Question 1

In the long run, a firm will choose a plant size that has the

Accepted Answer

A) minimum of average fixed costs. 
B) capacity to produce the largest quantity of the product. 
C) minimum average total cost of producing the target level of output. 
D) maximum level of resource use per unit of the total product of output. 
A) minimum of average fixed costs. 
B) capacity to produce the largest quantity of the product. 
C) minimum average total cost of producing the target level of output. 
D) maximum level of resource use per unit of the total product of output. C

Question 2

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's economic profit is

Accepted Answer

A) $150,000. 
B) $80,000. 
C) $230,000. 
D) $94,000. 
A) $150,000. 
B) $80,000. 
C) $230,000. 
D) $94,000. D

Question 3

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50.Its output quantity must be

Accepted Answer

A) 200 units. 
B) 400 units. 
C) 800 units. 
D) 1,600 units. 
A) 200 units. 
B) 400 units. 
C) 800 units. 
D) 1,600 units. C

Question 4

At any level of output.

Accepted Answer

A) average variable cost will exceed average total cost in the short run. 
B) marginal cost will exceed average variable cost by the level of average fixed cost. 
C) average variable cost will exceed average fixed cost by the level of average total cost. 
D) average total cost will exceed average variable cost by the level of average fixed cost. 
A) average variable cost will exceed average total cost in the short run. 
B) marginal cost will exceed average variable cost by the level of average fixed cost. 
C) average variable cost will exceed average fixed cost by the level of average total cost. 
D) average total cost will exceed average variable cost by the level of average fixed cost.

Question 5

Which of the following is most likely to be a fixed cost?

Accepted Answer

A) shipping charges 
B) property insurance premiums 
C) wages for unskilled labor 
D) expenditures for raw materials 
A) shipping charges 
B) property insurance premiums 
C) wages for unskilled labor 
D) expenditures for raw materials

Question 6

Marginal cost can be defined as the

Accepted Answer

A) change in total fixed cost resulting from one more unit of production. 
B) change in total cost resulting from one more unit of production. 
C) change in average total cost resulting from one more unit of production. 
D) change in average variable cost resulting from one more unit of production. 
A) change in total fixed cost resulting from one more unit of production. 
B) change in total cost resulting from one more unit of production. 
C) change in average total cost resulting from one more unit of production. 
D) change in average variable cost resulting from one more unit of production.

Question 7

The short-run average total cost curve is U-shaped because

Accepted Answer

A) average fixed costs decline continuously as output increases. 
B) of increasing and diminishing returns. 
C) of economies and diseconomies of scale. 
D) minimum efficient scale is encountered.Topic: Short-Run Production Relationships 
A) average fixed costs decline continuously as output increases. 
B) of increasing and diminishing returns. 
C) of economies and diseconomies of scale. 
D) minimum efficient scale is encountered.Topic: Short-Run Production Relationships

Question 8

When total product is increasing at a decreasing rate, marginal product is

Accepted Answer

A) positive and increasing. 
B) positive and decreasing. 
C) constant. 
D) negative. 
A) positive and increasing. 
B) positive and decreasing. 
C) constant. 
D) negative.

Question 9

Economic profits are usually larger than accounting profits.

Accepted Answer

A) True 
 B)False

Question 10

If in the short run a firm's total product is increasing, then its

Accepted Answer

A) marginal product must also be increasing. 
B) marginal product must be decreasing. 
C) marginal product could be either increasing or decreasing. 
D) average product must also be increasing. 
A) marginal product must also be increasing. 
B) marginal product must be decreasing. 
C) marginal product could be either increasing or decreasing. 
D) average product must also be increasing.

Question 11

Fixed costs are associated with

Accepted Answer

A) highly adjustable inputs such as labor. 
B) both the short run and the long run. 
C) the short run only. 
D) the long run only. 
A) highly adjustable inputs such as labor. 
B) both the short run and the long run. 
C) the short run only. 
D) the long run only.

Question 12

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

Accepted Answer

A) no generalization about the changes in TC and TVC can be made. 
B) the changes in TC and TVC are equal. 
C) the change in TC is greater than the change in TVC. 
D) the change in TVC is greater than the change in TC. 
A) no generalization about the changes in TC and TVC can be made. 
B) the changes in TC and TVC are equal. 
C) the change in TC is greater than the change in TVC. 
D) the change in TVC is greater than the change in TC.

