Question 1

Implicit cost is a

Accepted Answer

A) cost that is incurred when a monetary payment is made. 
B) cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered. 
C) cost that represents the value of resources used in production for which no monetary payment is made. 
D) sunk cost. 
E) b and d 
A) cost that is incurred when a monetary payment is made. 
B) cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered. 
C) cost that represents the value of resources used in production for which no monetary payment is made. 
D) sunk cost. 
E) b and d

Question 2

As the marginal physical product of a variable input increases, the marginal cost decreases.

Accepted Answer

A) True 
 B)False

Question 3

If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect __________ cost, but will affect __________ cost.

Accepted Answer

A) variable; fixed 
B) fixed; variable 
C) average fixed; average variable 
D) marginal; fixed 
E) b and c 
A) variable; fixed 
B) fixed; variable 
C) average fixed; average variable 
D) marginal; fixed 
E) b and c

Question 4

The short run is

Accepted Answer

A) a period of time in which all inputs are fixed. 
B) a period of time in which all inputs are variable. 
C) a period of time in which some inputs are fixed. 
D) always less than a year. 
E) a and d 
A) a period of time in which all inputs are fixed. 
B) a period of time in which all inputs are variable. 
C) a period of time in which some inputs are fixed. 
D) always less than a year. 
E) a and d

Question 5

-Refer to Situation 21-1. What will Diane's total variable costs be if she sells 36,500 donuts in one year?

Accepted Answer

A) $10,950 
B) $18,450 
C) $22,080 
D) $12,500 
A) $10,950 
B) $18,450 
C) $22,080 
D) $12,500

Question 6

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be __________ and the AFC curve should be __________ after the agreement goes into effect.

Accepted Answer

A) lower; lower 
B) lower; unchanged 
C) higher; higher 
D) lower; higher 
E) unchanged; lower 
A) lower; lower 
B) lower; unchanged 
C) higher; higher 
D) lower; higher 
E) unchanged; lower

Question 7

Suppose that minimum efficient scale as a percentage of U.S. consumption is 5 percent in industry X and it is 10 percent in industry Y. It follows that we would expect to find

Accepted Answer

A) fewer firms in industry Y than X. 
B) fewer firms in industry X than Y. 
C) bigger firms in industry Y than X. 
D) bigger firms in industry X than Y. 
E) none of the above 
A) fewer firms in industry Y than X. 
B) fewer firms in industry X than Y. 
C) bigger firms in industry Y than X. 
D) bigger firms in industry X than Y. 
E) none of the above

Question 8

The vertical distance between the AVC and ATC curves is equal to

Accepted Answer

A) marginal cost. 
B) average fixed cost. 
C) accounting profit. 
D) economic profit. 
E) none of the above 
A) marginal cost. 
B) average fixed cost. 
C) accounting profit. 
D) economic profit. 
E) none of the above

Question 9

If explicit costs equal $157,000, implicit costs equal $95,000, and accounting profit equals $23,000, it follows that total revenue equals __________ and economic profit equals __________.

Accepted Answer

A) $75,000; $17,000 
B) $180,000; -$72,000 
C) $68,000; $25,000 
D) $118,000; -$72,000 
E) There is not enough information given to answer this question. 
A) $75,000; $17,000 
B) $180,000; -$72,000 
C) $68,000; $25,000 
D) $118,000; -$72,000 
E) There is not enough information given to answer this question.

Question 10

Exhibit 21-10
​
   ​
-Refer to Exhibit 21-10. Jose is experiencing increasing marginal returns

Accepted Answer

A) only in the first hour of studying. 
B) up to the third hour of studying. 
C) up to the fourth hour of studying. 
D) during all six hours of studying. 
A) only in the first hour of studying. 
B) up to the third hour of studying. 
C) up to the fourth hour of studying. 
D) during all six hours of studying.

Question 11

If implicit costs equal accounting profit, economic profit must be

Accepted Answer

A) negative. 
B) positive. 
C) zero. 
D) higher in the short run than in the long run. 
E) higher in the long run than in the short run. 
A) negative. 
B) positive. 
C) zero. 
D) higher in the short run than in the long run. 
E) higher in the long run than in the short run.

Question 12

-Refer to Situation 21-4. What are Joe's explicit costs?

Accepted Answer

A) $125,000 
B) $175,000 
C) $35,000 
D) $200,000 
E) $50,000 
A) $125,000 
B) $175,000 
C) $35,000 
D) $200,000 
E) $50,000

Question 13

Describe the Alchian and Demsetz theory of why firms exist. How does this differ from the Coase theory of why firms exist?

