Question 1

Average total cost is increasing whenever

Accepted Answer

A) total cost is increasing. 
B) marginal cost is increasing. 
C) marginal cost is less than average total cost. 
D) marginal cost is greater than average total cost. 
A) total cost is increasing. 
B) marginal cost is increasing. 
C) marginal cost is less than average total cost. 
D) marginal cost is greater than average total cost.

Question 2

The average-fixed-cost curve is always declining. How does this affect the relationship between the AVC and ATC curves?

Accepted Answer

ATC = AVC + AFC, so the vertical distanc

Question 3

Several related measures of cost can be derived from a firm's total cost.

Accepted Answer

A) True 
 B)False

Question 4

Chloe gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 4 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Chloe's accounting profits are

Accepted Answer

A) $100, and her economic profits are $40. 
B) $100, and her economic profits are $15. 
C) $40, and her economic profits are $100. 
D) $15, and her economic profits are $140. 
A) $100, and her economic profits are $40. 
B) $100, and her economic profits are $15. 
C) $40, and her economic profits are $100. 
D) $15, and her economic profits are $140.

Question 5

The shape of the total-cost curve is unrelated to the shape of the production function.

Accepted Answer

A) True 
 B)False

Question 6

Variable costs equal fixed costs when nothing is produced.

Accepted Answer

A) True 
 B)False

Question 7

Figure 13-2   ​
-Refer to Figure 13-2. Curve D is always declining because

Accepted Answer

A) of diminishing marginal product. 
B) we are dividing fixed costs by higher and higher levels of output. 
C) marginal product first increases, then decreases. 
D) marginal product first decreases, then increases. 
A) of diminishing marginal product. 
B) we are dividing fixed costs by higher and higher levels of output. 
C) marginal product first increases, then decreases. 
D) marginal product first decreases, then increases.

Question 8

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

Accepted Answer

A) 2 houses 
B) 3 houses 
C) 5 houses 
D) 8 houses 
A) 2 houses 
B) 3 houses 
C) 5 houses 
D) 8 houses

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Table 13-14
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Labor } & \text { Output } & \begin{array} { l } 
\text { Marginal } \
\text { Product }
\end{array} & \begin{array} { l } 
\text { Variable } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Fixed } \
\text { Cost }
\end{array} \
\hline 0 & 0 & - & \$ 0 & \$ 10 \
\hline 1 & 200 & 200 & \$ 20 & \$ 10 \
\hline 2 & 350 & & \$ 40 & \$ 10 \
\hline 3 & 450 & & \$ 60 & \$ 10 \
\hline 4 & & 50 & \$ 80 & \$ 10 \
\hline 5 & & 25 & \$ 100 & \$ 10 \
\hline 6 & 530 & & \$ 120 & \$ 10 \
\hline
\end{array}$$
-Refer to Table 13-14. What is the shape of the average-variable-cost curve?

Accepted Answer

AVC = VC/Q, where VC is graphed on the v

Question 11

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

Accepted Answer

A) True 
 B)False

Question 12

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

Accepted Answer

A) Tyler says his costs are $25,900, and Greg says his costs are $66,500. 
B) Tyler says his costs are $25,000, and Greg says his costs are $65,000. 
C) Tyler says his costs are $66,500, and Greg says his costs are $66,500. 
D) Tyler says his costs are $75,000, and Greg says his costs are $41,500. 
A) Tyler says his costs are $25,900, and Greg says his costs are $66,500. 
B) Tyler says his costs are $25,000, and Greg says his costs are $65,000. 
C) Tyler says his costs are $66,500, and Greg says his costs are $66,500. 
D) Tyler says his costs are $75,000, and Greg says his costs are $41,500.

Question 13

An example of an explicit cost for the owner of a tattoo parlor would be the wages that she could earn if she worked as a graphic artist for an advertising agency.

Accepted Answer

A) True 
 B)False

Question 14

When marginal cost is less than average total cost,

Accepted Answer

A) marginal cost must be falling. 
B) average variable cost must be falling. 
C) average total cost is falling. 
D) average total cost is rising. 
A) marginal cost must be falling. 
B) average variable cost must be falling. 
C) average total cost is falling. 
D) average total cost is rising.

Question 15

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Accepted Answer

A) True 
 B)False

Question 16

Define profit.

Accepted Answer

Profit = T

Question 17

In the long run a company that produces and sells popcorn incurs total costs of $1,150 when output is 60 canisters and $1,100 when output is 90 canisters. The popcorn company exhibits

Accepted Answer

A) diseconomies of scale because total cost is rising as output rises. 
B) diseconomies of scale because average total cost is rising as output rises. 
C) economies of scale because total cost is rising as output rises. 
D) economies of scale because average total cost is falling as output rises. 
A) diseconomies of scale because total cost is rising as output rises. 
B) diseconomies of scale because average total cost is rising as output rises. 
C) economies of scale because total cost is rising as output rises. 
D) economies of scale because average total cost is falling as output rises.

