Question 1

Which of the following cost curves is never U-shaped?

Accepted Answer

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

Question 2

Exhibit 21-3
​
  
-Refer to Exhibit 21-3. The marginal cost figures in blanks (F) and (G), respectively, are

Accepted Answer

A) $2.00 and $1.33. 
B) $2.00 and $1.60. 
C) $20.00 and $13.33. 
D) $2.00 and $2.66. 
E) none of the above 
A) $2.00 and $1.33. 
B) $2.00 and $1.60. 
C) $20.00 and $13.33. 
D) $2.00 and $2.66. 
E) none of the above

Question 3

Exhibit 21-2
​
  
-Refer to Exhibit 21-2. What is the average total cost of producing 90 units of output?

Accepted Answer

A) $4.75 
B) $1.17 
C) $1.07 
D) $2.11 
E) There is not enough information provided to answer the question. 
A) $4.75 
B) $1.17 
C) $1.07 
D) $2.11 
E) There is not enough information provided to answer the question.

Question 4

Exhibit 21-2
​
  
-Refer to Exhibit 21-2. The dollar amounts that go in blanks (C) and (D), respectively, are

Accepted Answer

A) $10.00 and $1.00. 
B) $30.00 and $34.00. 
C) $3.00 and $4.00. 
D) $6.67 and $10.00. 
E) $1.00 and $1.50. 
A) $10.00 and $1.00. 
B) $30.00 and $34.00. 
C) $3.00 and $4.00. 
D) $6.67 and $10.00. 
E) $1.00 and $1.50.

Question 5

If the owner of a firm earns zero economic profit, he or she has earned total revenue equal to his or her

Accepted Answer

A) implicit costs. 
B) explicit costs. 
C) accounting profit. 
D) implicit costs plus explicit costs. 
E) none of the above 
A) implicit costs. 
B) explicit costs. 
C) accounting profit. 
D) implicit costs plus explicit costs. 
E) none of the above

Question 6

Making a manager a residual claimant is often a way of

Accepted Answer

A) forming a partnership. 
B) increasing the efficiency of a nonprofit firm. 
C) reducing the incentive of the manager to shirk. 
D) redirecting the firm to the objective of revenue maximization. 
A) forming a partnership. 
B) increasing the efficiency of a nonprofit firm. 
C) reducing the incentive of the manager to shirk. 
D) redirecting the firm to the objective of revenue maximization.

Question 7

Describe the average-marginal rule. Give a hypothetical numerical example that illustrates the average-marginal rule.

Accepted Answer

The average-marginal rule states the fol

Question 8

Economists predict that the __________ the cost of shirking to an individual, the __________ shirking that individual will undertake, ceteris paribus.

Accepted Answer

A) lower; less 
B) higher; less 
C) lower; more 
D) higher; more 
E) b and c 
A) lower; less 
B) higher; less 
C) lower; more 
D) higher; more 
E) b and c

Question 9

If the wage rate is constant and diminishing marginal returns have already set in, then

Accepted Answer

A) the wage rate must increase. 
B) marginal cost increases. 
C) marginal cost decreases. 
D) the wage rate must decrease. 
A) the wage rate must increase. 
B) marginal cost increases. 
C) marginal cost decreases. 
D) the wage rate must decrease.

Question 10

Exhibit 21-14
   Assume that labor is the only variable input and that each additional laborer is paid $600.
-Refer to Exhibit 21-14. What is the marginal cost of producing this good with 1 and 2 laborers working [blanks (E) and (F)], respectively?

Accepted Answer

A) $600; $300 
B) $60; $30 
C) $8; $12 
D) $6; $8 
E) none of the above 
A) $600; $300 
B) $60; $30 
C) $8; $12 
D) $6; $8 
E) none of the above

Question 11

Which of the following statements is true?

Accepted Answer

A) The short run is always somewhere between six and twelve months. 
B) In the short run, changes in output can only be brought about by a change in the quantity of variable inputs. 
C) The long run is any period of time over one year. 
D) In the short run, there are variable costs but no fixed costs. 
E) b and d 
A) The short run is always somewhere between six and twelve months. 
B) In the short run, changes in output can only be brought about by a change in the quantity of variable inputs. 
C) The long run is any period of time over one year. 
D) In the short run, there are variable costs but no fixed costs. 
E) b and d

Question 12

Which of the following statements is true?

Accepted Answer

A) Costs are always explicit, never implicit. 
B) Costs are always implicit, never explicit. 
C) George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop.The $5,000 for carpet is an implicit cost. 
D) An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made. 
E) none of the above 
A) Costs are always explicit, never implicit. 
B) Costs are always implicit, never explicit. 
C) George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop.The $5,000 for carpet is an implicit cost. 
D) An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made. 
E) none of the above

Question 13

Exhibit 21-11
​
  
-Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Accepted Answer

A) $50. 
B) $100. 
C) $300. 
D) $90.83. 
A) $50. 
B) $100. 
C) $300. 
D) $90.83.