Accepted Answer

Armen Alchian and Harold Demsetz argue t

Question 14

Exhibit 21-3
​
  
-Refer to Exhibit 21-3. The marginal physical product figures in blanks (B) and (C) are, respectively,

Accepted Answer

A) 10 and 15. 
B) 15 and 20. 
C) 20 and 15. 
D) 15 and 10. 
E) 10 and 10. 
A) 10 and 15. 
B) 15 and 20. 
C) 20 and 15. 
D) 15 and 10. 
E) 10 and 10.

Question 15

The change in total cost that results from a change in output is __________ cost.

Accepted Answer

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

Question 16

If the "minimum efficient scale" in an industry is at 25 percent of market sales, what is the maximum number of efficient firms the economy can support in this industry?

Accepted Answer

A) 75 
B) 25 
C) 10 
D) 4 
A) 75 
B) 25 
C) 10 
D) 4

Question 17

There are 30 students in a class. The average grade for the first 29 students is 87. The grade of the remaining student is 84. Given this student's grade, the average grade of the 30-student class will be

Accepted Answer

A) 87. 
B) higher than 87. 
C) lower than 87. 
D) 84. 
A) 87. 
B) higher than 87. 
C) lower than 87. 
D) 84.

Question 18

Noble Prizewinner Ronald Coase argued that firms exist in order to reduce transaction costs.

Accepted Answer

A) True 
 B)False

Question 19

Which of these statements is false?

Accepted Answer

A) There are no fixed costs in the long run. 
B) Total costs are equal to total fixed costs plus total variable costs. 
C) In the short run, all inputs are fixed inputs. 
D) A fixed cost is a cost that does not change as output changes. 
A) There are no fixed costs in the long run. 
B) Total costs are equal to total fixed costs plus total variable costs. 
C) In the short run, all inputs are fixed inputs. 
D) A fixed cost is a cost that does not change as output changes.

Question 20

According to the textbook, Iceland used crowdsourcing to

Accepted Answer

A) rewrite its constitution. 
B) elect members of its parliament. 
C) elect its president. 
D) rename its capitol city. 
A) rewrite its constitution. 
B) elect members of its parliament. 
C) elect its president. 
D) rename its capitol city.

Exam 21: Production and Costs

Implicit cost is a

As the marginal physical product of a variable input increases, the marginal cost decreases.

If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect __________ cost, but will affect __________ cost.

The short run is

-Refer to Situation 21-1. What will Diane's total variable costs be if she sells 36,500 donuts in one year?

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be __________ and the AFC curve should be __________ after the agreement goes into effect.

Suppose that minimum efficient scale as a percentage of U.S. consumption is 5 percent in industry X and it is 10 percent in industry Y. It follows that we would expect to find

The vertical distance between the AVC and ATC curves is equal to

If explicit costs equal $157,000, implicit costs equal $95,000, and accounting profit equals $23,000, it follows that total revenue equals __________ and economic profit equals __________.

Exhibit 21-10 ​ ​ -Refer to Exhibit 21-10. Jose is experiencing increasing marginal returns

If implicit costs equal accounting profit, economic profit must be

-Refer to Situation 21-4. What are Joe's explicit costs?

Describe the Alchian and Demsetz theory of why firms exist. How does this differ from the Coase theory of why firms exist?

Exhibit 21-3 ​ -Refer to Exhibit 21-3. The marginal physical product figures in blanks (B) and (C) are, respectively,

The change in total cost that results from a change in output is __________ cost.

If the "minimum efficient scale" in an industry is at 25 percent of market sales, what is the maximum number of efficient firms the economy can support in this industry?

There are 30 students in a class. The average grade for the first 29 students is 87. The grade of the remaining student is 84. Given this student's grade, the average grade of the 30-student class will be

Noble Prizewinner Ronald Coase argued that firms exist in order to reduce transaction costs.

Which of these statements is false?

According to the textbook, Iceland used crowdsourcing to

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Perfect Competition

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

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If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect cost, but will affect cost.

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be and the AFC curve should be after the agreement goes into effect.

If explicit costs equal $157,000, implicit costs equal $95,000, and accounting profit equals $23,000, it follows that total revenue equals and economic profit equals .

Exhibit 21-10 -Refer to Exhibit 21-10. Jose is experiencing increasing marginal returns

Exhibit 21-3 -Refer to Exhibit 21-3. The marginal physical product figures in blanks (B) and (C) are, respectively,