Question 1

If the owners of a firm earn accounting profit, it follows that

Accepted Answer

A) they will earn economic profit, too. 
B) their explicit costs are greater than their implicit costs. 
C) their implicit costs are greater than their explicit costs. 
D) they will not earn economic profit. 
E) none of the above 
A) they will earn economic profit, too. 
B) their explicit costs are greater than their implicit costs. 
C) their implicit costs are greater than their explicit costs. 
D) they will not earn economic profit. 
E) none of the above

Question 2

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

Accepted Answer

A) $150,000 
B) $175,000 
C) $35,000 
D) $200,000 
E) $50,000 
A) $150,000 
B) $175,000 
C) $35,000 
D) $200,000 
E) $50,000

Question 3

The owner of a firm signs a binding one-year lease on a factory for $10,000 rent a month and pays the first month's rent. The $10,000 rent is

Accepted Answer

A) a fixed cost but not a sunk cost. 
B) a sunk cost but not a fixed cost. 
C) both a fixed cost and a sunk cost. 
D) neither a fixed cost nor a sunk cost. 
E) none of the above 
A) a fixed cost but not a sunk cost. 
B) a sunk cost but not a fixed cost. 
C) both a fixed cost and a sunk cost. 
D) neither a fixed cost nor a sunk cost. 
E) none of the above

Question 4

If the average variable cost curve is falling,

Accepted Answer

A) the MC curve must be below it. 
B) marginal cost is greater than average variable cost. 
C) the MC curve is necessarily falling. 
D) the MC curve is necessarily horizontal (neither rising nor falling). 
E) the MC curve is necessarily rising. 
A) the MC curve must be below it. 
B) marginal cost is greater than average variable cost. 
C) the MC curve is necessarily falling. 
D) the MC curve is necessarily horizontal (neither rising nor falling). 
E) the MC curve is necessarily rising.

Question 5

Exhibit 21-13
​
  
-Refer to Exhibit 21-13. What dollar amounts go in blanks (A) and (B), respectively?

Accepted Answer

A) $200; $100 
B) $200; $200 
C) $50; $100 
D) $10; $100 
E) There is not enough information to answer this question. 
A) $200; $100 
B) $200; $200 
C) $50; $100 
D) $10; $100 
E) There is not enough information to answer this question.

Question 6

Minimum efficient scale refers to the

Accepted Answer

A) minimum size plant in any given industry. 
B) minimum point on the short-run average total cost curve. 
C) output level when economies of scale first set in. 
D) output level when diseconomies of scale first set in. 
E) lowest output level at which average total costs are minimized. 
A) minimum size plant in any given industry. 
B) minimum point on the short-run average total cost curve. 
C) output level when economies of scale first set in. 
D) output level when diseconomies of scale first set in. 
E) lowest output level at which average total costs are minimized.

Question 7

Exhibit 21-13
​
  
-Refer to Exhibit 21-13. What dollar amounts go in blanks (M) and (N), respectively?

Accepted Answer

A) $200; $125 
B) $120; $150 
C) $230; $125 
D) $150; $300 
E) There is not enough information to answer this question. 
A) $200; $125 
B) $120; $150 
C) $230; $125 
D) $150; $300 
E) There is not enough information to answer this question.

Question 8

A cost of resources used in production for which no actual monetary payment is made is a(n) __________ cost.

Accepted Answer

A) tacit 
B) implicit 
C) covert 
D) explicit 
A) tacit 
B) implicit 
C) covert 
D) explicit

Question 9

Which of the following statements is true?

Accepted Answer

A) The marginal cost curve has an upward-sloping portion to it because of the law of diminishing marginal returns. 
B) The marginal cost curve cuts the ATC curve at its highest point. 
C) When marginal cost is rising, so must average total cost be rising. 
D) A decline in marginal cost causes the MPP (of the variable input) to decline. 
E) none of the above 
A) The marginal cost curve has an upward-sloping portion to it because of the law of diminishing marginal returns. 
B) The marginal cost curve cuts the ATC curve at its highest point. 
C) When marginal cost is rising, so must average total cost be rising. 
D) A decline in marginal cost causes the MPP (of the variable input) to decline. 
E) none of the above

Question 10

-Refer to Situation 21-l. What will Diane's total costs be if she sells 2,500 donuts in her first week and then goes out of business?

Accepted Answer

A) $20,750 
B) $10,950 
C) $20,880 
D) $30,500 
A) $20,750 
B) $10,950 
C) $20,880 
D) $30,500

Question 11

In the long run, if inputs are increased by 10 percent and output increases by 10 percent, then __________ are said to exist.

Accepted Answer

A) economies of scale 
B) constant returns to scale 
C) diseconomies of scale 
D) diminishing marginal returns 
A) economies of scale 
B) constant returns to scale 
C) diseconomies of scale 
D) diminishing marginal returns

Question 12

-Refer to Situation 21-2. What are Alejandro's average variable costs at the present level of production?

Accepted Answer

A) $60 
B) $150 
C) $100 
D) $200 
E) There is not enough information to answer the question. 
A) $60 
B) $150 
C) $100 
D) $200 
E) There is not enough information to answer the question.

Question 13

Exhibit 21-11
​
  
-Refer to Exhibit 21-11. Total fixed cost is

Accepted Answer

A) $500. 
B) $600. 
C) $100. 
D) $110. 
E) There is not enough information provided to answer this question. 
A) $500. 
B) $600. 
C) $100. 
D) $110. 
E) There is not enough information provided to answer this question.

