is Christine's annual opportunity cost of the financial capital that she invested in her business?

Accepted Answer

A) $5 
B) $50 
C) $100 
D) $200 
A) $5 
B) $50 
C) $100 
D) $200

Question 10

Bob Edwards owns a bagel shop. Bob hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced. The results indicate a U-shaped average total cost curve. Bob's economist explains that ATC is U-shaped for two reasons. The first is the existence of diminishing marginal product, which causes it to rise. What would be the second reason? Assume that the marginal cost curve is linear. (Hint: The second reason relates to average fixed cost)

Accepted Answer

Average fixed cost always decl

Question 11

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

Accepted Answer

A) True 
 B)False

Question 12

If a firm uses labor to produce output, the firm's production function depicts the relationship between

Accepted Answer

A) the number of workers and the quantity of output. 
B) marginal product and marginal cost. 
C) the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. 
D) fixed inputs and variable inputs in the short run. 
A) the number of workers and the quantity of output. 
B) marginal product and marginal cost. 
C) the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. 
D) fixed inputs and variable inputs in the short run.

Question 13

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 14

Which of the following statements about costs is correct?

Accepted Answer

A) When marginal cost is less than average total cost, average total cost is rising. 
B) The total cost curve is U-shaped. 
C) As the quantity of output increases, marginal cost eventually rises. 
D) All of the above are correct. 
A) When marginal cost is less than average total cost, average total cost is rising. 
B) The total cost curve is U-shaped. 
C) As the quantity of output increases, marginal cost eventually rises. 
D) All of the above are correct.

Question 15

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) increasing marginal product. 
D) diminishing marginal product. 
A) economies of scale. 
B) diseconomies of scale. 
C) increasing marginal product. 
D) diminishing marginal product.

Question 16

Tsintah weaves traditional Navaho rugs. She weaves and sells 50 rugs. Her average cost of production per rug is $50. She sells each rug for a price of $65. Tsintah's total revenues are

Accepted Answer

A) $750. 
B) $2,500. 
C) $3,250. 
D) $5,750. 
A) $750. 
B) $2,500. 
C) $3,250. 
D) $5,750.

Question 17

Table 13-19  
-Refer to Table 13-19. What is the average total cost of producing 425 units of output?

Accepted Answer

ATC = TC/Q

Question 18

Table 13-14  
-Refer to Table 13-14. What is the variable cost of producing 5 units of output?

Accepted Answer

A) $10 
B) $20 
C) $100 
D) $110 
A) $10 
B) $20 
C) $100 
D) $110

Question 19

Profit is defined as total revenue

Accepted Answer

A) plus total cost. 
B) times total cost. 
C) minus total cost. 
D) divided by total cost. 
A) plus total cost. 
B) times total cost. 
C) minus total cost. 
D) divided by total cost.

Question 20

Which of the following statements is correct?

Accepted Answer

A) Assuming that explicit costs are positive, economic profit is greater than accounting profit. 
B) Assuming that implicit costs are positive, accounting profit is greater than economic profit. 
C) Assuming that explicit costs are positive, accounting profit is equal to economic profit. 
D) Assuming that implicit costs are positive, economic profit is positive. 
A) Assuming that explicit costs are positive, economic profit is greater than accounting profit. 
B) Assuming that implicit costs are positive, accounting profit is greater than economic profit. 
C) Assuming that explicit costs are positive, accounting profit is equal to economic profit. 
D) Assuming that implicit costs are positive, economic profit is positive.

Exam 13: The Costs of Production

How can the average-fixed-cost curve be declining when fixed cost is constant?

Figure 13-3 -Refer to Figure 13-3. The changing slope of the total cost curve reflects

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

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

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

If a firm uses labor to produce output, the firm's production function depicts the relationship between

Which of the following statements about costs is correct?

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

Tsintah weaves traditional Navaho rugs. She weaves and sells 50 rugs. Her average cost of production per rug is $50. She sells each rug for a price of $65. Tsintah's total revenues are

Table 13-19 -Refer to Table 13-19. What is the average total cost of producing 425 units of output?

Table 13-14 -Refer to Table 13-14. What is the variable cost of producing 5 units of output?

Profit is defined as total revenue

Which of the following statements is correct?

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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