Question 18

Table 13-9
​
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Labor } \
\text { (Number of w orkers) }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Fixed Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & 0 & 30 & 0 \
\hline 1 & 100 & 30 & 15 \
\hline 2 & 180 & 30 & 30 \
\hline 3 & 240 & 30 & 45 \
\hline 4 & 280 & 30 & 60 \
\hline 5 & 300 & 30 & 75 \
\hline
\end{array}$$
-Refer to Table 13-9. The average variable cost of producing 240 units is

Accepted Answer

A) $0.13. 
B) $0.19. 
C) $0.32. 
D) $0.80. 
A) $0.13. 
B) $0.19. 
C) $0.32. 
D) $0.80.

Question 19

Table 13-8
​
​
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Fixed Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & 20 & 0 \
\hline 1 & 20 & 10 \
\hline 2 & 20 & 40 \
\hline 3 & 20 & 80 \
\hline 4 & 20 & 130 \
\hline 5 & 20 & 200 \
\hline 6 & 20 & 300 \
\hline
\end{array}$$
-Refer to Table 13-8. What is the shape of the marginal cost curve for this firm?

Accepted Answer

A) constant 
B) upward-sloping 
C) downward-sloping 
D) U-shaped 
A) constant 
B) upward-sloping 
C) downward-sloping 
D) U-shaped

Question 20

Table 13-9
​
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Labor } \
\text { (Number of w orkers) }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Fixed Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & 0 & 30 & 0 \
\hline 1 & 100 & 30 & 15 \
\hline 2 & 180 & 30 & 30 \
\hline 3 & 240 & 30 & 45 \
\hline 4 & 280 & 30 & 60 \
\hline 5 & 300 & 30 & 75 \
\hline
\end{array}$$
-Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its total-cost curve is

Accepted Answer

A) constant. 
B) increasing at a decreasing rate. 
C) increasing at an increasing rate. 
D) unknown because there is no relationship between a firm's production function and its total-cost curve. 
A) constant. 
B) increasing at a decreasing rate. 
C) increasing at an increasing rate. 
D) unknown because there is no relationship between a firm's production function and its total-cost curve.

Exam 13: The Costs of Production

Average total cost is increasing whenever

The average-fixed-cost curve is always declining. How does this affect the relationship between the AVC and ATC curves?

Several related measures of cost can be derived from a firm's total cost.

The shape of the total-cost curve is unrelated to the shape of the production function.

Variable costs equal fixed costs when nothing is produced.

Figure 13-2 ​ -Refer to Figure 13-2. Curve D is always declining because

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

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

Table 13-14 Labor Output Marginal Product Variable Cost Fixed Cost 0 0 - \ 0 \ 10 1 200 200 \ 20 \ 10 2 350 \ 40 \ 10 3 450 \ 60 \ 10 4 50 \ 80 \ 10 5 25 \ 100 \ 10 6 530 \ 120 \ 10 -Refer to Table 13-14. What is the shape of the average-variable-cost curve?

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

An example of an explicit cost for the owner of a tattoo parlor would be the wages that she could earn if she worked as a graphic artist for an advertising agency.

When marginal cost is less than average total cost,

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Define profit.

In the long run a company that produces and sells popcorn incurs total costs of $1,150 when output is 60 canisters and $1,100 when output is 90 canisters. The popcorn company exhibits

Table 13-9 ​ ​ Labor (Number of w orkers) Output (Units) Fixed Cost (Dollars) Variable Cost (Dollars) 0 0 30 0 1 100 30 15 2 180 30 30 3 240 30 45 4 280 30 60 5 300 30 75 -Refer to Table 13-9. The average variable cost of producing 240 units is

Table 13-8 ​ ​ Output (Units) Fixed Cost (Dollars) Variable Cost (Dollars) 0 20 0 1 20 10 2 20 40 3 20 80 4 20 130 5 20 200 6 20 300 -Refer to Table 13-8. What is the shape of the marginal cost curve for this firm?

Table 13-9 ​ ​ Labor (Number of w orkers) Output (Units) Fixed Cost (Dollars) Variable Cost (Dollars) 0 0 30 0 1 100 30 15 2 180 30 30 3 240 30 45 4 280 30 60 5 300 30 75 -Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its total-cost curve is

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

Filters

Figure 13-2 -Refer to Figure 13-2. Curve D is always declining because

Table 13-9 Labor (Number of w orkers) Output (Units) Fixed Cost (Dollars) Variable Cost (Dollars) 0 0 30 0 1 100 30 15 2 180 30 30 3 240 30 45 4 280 30 60 5 300 30 75 -Refer to Table 13-9. The average variable cost of producing 240 units is

Table 13-8 Output (Units) Fixed Cost (Dollars) Variable Cost (Dollars) 0 20 0 1 20 10 2 20 40 3 20 80 4 20 130 5 20 200 6 20 300 -Refer to Table 13-8. What is the shape of the marginal cost curve for this firm?

Table 13-9 Labor (Number of w orkers) Output (Units) Fixed Cost (Dollars) Variable Cost (Dollars) 0 0 30 0 1 100 30 15 2 180 30 30 3 240 30 45 4 280 30 60 5 300 30 75 -Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its total-cost curve is