Question 1

When there are economies of scale in production, what can we conclude?

Accepted Answer

A)  Marginal cost increases as output expands. 
B)  Marginal product of an input diminishes with increased utilization. 
C)  Long-run average total cost declines as output expands. 
D)  Long-run average total cost increases as output expands. 
A)  Marginal cost increases as output expands. 
B)  Marginal product of an input diminishes with increased utilization. 
C)  Long-run average total cost declines as output expands. 
D)  Long-run average total cost increases as output expands. C

Question 2

What does diminishing marginal productivity in a frozen pizza company mean?

Accepted Answer

A)  Hiring additional workers does not change the total output of pizza produced. 
B)  Hiring additional workers causes the total output of pizza to fall. 
C)  Hiring additional workers adds fewer and fewer pizzas to total output. 
D)  The average total cost of production must be decreasing. 
A)  Hiring additional workers does not change the total output of pizza produced. 
B)  Hiring additional workers causes the total output of pizza to fall. 
C)  Hiring additional workers adds fewer and fewer pizzas to total output. 
D)  The average total cost of production must be decreasing. C

Question 3

What is the sum of AVC and AFC equal to?

Accepted Answer

A)  average total cost 
B)  economic profit 
C)  total variable cost 
D)  accounting profit 
A)  average total cost 
B)  economic profit 
C)  total variable cost 
D)  accounting profit A

Question 4

TABLE 7-3
  
-Refer to Table 7-3. What is the level of the firm's total fixed cost (in thousands)?

Accepted Answer

A)  $0 
B)  $5 
C)  $8 
D)  $25 
A)  $0 
B)  $5 
C)  $8 
D)  $25

Question 5

Which of the following most accurately describes what must be occurring if the short-run average total cost is increasing?

Accepted Answer

A)  Total fixed cost must be increasing. 
B)  Average variable cost must be decreasing. 
C)  Marginal cost must be greater than average total cost. 
D)  Average fixed cost must be greater than the marginal cost. 
A)  Total fixed cost must be increasing. 
B)  Average variable cost must be decreasing. 
C)  Marginal cost must be greater than average total cost. 
D)  Average fixed cost must be greater than the marginal cost.

Question 6

A one-day ticket to Sea World costs $37, but a two-day pass costs $42. What is the average cost per day for a one-day pass? What is the average cost per day for a two-day pass? What is the marginal cost of a second day at Sea World? Why might Sea World charge such a price for a second day's entrance to the park?

Accepted Answer

The one-day pass average cost is $37. Th

Question 7

FIGURE 7-1
  
-Refer to Figure 7-1. What is the marginal product of the second worker hired each week?

Accepted Answer

A)  10 bicycles 
B)  15 bicycles 
C)  20 bicycles 
D)  30 bicycles 
A)  10 bicycles 
B)  15 bicycles 
C)  20 bicycles 
D)  30 bicycles

Question 8

How short is the short-run production period?

Accepted Answer

In the short run, some factors cannot be

Question 9

Which of the following most accurately describes the short-run period?

Accepted Answer

A)  It is a period of time in which the existing firms in the industry do not have sufficient time to adjust the quantity of any inputs that they employ. 
B)  It is a period of time in which new entrants have sufficient time to build factories and enter the industry. 
C)  It is a period of time in which the existing firms in the industry do not have sufficient time to adjust their current rate of output. 
D)  It is a period of time in which the existing firms in the market do not have sufficient time to increase the size of their existing plants or build new factories. 
A)  It is a period of time in which the existing firms in the industry do not have sufficient time to adjust the quantity of any inputs that they employ. 
B)  It is a period of time in which new entrants have sufficient time to build factories and enter the industry. 
C)  It is a period of time in which the existing firms in the industry do not have sufficient time to adjust their current rate of output. 
D)  It is a period of time in which the existing firms in the market do not have sufficient time to increase the size of their existing plants or build new factories.

Question 10

TABLE 7-5
  
-Refer to Table 7-5. How much are average fixed costs at four units of output?

Accepted Answer

A)  $10 
B)  $20 
C)  $30 
D)  $40 
A)  $10 
B)  $20 
C)  $30 
D)  $40

Question 11

Which of the following statements best describes the marginal cost curve?

Accepted Answer

A)  It generally falls at first and then rises as output expands. 
B)  It is a vertical line. 
C)  It intersects the average variable cost curve from below at its maximum point. 
D)  It generally rises at first and then declines as output expands. 
A)  It generally falls at first and then rises as output expands. 
B)  It is a vertical line. 
C)  It intersects the average variable cost curve from below at its maximum point. 
D)  It generally rises at first and then declines as output expands.

Question 12

What will an increase in the interest payments on outstanding debt cause in the short run?

Accepted Answer

A)  an increase in both AFC and ATC 
B)  an increase in MC and a decrease in AFC 
C)  an increase in MC, AVC, and ATC 
D)  no change, because capital is fixed in the short run 
A)  an increase in both AFC and ATC 
B)  an increase in MC and a decrease in AFC 
C)  an increase in MC, AVC, and ATC 
D)  no change, because capital is fixed in the short run

Question 13

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-6
  
-Refer to Figure 7-6. Which plant size is optimal for the firm to produce qA units of output each week?

