Question 1

When a firm earns zero economic profit, it has

Accepted Answer

A) not covered all its explicit costs. 
B) not covered all its implicit costs. 
C) not earned enough to stay in business. 
D) definitely earned an accounting profit if implicit costs are positive. 
E) none of the above 
A) not covered all its explicit costs. 
B) not covered all its implicit costs. 
C) not earned enough to stay in business. 
D) definitely earned an accounting profit if implicit costs are positive. 
E) none of the above

Question 2

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

Accepted Answer

A) $10; $10 
B) $20; $50 
C) $20; $30 
D) $42; $40 
E) There is not enough information to answer this question. 
A) $10; $10 
B) $20; $50 
C) $20; $30 
D) $42; $40 
E) There is not enough information to answer this question.

Question 3

Carol works for Firm X. She takes long breaks and often daydreams when she is being paid to work. Carol is

Accepted Answer

A) satisfying. 
B) shirking. 
C) monitoring. 
D) separating ownership from control. 
A) satisfying. 
B) shirking. 
C) monitoring. 
D) separating ownership from control.

Question 4

Exhibit 21-3
​
  
-Refer to Exhibit 21-3. What is the average total cost of producing 45 units of output?

Accepted Answer

A) $25.11 
B) $24.44 
C) $21.11 
D) $21.33 
A) $25.11 
B) $24.44 
C) $21.11 
D) $21.33

Question 5

Exhibit 21-7
​
  
-John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000. Instead, John decides to give the card to his sister (an avid baseball-card collector) as a birthday present. The opportunity cost of John's generosity is

Accepted Answer

A) $10, the purchase price. 
B) $0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away. 
C) $2,000, the amount offered by the collector. 
D) $1,005, the average of $10 and $2,000. 
A) $10, the purchase price. 
B) $0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away. 
C) $2,000, the amount offered by the collector. 
D) $1,005, the average of $10 and $2,000.

Question 6

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

Accepted Answer

A) $8.30 
B) $1.81 
C) $1.08 
D) $9.71 
A) $8.30 
B) $1.81 
C) $1.08 
D) $9.71

Question 7

Suppose that unit costs are the same at both 100 units of output and 150 units of output. Unit costs are higher at output levels less than 100 units and at output levels greater than 150 units. It follows that minimum efficient scale exists

Accepted Answer

A) somewhere between 100 and 150 units. 
B) at 100 units. 
C) at 150 units. 
D) at less than 100 units. 
E) at greater than 150 units. 
A) somewhere between 100 and 150 units. 
B) at 100 units. 
C) at 150 units. 
D) at less than 100 units. 
E) at greater than 150 units.

Question 8

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

Accepted Answer

A) $100; $50 
B) $25; $68 
C) $200; $200 
D) $66.67; $50 
E) There is not enough information to answer this question. 
A) $100; $50 
B) $25; $68 
C) $200; $200 
D) $66.67; $50 
E) There is not enough information to answer this question.

Question 9

Exhibit 21-8
​
  
-Exhibit 21-8 shows how output varies with the only variable input used in its production. The table indicates that diminishing marginal returns set in with the hiring of which unit of labor?

Accepted Answer

A) first 
B) second 
C) third 
D) fourth 
E) fifth 
A) first 
B) second 
C) third 
D) fourth 
E) fifth

Question 10

In the long run, if inputs are increased by 10 percent and output increases by 20 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 11

As the marginal physical product curve rises,

Accepted Answer

A) the marginal cost curve rises. 
B) the marginal cost curve falls. 
C) the total cost curve rises. 
D) the total cost curve falls. 
A) the marginal cost curve rises. 
B) the marginal cost curve falls. 
C) the total cost curve rises. 
D) the total cost curve falls.

Question 12

Exhibit 21-7
​
  
-Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is

Accepted Answer

A) $85.00. 
B) $12.14. 
C) $21.00. 
D) $5.00. 
A) $85.00. 
B) $12.14. 
C) $21.00. 
D) $5.00.

Question 13

At 200 units of output, total cost is $52,000 and total variable cost is $35,000. What does total fixed cost equal at 200 units?

Accepted Answer

A) $260 
B) $900 
C) $17,000 
D) $85 
E) $175 
A) $260 
B) $900 
C) $17,000 
D) $85 
E) $175

Question 14

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

Accepted Answer

A) $280; $400 
B) $28; $40 
C) $260; $360 
D) $50; $400 
E) There is not enough information to answer this question. 
A) $280; $400 
B) $28; $40 
C) $260; $360 
D) $50; $400 
E) There is not enough information to answer this question.

Question 15

Which of the following statements is true?

