Question 1

In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories.

Accepted Answer

A) True 
 B)False

Question 2

If a firm produces nothing, which of the following costs will be zero?

Accepted Answer

A) Total cost 
B) Fixed cost 
C) Opportunity cost 
D) Variable cost 
A) Total cost 
B) Fixed cost 
C) Opportunity cost 
D) Variable cost

Question 3

Kate is a florist. Kate can arrange 27 bouquets per day. She is considering hiring her husband Amir to work for her. Together Kate and Amir can arrange 41 bouquets per day. What is Amir's marginal product?

Accepted Answer

A) 68 bouquets 
B) 41 bouquets 
C) 29 bouquets 
D) 14 bouquets 
A) 68 bouquets 
B) 41 bouquets 
C) 29 bouquets 
D) 14 bouquets

Question 4

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A) $30 
B) $140 
C) $170 
D) $300 
A) $30 
B) $140 
C) $170 
D) $300

Question 5

The Bow Wow company produced and sold 400 dog beds. The average cost of production per dog bed was $40. Each dog bed can be sold for a price of $75. Bow Wow's total costs are

Accepted Answer

A) $17,500. 
B) $16,000. 
C) $30,000. 
D) $46,000. 
A) $17,500. 
B) $16,000. 
C) $30,000. 
D) $46,000.

Question 6

A difference between explicit and implicit costs is that

Accepted Answer

A) explicit costs must be greater than implicit costs. 
B) explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. 
C) implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. 
D) implicit costs must be greater than explicit costs. 
A) explicit costs must be greater than implicit costs. 
B) explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. 
C) implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. 
D) implicit costs must be greater than explicit costs.

Question 7

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Accepted Answer

A) True 
 B)False

Question 8

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 firm's total-cost curve?

Accepted Answer

The firm's total-cost curve wo

Question 9

If a firm produces nothing, it still incurs its fixed costs.

Accepted Answer

A) True 
 B)False

Question 10

Accountants often ignore implicit costs.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Accepted Answer

A) True 
 B)False

Question 12

Economies of scale occur when

Accepted Answer

A) long-run average total costs rise as output increases. 
B) long-run average total costs fall as output increases. 
C) average fixed costs are falling. 
D) average fixed costs are constant. 
A) long-run average total costs rise as output increases. 
B) long-run average total costs fall as output increases. 
C) average fixed costs are falling. 
D) average fixed costs are constant.

Question 13

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 14

If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.

Accepted Answer

A) True 
 B)False

Question 15

What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Accepted Answer

The opportunity cost of an ite

Question 16

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?

Accepted Answer

A) Shoe polish and wages Pete could earn delivering newspapers 
B) Shoe polish and rent on the shoe stand 
C) Wages Pete could earn delivering newspapers and interest that Pete's money was earning before he spent his savings to set up the shoe-shine business 
D) Rent on the shoe stand and interest that Pete's money was earning before he spent his savings to set up the shoe-shine business 
A) Shoe polish and wages Pete could earn delivering newspapers 
B) Shoe polish and rent on the shoe stand 
C) Wages Pete could earn delivering newspapers and interest that Pete's money was earning before he spent his savings to set up the shoe-shine business 
D) Rent on the shoe stand and interest that Pete's money was earning before he spent his savings to set up the shoe-shine business

Question 17

A firm's total profit equals its marginal revenue minus its marginal cost.

Accepted Answer

A) True 
 B)False

Question 18

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 B is experiencing diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 19

Table 13-15
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Labor } & \text { Output } & \begin{array} { l } 
\text { Marginal } \
\text { Product }
\end{array} & \begin{array} { l } 
\text { Variable } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Fixed } \
\text { Cost }
\end{array} \
\hline 0 & 0 & - & \$ 0 & \$ 5 \
\hline 1 & 100 & 100 & \$ 5 & \$ 5 \
\hline 2 & 250 & & \$ 10 & \$ 5 \
\hline 3 & 350 & & \$ 15 & \$ 5 \
\hline 4 & & 50 & \$ 20 & \$ 5 \
\hline 5 & & 25 & \$ 25 & \$ 5 \
\hline 6 & 430 & & \$ 30 & \$ 5 \
\hline
\end{array}$$
-Refer to Table 13-15. What is the shape of this firm's total-cost curve?

Accepted Answer

This firm's total-cost curve would be in

Question 20

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Accepted Answer

ATC = AVC + AFC, so the vertical distanc

Exam 13: The Costs of Production

In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories.

If a firm produces nothing, which of the following costs will be zero?

Kate is a florist. Kate can arrange 27 bouquets per day. She is considering hiring her husband Amir to work for her. Together Kate and Amir can arrange 41 bouquets per day. What is Amir's marginal product?

The Bow Wow company produced and sold 400 dog beds. The average cost of production per dog bed was $40. Each dog bed can be sold for a price of $75. Bow Wow's total costs are

A difference between explicit and implicit costs is that

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

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 firm's total-cost curve?

If a firm produces nothing, it still incurs its fixed costs.

Accountants often ignore implicit costs.

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Economies of scale occur when

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.

If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.

What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?

A firm's total profit equals its marginal revenue minus its marginal cost.

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 B is experiencing diseconomies of scale.

Table 13-15 Labor Output Marginal Product Variable Cost Fixed Cost 0 0 - \ 0 \ 5 1 100 100 \ 5 \ 5 2 250 \ 10 \ 5 3 350 \ 15 \ 5 4 50 \ 20 \ 5 5 25 \ 25 \ 5 6 430 \ 30 \ 5 -Refer to Table 13-15. What is the shape of this firm's total-cost curve?

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

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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