Accepted Answer

A)  Plant 2 
B)  Plant 3 
C)  Plant 4 
D)  Plant 5 
A)  Plant 2 
B)  Plant 3 
C)  Plant 4 
D)  Plant 5

Question 14

What relationship does a production function show?

Accepted Answer

A)  the relationship between variable inputs and outputs 
B)  the relationship between variable inputs and fixed inputs 
C)  the relationship between inputs and costs 
D)  the relationship between costs and outputs 
A)  the relationship between variable inputs and outputs 
B)  the relationship between variable inputs and fixed inputs 
C)  the relationship between inputs and costs 
D)  the relationship between costs and outputs

Question 15

In what way does an economist's measurement of profit differ from an accountant's?

Accepted Answer

A)  Accountants calculate total revenue differently than do economists. 
B)  Accountants do not always include all of the opportunity costs when calculating total production costs. 
C)  Economists calculate higher profits for firms as economic profit generally exceeds accounting profit. 
D)  Economists do not always include all of the opportunity costs when calculating total production costs. 
A)  Accountants calculate total revenue differently than do economists. 
B)  Accountants do not always include all of the opportunity costs when calculating total production costs. 
C)  Economists calculate higher profits for firms as economic profit generally exceeds accounting profit. 
D)  Economists do not always include all of the opportunity costs when calculating total production costs.

Question 16

Which of the following best illustrates the cost curves of a firm that is experiencing economies of scale?

Accepted Answer

A)  The short-run marginal cost is falling as output expands. 
B)  The long-run marginal cost is falling as output expands. 
C)  The long-run average total cost is falling as output expands. 
D)  The short-run average total cost is falling as output expands. 
A)  The short-run marginal cost is falling as output expands. 
B)  The long-run marginal cost is falling as output expands. 
C)  The long-run average total cost is falling as output expands. 
D)  The short-run average total cost is falling as output expands.

Question 17

Which of the following does NOT describe average fixed cost?

Accepted Answer

A)  It is calculated by dividing fixed costs by output. 
B)  It declines continuously as output increases. 
C)  It equals the difference between average total cost and average variable cost. 
D)  It is always less than average variable cost. 
A)  It is calculated by dividing fixed costs by output. 
B)  It declines continuously as output increases. 
C)  It equals the difference between average total cost and average variable cost. 
D)  It is always less than average variable cost.

Question 18

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

Accepted Answer

A) True 
 B)False

Question 19

Complete the following table describing the short-run daily costs of the Kangaroo Backpack Company.

Accepted Answer

The answer of Complete the following table describing the short-run...

Question 20

Which of the following factors of production is variable in the short run?

Accepted Answer

A)  labour 
B)  machinery and equipment 
C)  land 
D)  the size of the firm's plant 
A)  labour 
B)  machinery and equipment 
C)  land 
D)  the size of the firm's plant

When there are economies of scale in production, what can we conclude?

What does diminishing marginal productivity in a frozen pizza company mean?

What is the sum of AVC and AFC equal to?

TABLE 7-3 -Refer to Table 7-3. What is the level of the firm's total fixed cost (in thousands)?

Which of the following most accurately describes what must be occurring if the short-run average total cost is increasing?

FIGURE 7-1 -Refer to Figure 7-1. What is the marginal product of the second worker hired each week?

How short is the short-run production period?

Which of the following most accurately describes the short-run period?

TABLE 7-5 -Refer to Table 7-5. How much are average fixed costs at four units of output?

Which of the following statements best describes the marginal cost curve?

What will an increase in the interest payments on outstanding debt cause in the short run?

What relationship does a production function show?

In what way does an economist's measurement of profit differ from an accountant's?

Which of the following best illustrates the cost curves of a firm that is experiencing economies of scale?

Which of the following does NOT describe average fixed cost?

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

Complete the following table describing the short-run daily costs of the Kangaroo Backpack Company.

Which of the following factors of production is variable in the short run?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

The Environment

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Exam 7: Production and Costs

When there are economies of scale in production, what can we conclude?

What does diminishing marginal productivity in a frozen pizza company mean?

What is the sum of AVC and AFC equal to?

TABLE 7-3 -Refer to Table 7-3. What is the level of the firm's total fixed cost (in thousands)?

Which of the following most accurately describes what must be occurring if the short-run average total cost is increasing?

FIGURE 7-1 -Refer to Figure 7-1. What is the marginal product of the second worker hired each week?

How short is the short-run production period?

Which of the following most accurately describes the short-run period?

TABLE 7-5 -Refer to Table 7-5. How much are average fixed costs at four units of output?

Which of the following statements best describes the marginal cost curve?

What will an increase in the interest payments on outstanding debt cause in the short run?

What relationship does a production function show?

In what way does an economist's measurement of profit differ from an accountant's?

Which of the following best illustrates the cost curves of a firm that is experiencing economies of scale?

Which of the following does NOT describe average fixed cost?

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

Complete the following table describing the short-run daily costs of the Kangaroo Backpack Company.

Which of the following factors of production is variable in the short run?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

The Environment

Filters