Question 14

If the marginal cost curve for a firm first declines and then rises, it follows that the MPP of the variable input

Accepted Answer

A) is constant. 
B) first declines and then rises. 
C) first rises and then declines. 
D) continually declines. 
E) none of the above 
A) is constant. 
B) first declines and then rises. 
C) first rises and then declines. 
D) continually declines. 
E) none of the above

Question 15

Suppose that a firm produces hard candies using both machines and labor, and that its quantity of machines is currently fixed but it can vary the number of workers. As more workers are added to operate the machines, output increases. Is this a refutation of the law of diminishing marginal returns?

Accepted Answer

A) Yes, because the law definitely states that output will decrease as more workers are added. 
B) No, because we must be observing output in the long run if the stated scenario is occurring. 
C) Yes, because the only way that this could occur is if the number of machines being used is also increasing. 
D) No, because it is entirely possible for output to increase even when the law is in operation. 
A) Yes, because the law definitely states that output will decrease as more workers are added. 
B) No, because we must be observing output in the long run if the stated scenario is occurring. 
C) Yes, because the only way that this could occur is if the number of machines being used is also increasing. 
D) No, because it is entirely possible for output to increase even when the law is in operation.

Question 16

"Managerial coordination" refers to the

Accepted Answer

A) behavior of a worker who is putting forth less than the agreed-to effort. 
B) process whereby individuals perform certain tasks based on changes in market forces. 
C) process whereby persons share in the profits of a business firm. 
D) process whereby managers direct employees to perform certain tasks. 
A) behavior of a worker who is putting forth less than the agreed-to effort. 
B) process whereby individuals perform certain tasks based on changes in market forces. 
C) process whereby persons share in the profits of a business firm. 
D) process whereby managers direct employees to perform certain tasks.

Question 17

Exhibit 21-7
​
  
-Refer to Exhibit 21-7. The total variable cost of producing 3 units is

Accepted Answer

A) $31.00. 
B) $51.00. 
C) $17.00. 
D) $60.00. 
E) There is not enough information to answer this question. 
A) $31.00. 
B) $51.00. 
C) $17.00. 
D) $60.00. 
E) There is not enough information to answer this question.

Question 18

Consider the following information about a business Diane opened last year: price = $20, quantity sold = 25,000; implicit cost = $255,000; explicit cost = $360,000. Assuming that all relevant costs and revenue are noted, what was Diane's accounting profit?

Accepted Answer

A) $140,000 
B) -$115,000 
C) -$140,000 
D) $115,000 
E) $245,000 
A) $140,000 
B) -$115,000 
C) -$140,000 
D) $115,000 
E) $245,000

Question 19

A person who does not ignore a sunk cost increases the probability that

Accepted Answer

A) the past will influence the future. 
B) the future will influence the past. 
C) the future will be like the past. 
D) there will be no future. 
E) the future will be like the present. 
A) the past will influence the future. 
B) the future will influence the past. 
C) the future will be like the past. 
D) there will be no future. 
E) the future will be like the present.

Question 20

The law of diminishing marginal returns is

Accepted Answer

A) the same concept as economies of scale. 
B) another name for the law of diminishing marginal utility. 
C) important for long-run economic analysis. 
D) relevant to the production of goods, but not services. 
E) none of the above 
A) the same concept as economies of scale. 
B) another name for the law of diminishing marginal utility. 
C) important for long-run economic analysis. 
D) relevant to the production of goods, but not services. 
E) none of the above

Exam 21: Production and Costs

If the owners of a firm earn accounting profit, it follows that

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

The owner of a firm signs a binding one-year lease on a factory for $10,000 rent a month and pays the first month's rent. The $10,000 rent is

If the average variable cost curve is falling,

Exhibit 21-13 ​ -Refer to Exhibit 21-13. What dollar amounts go in blanks (A) and (B), respectively?

Minimum efficient scale refers to the

Exhibit 21-13 ​ -Refer to Exhibit 21-13. What dollar amounts go in blanks (M) and (N), respectively?

A cost of resources used in production for which no actual monetary payment is made is a(n) __________ cost.

Which of the following statements is true?

-Refer to Situation 21-l. What will Diane's total costs be if she sells 2,500 donuts in her first week and then goes out of business?

In the long run, if inputs are increased by 10 percent and output increases by 10 percent, then __________ are said to exist.

-Refer to Situation 21-2. What are Alejandro's average variable costs at the present level of production?

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Total fixed cost is

If the marginal cost curve for a firm first declines and then rises, it follows that the MPP of the variable input

Suppose that a firm produces hard candies using both machines and labor, and that its quantity of machines is currently fixed but it can vary the number of workers. As more workers are added to operate the machines, output increases. Is this a refutation of the law of diminishing marginal returns?

"Managerial coordination" refers to the

Exhibit 21-7 ​ -Refer to Exhibit 21-7. The total variable cost of producing 3 units is

Consider the following information about a business Diane opened last year: price = $20, quantity sold = 25,000; implicit cost = $255,000; explicit cost = $360,000. Assuming that all relevant costs and revenue are noted, what was Diane's accounting profit?

A person who does not ignore a sunk cost increases the probability that

The law of diminishing marginal returns is

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

Filters

Exhibit 21-13 -Refer to Exhibit 21-13. What dollar amounts go in blanks (A) and (B), respectively?

Exhibit 21-13 -Refer to Exhibit 21-13. What dollar amounts go in blanks (M) and (N), respectively?

Exhibit 21-11 -Refer to Exhibit 21-11. Total fixed cost is

Exhibit 21-7 -Refer to Exhibit 21-7. The total variable cost of producing 3 units is