Accepted Answer

A) At a high level of output, AFC is zero. 
B) If the law of diminishing marginal returns did not exist, then the marginal cost curve would not have an upward-sloping portion. 
C) The marginal cost curve cuts the average fixed cost curve at its minimum. 
D) There are no fixed costs in the short run. 
E) none of the above 
A) At a high level of output, AFC is zero. 
B) If the law of diminishing marginal returns did not exist, then the marginal cost curve would not have an upward-sloping portion. 
C) The marginal cost curve cuts the average fixed cost curve at its minimum. 
D) There are no fixed costs in the short run. 
E) none of the above

Question 16

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 MPP of the fourth unit of labor [blank (D)]?

Accepted Answer

A) 70 units 
B) 60 units 
C) 100 units 
D) 15 units 
A) 70 units 
B) 60 units 
C) 100 units 
D) 15 units

Question 17

Which of the following statements is false?

Accepted Answer

A) Average fixed cost continually declines as output increases. 
B) Marginal cost is equal to the change in total cost divided by the change in quantity of output. 
C) The law of diminishing marginal returns states that, in the long run, as ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline. 
D) The vertical distance between the AVC curve and the ATC curve declines as more output is produced. 
A) Average fixed cost continually declines as output increases. 
B) Marginal cost is equal to the change in total cost divided by the change in quantity of output. 
C) The law of diminishing marginal returns states that, in the long run, as ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline. 
D) The vertical distance between the AVC curve and the ATC curve declines as more output is produced.

Question 18

Exhibit 21-4
​
  
-Refer to Exhibit 21-4. Curve D is a(n) __________ cost curve.

Accepted Answer

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

Question 19

Which of the following statements is sequentially correct?

Accepted Answer

A) Changes in marginal physical product change marginal cost, which changes average variable and average total cost. 
B) Changes in marginal cost change marginal physical product, which changes average variable and average total cost. 
C) Changes in average variable cost change marginal cost, which changes average total cost, which changes marginal physical product. 
D) Changes in average variable and average total cost change marginal cost, which changes marginal physical product. 
A) Changes in marginal physical product change marginal cost, which changes average variable and average total cost. 
B) Changes in marginal cost change marginal physical product, which changes average variable and average total cost. 
C) Changes in average variable cost change marginal cost, which changes average total cost, which changes marginal physical product. 
D) Changes in average variable and average total cost change marginal cost, which changes marginal physical product.

Question 20

Describe the law of diminishing marginal returns. How does it relate to the shape of the marginal cost (MC) curve?

Accepted Answer

The law of diminishing marginal returns

Exam 21: Production and Costs

When a firm earns zero economic profit, it has

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

Carol works for Firm X. She takes long breaks and often daydreams when she is being paid to work. Carol is

Exhibit 21-3 ​ -Refer to Exhibit 21-3. What is the average total cost of producing 45 units of output?

Exhibit 21-7 ​ -John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000. Instead, John decides to give the card to his sister (an avid baseball-card collector) as a birthday present. The opportunity cost of John's generosity is

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

Suppose that unit costs are the same at both 100 units of output and 150 units of output. Unit costs are higher at output levels less than 100 units and at output levels greater than 150 units. It follows that minimum efficient scale exists

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

Exhibit 21-8 ​ -Exhibit 21-8 shows how output varies with the only variable input used in its production. The table indicates that diminishing marginal returns set in with the hiring of which unit of labor?

In the long run, if inputs are increased by 10 percent and output increases by 20 percent, then __________ are said to exist.

As the marginal physical product curve rises,

Exhibit 21-7 ​ -Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is

At 200 units of output, total cost is $52,000 and total variable cost is $35,000. What does total fixed cost equal at 200 units?

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

Which of the following statements is true?

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 MPP of the fourth unit of labor [blank (D)]?

Which of the following statements is false?

Exhibit 21-4 ​ -Refer to Exhibit 21-4. Curve D is a(n) __________ cost curve.

Which of the following statements is sequentially correct?

Describe the law of diminishing marginal returns. How does it relate to the shape of the marginal cost (MC) curve?

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 (T) and (U), respectively?

Exhibit 21-3 -Refer to Exhibit 21-3. What is the average total cost of producing 45 units of output?

Exhibit 21-7 -John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000. Instead, John decides to give the card to his sister (an avid baseball-card collector) as a birthday present. The opportunity cost of John's generosity is

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

Exhibit 21-8 -Exhibit 21-8 shows how output varies with the only variable input used in its production. The table indicates that diminishing marginal returns set in with the hiring of which unit of labor?

Exhibit 21-7 -Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is

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

Exhibit 21-4 -Refer to Exhibit 21-4. Curve D is a(n) __________ cost curve.