Question 14

Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.

Accepted Answer

A) long run; short run 
B) short run; long run 
C) industry; firm 
D) firm; industry 
E) firm in the short run; industry in the long run 
A) long run; short run 
B) short run; long run 
C) industry; firm 
D) firm; industry 
E) firm in the short run; industry in the long run

Question 15

Average variable cost equals

Accepted Answer

A) average total cost minus average fixed cost. 
B) total variable cost divided by the change in output. 
C) total variable cost divided by output. 
D) price of the variable input times the quantity of the variable input. 
E) a and c 
A) average total cost minus average fixed cost. 
B) total variable cost divided by the change in output. 
C) total variable cost divided by output. 
D) price of the variable input times the quantity of the variable input. 
E) a and c

Question 16

Exhibit 21-1
  
-Refer to Exhibit 21-1. Diminishing marginal returns set in with the addition of which unit of the variable input?

Accepted Answer

A) the fourth 
B) the fifth 
C) the sixth 
D) the second 
E) the third 
A) the fourth 
B) the fifth 
C) the sixth 
D) the second 
E) the third

Question 17

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

Accepted Answer

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

Question 18

Accounting profit equals economic profit if __________ equals __________.

Accepted Answer

A) explicit costs; implicit costs 
B) total revenue; marginal cost 
C) implicit costs; zero 
D) explicit costs; zero 
E) unit cost; marginal cost 
A) explicit costs; implicit costs 
B) total revenue; marginal cost 
C) implicit costs; zero 
D) explicit costs; zero 
E) unit cost; marginal cost

Question 19

Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) __________ percentage, causing unit costs to __________.

Accepted Answer

A) greater; fall 
B) smaller; fall 
C) greater; rise 
D) smaller; rise 
E) equal; fall 
A) greater; fall 
B) smaller; fall 
C) greater; rise 
D) smaller; rise 
E) equal; fall

Question 20

Which of the following statements is true?

Accepted Answer

A) In the short run, there are no fixed costs, only variable costs. 
B) In the short run, there are fixed and variable costs, but in the long run there are only fixed costs. 
C) In the short run, there are fixed and variable costs, but fixed costs are the only costs a firm is concerned with. 
D) In the long run, there are no costs, fixed or variable. 
E) none of the above 
A) In the short run, there are no fixed costs, only variable costs. 
B) In the short run, there are fixed and variable costs, but in the long run there are only fixed costs. 
C) In the short run, there are fixed and variable costs, but fixed costs are the only costs a firm is concerned with. 
D) In the long run, there are no costs, fixed or variable. 
E) none of the above

Exam 21: Production and Costs

Which of the following cost curves is never U-shaped?

Exhibit 21-3 ​ -Refer to Exhibit 21-3. The marginal cost figures in blanks (F) and (G), respectively, are

Exhibit 21-2 ​ -Refer to Exhibit 21-2. What is the average total cost of producing 90 units of output?

Exhibit 21-2 ​ -Refer to Exhibit 21-2. The dollar amounts that go in blanks (C) and (D), respectively, are

If the owner of a firm earns zero economic profit, he or she has earned total revenue equal to his or her

Making a manager a residual claimant is often a way of

Describe the average-marginal rule. Give a hypothetical numerical example that illustrates the average-marginal rule.

Economists predict that the __________ the cost of shirking to an individual, the __________ shirking that individual will undertake, ceteris paribus.

If the wage rate is constant and diminishing marginal returns have already set in, then

Exhibit 21-14 Assume that labor is the only variable input and that each additional laborer is paid $600. -Refer to Exhibit 21-14. What is the marginal cost of producing this good with 1 and 2 laborers working [blanks (E) and (F)], respectively?

Which of the following statements is true?

Which of the following statements is true?

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.

Average variable cost equals

Exhibit 21-1 -Refer to Exhibit 21-1. Diminishing marginal returns set in with the addition of which unit of the variable input?

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

Accounting profit equals economic profit if __________ equals __________.

Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) __________ percentage, causing unit costs to __________.

Which of the following statements is true?

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 21-3 -Refer to Exhibit 21-3. The marginal cost figures in blanks (F) and (G), respectively, are

Exhibit 21-2 -Refer to Exhibit 21-2. What is the average total cost of producing 90 units of output?

Exhibit 21-2 -Refer to Exhibit 21-2. The dollar amounts that go in blanks (C) and (D), respectively, are

Economists predict that the the cost of shirking to an individual, the shirking that individual will undertake, ceteris paribus.

Exhibit 21-11 -Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Economies of scale are relevant to the , whereas the law of diminishing marginal returns is relevant to the .

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

Accounting profit equals economic profit if equals .

Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) percentage, causing unit costs to .