Question 13

Total fixed cost (TFC)

Accepted Answer

A) falls as the firm expands output from zero, but eventually rises. 
B) falls continuously as total output expands. 
C) varies directly with total output. 
D) does not change as total output increases or decreases. 
A) falls as the firm expands output from zero, but eventually rises. 
B) falls continuously as total output expands. 
C) varies directly with total output. 
D) does not change as total output increases or decreases.

Question 14

The law of diminishing returns explains diseconomies of scale.Topic: Short-Run Production Relationships

Accepted Answer

A) True 
 B)False

Question 15

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Accepted Answer

A) None, because fixed costs do not affect marginal cost. 
B) Marginal cost would increase by 50 percent. 
C) Marginal cost would increase by less than 50 percent. 
D) Marginal cost would increase by more than 50 percent. 
A) None, because fixed costs do not affect marginal cost. 
B) Marginal cost would increase by 50 percent. 
C) Marginal cost would increase by less than 50 percent. 
D) Marginal cost would increase by more than 50 percent.

Question 16

(Last Word) Which of the following is a predicted result of the increased use of additive manufacturing (using 3-D printers)?

Accepted Answer

A) Economies of scale in manufacturing will be eliminated, driving up production costs and prices. 
B) lower prices of manufactured goods through the elimination of large fixed costs and transportation costs 
C) monopolization of manufactured goods industries, as few individuals can afford additive manufacturing technology 
D) significant increases in the fixed costs of producing manufactured goods 
A) Economies of scale in manufacturing will be eliminated, driving up production costs and prices. 
B) lower prices of manufactured goods through the elimination of large fixed costs and transportation costs 
C) monopolization of manufactured goods industries, as few individuals can afford additive manufacturing technology 
D) significant increases in the fixed costs of producing manufactured goods

Question 17

Which of the following statements is not correct?

Accepted Answer

A) The real cost of producing X is the quantity of products, R, S, or T etc., which could have been produced with the resources devoted to X. 
B) Diseconomies of scale arise primarily from the difficulties in managing and coordinating a large-scale business enterprise. 
C) The law of diminishing returns explains the fact that the long-run average total cost curve is U-shaped. 
D) Average fixed costs diminish so long as output increases. 
A) The real cost of producing X is the quantity of products, R, S, or T etc., which could have been produced with the resources devoted to X. 
B) Diseconomies of scale arise primarily from the difficulties in managing and coordinating a large-scale business enterprise. 
C) The law of diminishing returns explains the fact that the long-run average total cost curve is U-shaped. 
D) Average fixed costs diminish so long as output increases.

Question 18

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles.This is an example of one reason for

Accepted Answer

A) economies of scale. 
B) diminishing returns to scale. 
C) diminishing marginal returns. 
D) increasing marginal cost. 
A) economies of scale. 
B) diminishing returns to scale. 
C) diminishing marginal returns. 
D) increasing marginal cost.

Question 19

If a firm's revenues just cover all its implicit costs, then

Accepted Answer

A) normal profit is zero. 
B) economic profit is zero. 
C) total revenues equal its explicit costs. 
D) total revenues equal its implicit costs. 
A) normal profit is zero. 
B) economic profit is zero. 
C) total revenues equal its explicit costs. 
D) total revenues equal its implicit costs.

Question 20

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs

Accepted Answer

A) are $2.50. 
B) are $1,250. 
C) are $750. 
D) are $1,100. 
A) are $2.50. 
B) are $1,250. 
C) are $750. 
D) are $1,100.

Exam 9: Businesses and the Costs of Production

In the long run, a firm will choose a plant size that has the

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50.Its output quantity must be

At any level of output.

Which of the following is most likely to be a fixed cost?

Marginal cost can be defined as the

The short-run average total cost curve is U-shaped because

When total product is increasing at a decreasing rate, marginal product is

Economic profits are usually larger than accounting profits.

If in the short run a firm's total product is increasing, then its

Fixed costs are associated with

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

Total fixed cost (TFC)

The law of diminishing returns explains diseconomies of scale.Topic: Short-Run Production Relationships

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

(Last Word) Which of the following is a predicted result of the increased use of additive manufacturing (using 3-D printers)?

Which of the following statements is not correct?

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles.This is an example of one reason for

If a firm's revenues just cover all its implicit costs, then

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

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Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

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Immigration

An Introduction to Macroeconomics

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Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

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Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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