Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Economies of scale occur when

Accepted Answer

A) long-run average total costs rise as output increases. 
B) long-run average total costs fall as output increases. 
C) average fixed costs are falling. 
D) average fixed costs are constant. 
A) long-run average total costs rise as output increases. 
B) long-run average total costs fall as output increases. 
C) average fixed costs are falling. 
D) average fixed costs are constant.

Question 3

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 4

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 $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units?

Accepted Answer

A) $46.53 
B) $800 
C) $4,800 
D) $5,300 
A) $46.53 
B) $800 
C) $4,800 
D) $5,300

Question 5

Table 13-6
Wooden Chair Factory  
-Refer to Table 13-6. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

Accepted Answer

A) the third worker 
B) the fourth worker 
C) the fifth worker 
D) the sixth worker 
A) the third worker 
B) the fourth worker 
C) the fifth worker 
D) the sixth worker

Question 6

Economists normally assume that the goal of a firm is to
(i)earn profits as large as possible, even if it means reducing output.
(ii)earn revenues as large as possible, even if it means reducing profits.
(iii)minimize costs, regardless of profits.

Accepted Answer

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

Question 7

Describe the relationship between average total cost and marginal cost.

Accepted Answer

If marginal cost (MC) is greater than av

Question 8

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

Accepted Answer

A) 2 houses 
B) 3 houses 
C) 5 houses 
D) 8 houses 
A) 2 houses 
B) 3 houses 
C) 5 houses 
D) 8 houses

Question 9

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A) $30 
B) $140 
C) $170 
D) $300 
A) $30 
B) $140 
C) $170 
D) $300

Question 10

Marginal cost is equal to average total cost when

Accepted Answer

A) average variable cost is falling. 
B) average fixed cost is rising. 
C) marginal cost is at its minimum. 
D) average total cost is at its minimum. 
A) average variable cost is falling. 
B) average fixed cost is rising. 
C) marginal cost is at its minimum. 
D) average total cost is at its minimum.

Question 11

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. According to an economist, which of the following revenue totals will yield Ellie's business $50,000 in economic profits?

Accepted Answer

A) $55,200 
B) $100,200 
C) $132,500 
D) $185,700 
A) $55,200 
B) $100,200 
C) $132,500 
D) $185,700

Question 12

Can economic profit ever exceed accounting profit?

Accepted Answer

No. Economic profit = Accounting profit

Question 13

Table 13-14  
-Refer to Table 13-14. What is the average fixed cost of producing 8 units of output?

Accepted Answer

A) $1.25 
B) $3.13 
C) $20.00 
D) $24.37 
A) $1.25 
B) $3.13 
C) $20.00 
D) $24.37

Question 14

The amount by which total cost rises when the firm produces one additional unit of output is called

Accepted Answer

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

Question 15

Tony's Taco Truck has average variable costs of $1 and average fixed costs of $2 when it produces 50 units of output (tacos). The truck's total cost at 50 units of output is

Accepted Answer

A) ​$3. 
B) ​$50. 
C) ​$100. 
D) ​$150. 
A) ​$3. 
B) ​$50. 
C) ​$100. 
D) ​$150.

Question 16

Economic profit is equal to total revenue minus the

Accepted Answer

A) explicit cost of producing goods and services. 
B) opportunity cost of producing goods and services. 
C) accounting cost of producing goods and services. 
D) implicit cost of producing goods and services. 
A) explicit cost of producing goods and services. 
B) opportunity cost of producing goods and services. 
C) accounting cost of producing goods and services. 
D) implicit cost of producing goods and services.

Question 17

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.  
-Refer to Figure 13-9. At levels of output between M and N, the firm experiences

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) constant returns to scale. 
D) both the benefits of specialization and diminishing marginal productivity. 
A) economies of scale. 
B) diseconomies of scale. 
C) constant returns to scale. 
D) both the benefits of specialization and diminishing marginal productivity.

Question 18

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu 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 19

In the short run, if a firm produces nothing, total costs are zero.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?

Accepted Answer

A) 10 units of output 
B) 15 units of output 
C) 16 units of output 
D) 25 units of output 
A) 10 units of output 
B) 15 units of output 
C) 16 units of output 
D) 25 units of output

Exam 13: The Costs of Production

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

Economies of scale occur when

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?

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 $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units?

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

Economists normally assume that the goal of a firm is to (i)earn profits as large as possible, even if it means reducing output. (ii)earn revenues as large as possible, even if it means reducing profits. (iii)minimize costs, regardless of profits.

Describe the relationship between average total cost and marginal cost.

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

Marginal cost is equal to average total cost when

Can economic profit ever exceed accounting profit?

Table 13-14 -Refer to Table 13-14. What is the average fixed cost of producing 8 units of output?

The amount by which total cost rises when the firm produces one additional unit of output is called

Tony's Taco Truck has average variable costs of $1 and average fixed costs of $2 when it produces 50 units of output (tacos). The truck's total cost at 50 units of output is

Economic profit is equal to total revenue minus the

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At levels of output between M and N, the firm experiences

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

In the short run, if a firm produces nothing, total costs are zero.

Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?

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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