Question 1

A firm produces 100 units of output at a total cost of $1,900. If fixed costs are $100,

Accepted Answer

A) average fixed cost is $19. 
B) average variable cost is $18. 
C) average total cost is $20. 
D) average total cost is $21. 
A) average fixed cost is $19. 
B) average variable cost is $18. 
C) average total cost is $20. 
D) average total cost is $21.

Question 2

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Accepted Answer

A) True 
 B)False

Question 3

Kerem makes candles. If he charges $25 for each candle, his total revenue will be

Accepted Answer

A) $1,250 if he sells 100 candles. 
B) $625 if he sells 25 candles. 
C) $25 regardless of how many candles he sells. 
D) $2,500 if he sells 5 candles. 
A) $1,250 if he sells 100 candles. 
B) $625 if he sells 25 candles. 
C) $25 regardless of how many candles he sells. 
D) $2,500 if he sells 5 candles.

Question 4

Consider a small family wheat farm. List some examples of implicit costs of farming.

Accepted Answer

the lost earnings of any famil

Question 5

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Accepted Answer

A) True 
 B)False

Question 6

Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings to start a coffee shop. The interest rate is 5 percent for both the bank loan and her personal savings. Her opportunity cost of capital is $250.

Accepted Answer

A) True 
 B)False

Question 7

Table 13-10
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.
​
​
 \[\begin{array} { | c | c | c | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { (Instructional } \
\text { modules per } \
\text { month) }
\end{array} & \begin{array} { c } 
\text { Fixed } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Variable } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Fixed Cost } \
\text { (Dollars } \
\text { per unit) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable } \
\text { Cost } \
\text { (Dollars per } \
\text { unit) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Total Cost } \
\text { (Dollars } \
\text { per unit) }
\end{array} \
\hline 0 & 1,080 & & & & & & \
\hline 1 & 1,080 & 400 & 1480 & 400 & & & \
\hline 2 & & & & 450 & & & 965\
\hline 3 & & 1,350 & 2,430 & & & & \
\hline 4 & & 1,900 & & & & 475& \
\hline 5 & & 2,500 & & & 216 & & \
\hline 6 & & & 4,280 & 700 & & & \
\hline 7 & & 4,100 & & & & & \
\hline 8 & & 5,400 & & &135 & & \
\hline 9 & & 7,300 & & & & & \
\hline 10 & & & 10,880 & & & 980 & \
\hline
\end{array}\] ​
​
​
-Refer to Table 13-10. How many instructional modules are produced when marginal cost is $1,300?

Accepted Answer

A) 4 
B) 5 
C) 7 
D) 8 
A) 4 
B) 5 
C) 7 
D) 8

Question 8

Jacqui decides to open her own business and earns $90,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 3 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business?

Accepted Answer

A) $49,400 
B) $89,400 
C) $44,400 
D) $59,400 
A) $49,400 
B) $89,400 
C) $44,400 
D) $59,400

Question 9

Table 13-10
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.
​
​
 \[\begin{array} { | c | c | c | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { (Instructional } \
\text { modules per } \
\text { month) }
\end{array} & \begin{array} { c } 
\text { Fixed } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Variable } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Fixed Cost } \
\text { (Dollars } \
\text { per unit) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable } \
\text { Cost } \
\text { (Dollars per } \
\text { unit) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Total Cost } \
\text { (Dollars } \
\text { per unit) }
\end{array} \
\hline 0 & 1,080 & & & & & & \
\hline 1 & 1,080 & 400 & 1480 & 400 & & & \
\hline 2 & & & & 450 & & & 965\
\hline 3 & & 1,350 & 2,430 & & & & \
\hline 4 & & 1,900 & & & & 475& \
\hline 5 & & 2,500 & & & 216 & & \
\hline 6 & & & 4,280 & 700 & & & \
\hline 7 & & 4,100 & & & & & \
\hline 8 & & 5,400 & & &135 & & \
\hline 9 & & 7,300 & & & & & \
\hline 10 & & & 10,880 & & & 980 & \
\hline
\end{array}\] ​
​
​
-Refer to Table 13-10. One month, Teacher's Helper produced 18 instructional modules. What was the average fixed cost for that month?

Accepted Answer

A) $60 
B) $108 
C) $811 
D) It can't be determined from the information given. 
A) $60 
B) $108 
C) $811 
D) It can't be determined from the information given.

Question 10

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 11

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False

Question 12

How can the average-fixed-cost curve be declining when fixed cost is constant?

Accepted Answer

Although fixed cost is unchang

Question 13

Describe how a study group of economics students could experience economies of scale as they study for an economics exam.

Accepted Answer

In this example, the costs of production

Question 14

Table 13-13
Listed in the table are the long-run total costs for three different firms.
 $$\begin{array} { | l | l | l | l | l | l | } 
\hline \text { uantity } & \mathbf { 2 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } & \mathbf { 5 } \
\hline \text { Firm A } & 100 & 100 & 100 & 100 & 100 \
\hline \text { Firm B } & 100 & 200 & 300 & 400 & 500 \
\hline \text { Firm C } & 100 & 300 & 600 & 1,000 & 1,500 \
\hline
\end{array}$$
-Refer to Table 13-13. Firm C is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 15

Can economic profit ever exceed accounting profit?

Accepted Answer

No. Economic profit = Accounting profit

Question 16

Which of the following is an example of an implicit cost?

Accepted Answer

A) Interest paid on the firm's debt 
B) Rent paid by the firm to lease office space 
C) The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm 
D) Wages paid to workers 
A) Interest paid on the firm's debt 
B) Rent paid by the firm to lease office space 
C) The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm 
D) Wages paid to workers

Question 17

Describe how an accounting firm could experience diseconomies of scale.

Accepted Answer

Problems with coordination can cause dis

Question 18

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) coordination problems arising from the large size of the firm. 
D) fixed costs greatly exceeding variable costs. 
A) economies of scale. 
B) diseconomies of scale. 
C) coordination problems arising from the large size of the firm. 
D) fixed costs greatly exceeding variable costs.

Question 19

Scenario 13-3
Diamond is an organic brocolli farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Diamond helps people organize their houses. Due to the popularity of her home-organization services, Farmer Diamond has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Diamond charges $45 an hour for her home-organization services. One spring day, Diamond spends 8 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of brocolli.
-Refer to Scenario 13-3.Diamond's accounting profit from farming equals

Accepted Answer

A) −$80. 
B) $130. 
C) $170. 
D) $260. 
A) −$80. 
B) $130. 
C) $170. 
D) $260.

Question 20

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production

A firm produces 100 units of output at a total cost of $1,900. If fixed costs are $100,

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Kerem makes candles. If he charges $25 for each candle, his total revenue will be

Consider a small family wheat farm. List some examples of implicit costs of farming.

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings to start a coffee shop. The interest rate is 5 percent for both the bank loan and her personal savings. Her opportunity cost of capital is $250.

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the average-total-cost curve.

The cost of producing an additional unit of a good is not the same as the average cost of the good.

How can the average-fixed-cost curve be declining when fixed cost is constant?

Describe how a study group of economics students could experience economies of scale as they study for an economics exam.

Table 13-13 Listed in the table are the long-run total costs for three different firms. uantity Firm A 100 100 100 100 100 Firm B 100 200 300 400 500 Firm C 100 300 600 1,000 1,500 -Refer to Table 13-13. Firm C is experiencing economies of scale.

Can economic profit ever exceed accounting profit?

Which of the following is an example of an implicit cost?

Describe how an accounting firm could experience diseconomies of scale.

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

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 Nations 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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