Question 1

FIGURE 7-1
  
-Refer to Figure 7-1. When does marginal product begin to diminish?

Accepted Answer

A)  with the first worker hired 
B)  with the second worker hired 
C)  with the third worker hired 
D)  with the fourth worker hired 
A)  with the first worker hired 
B)  with the second worker hired 
C)  with the third worker hired 
D)  with the fourth worker hired

Question 2

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

Accepted Answer

A)  Average fixed cost increases as output expands. 
B)  Marginal cost decreases as output expands. 
C)  Long-run average total cost declines as output expands. 
D)  Long-run average total cost increases as output expands. 
A)  Average fixed cost increases as output expands. 
B)  Marginal cost decreases as output expands. 
C)  Long-run average total cost declines as output expands. 
D)  Long-run average total cost increases as output expands.

Question 3

Refer to Table 7-4. What is the marginal cost of producing a third watch?

Accepted Answer

A)  $4 
B)  $5 
C)  $50 
D)  $69 
A)  $4 
B)  $5 
C)  $50 
D)  $69

Question 4

Which of the following best describes total variable costs?

Accepted Answer

A)  They increase as production increases. 
B)  They decrease as production increases. 
C)  They are costs associated with short-run fixed capital. 
D)  They are so named because they vary from firm to firm within an industry. 
A)  They increase as production increases. 
B)  They decrease as production increases. 
C)  They are costs associated with short-run fixed capital. 
D)  They are so named because they vary from firm to firm within an industry.

Question 5

TABLE 7-5
  
-Refer to Table 7-5. How much are total fixed costs?

Accepted Answer

A)  $20 
B)  $30 
C)  $40 
D)  $50 
A)  $20 
B)  $30 
C)  $40 
D)  $50

Question 6

FIGURE 7-3
  
-Refer to Figure 7-3. Which is the average fixed cost curve?

Accepted Answer

A)  the curve labelled A 
B)  the curve labelled B 
C)  the curve labelled C 
D)  the curve labelled D 
A)  the curve labelled A 
B)  the curve labelled B 
C)  the curve labelled C 
D)  the curve labelled D

Question 7

The average total cost of producing laptop computers in a factory is $500 at the current output level of 100 units per week. If fixed costs equal $10 000, which of the following statements regarding cost is accurate?

Accepted Answer

A)  Average variable cost equals $400. 
B)  Average fixed cost equals $10 000. 
C)  Variable cost equals $50 000 per week. 
D)  Total cost equals $60 000 per week. 
A)  Average variable cost equals $400. 
B)  Average fixed cost equals $10 000. 
C)  Variable cost equals $50 000 per week. 
D)  Total cost equals $60 000 per week.

Question 8

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

Accepted Answer

A)  the income an entrepreneur could have earned working for someone else 
B)  the cost of labour for a farmer who tills his fields 
C)  the income of a labourer in a factory that assembles DVD players 
D)  the cost of raw materials used to produce bread in a bakery 
A)  the income an entrepreneur could have earned working for someone else 
B)  the cost of labour for a farmer who tills his fields 
C)  the income of a labourer in a factory that assembles DVD players 
D)  the cost of raw materials used to produce bread in a bakery

Question 9

When calculating the marginal product of capital, which of the following conditions must be met?

Accepted Answer

A)  The total number of units of capital employed has to be constant. 
B)  All other inputs must remain fixed. 
C)  Other inputs must be varied in the same proportion as capital. 
D)  Total output must be held fixed by assumption. 
A)  The total number of units of capital employed has to be constant. 
B)  All other inputs must remain fixed. 
C)  Other inputs must be varied in the same proportion as capital. 
D)  Total output must be held fixed by assumption.

Question 10

What will a new (superior) technology cause in the short run?

Accepted Answer

A)  a decrease in MC, AVC, and ATC 
B)  an increase in AFC and a decrease in AVC 
C)  a decrease in MC and an increase in ATC 
D)  a decrease in both MC and AVC 
A)  a decrease in MC, AVC, and ATC 
B)  an increase in AFC and a decrease in AVC 
C)  a decrease in MC and an increase in ATC 
D)  a decrease in both MC and AVC

Question 11

What will an increase in advertising expenditures cause in the long run?

Accepted Answer

A)  an increase in MC and a decrease in AC 
B)  an increase in both MC and AC 
C)  an increase in AC and no change in MC 
D)  a decrease in both MC and AC 
A)  an increase in MC and a decrease in AC 
B)  an increase in both MC and AC 
C)  an increase in AC and no change in MC 
D)  a decrease in both MC and AC

Question 12

A firm is operating at a scale where diseconomies of scale are present. Why is the firm NOT operating efficiently?

Accepted Answer

A)  The firm is operating at a scale where total fixed costs are not minimized. 
B)  The firm is operating at a scale where the average total cost of production is falling as output expands. 
C)  The firm has grown so large that average total cost increases as output expands. 
D)  The firm is operating at a scale where average fixed costs are not as low as possible. 
A)  The firm is operating at a scale where total fixed costs are not minimized. 
B)  The firm is operating at a scale where the average total cost of production is falling as output expands. 
C)  The firm has grown so large that average total cost increases as output expands. 
D)  The firm is operating at a scale where average fixed costs are not as low as possible.

Question 13

Ray Tucker has run his company, Tucker's Towing and Wrecking, for two years and has made an accounting profit of $34 000 each year. As long as Tucker's Towing continues to make accounting profits, it is rational to remain in the towing business.

Accepted Answer

A) True 
 B)False

Question 14

Average variable cost equals total variable cost divided by output.

Accepted Answer

A) True 
 B)False

Question 15

FIGURE 7-4
  
-Refer to Figure 7-4. At output level 0Q, what is average fixed cost equal to?

Accepted Answer

A)  ED 
B)  FE 
C)  FC 
D)  EB. 
A)  ED 
B)  FE 
C)  FC 
D)  EB.

Question 16

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 7-5
  
-Refer to Figure 7-5. What is the total cost of producing 500 basketballs per week, assuming the firm uses the optimal plant size for producing that quantity of output?

Accepted Answer

A)  $500 
B)  $5000 
C)  $13 500 
D)  $22 500 
A)  $500 
B)  $5000 
C)  $13 500 
D)  $22 500

Question 17

If Rocco's Rib Joint took in $35 000 in revenue last week and had out-of-pocket expenses of $31 500, which of the following best describes Rocco's profits last week?

Accepted Answer

A)  Rocco really didn't make any profit since he needs to put the difference between revenue and out-of-pocket expenses back into the firm. 
B)  Rocco made an economic profit of $3500. 
C)  It is not clear whether Rocco earned any profit last week because it depends on the magnitude of the implicit costs. 
D)  Rocco did not earn an economic profit. 
A)  Rocco really didn't make any profit since he needs to put the difference between revenue and out-of-pocket expenses back into the firm. 
B)  Rocco made an economic profit of $3500. 
C)  It is not clear whether Rocco earned any profit last week because it depends on the magnitude of the implicit costs. 
D)  Rocco did not earn an economic profit.

Question 18

FIGURE 7-4
  
-Refer to Figure 7-4. At output level 0Q, what is total variable cost equal to?

Accepted Answer

A)  area CFQ0 
B)  area ADEB 
C)  area ADQ0 
D)  area BEQ0 
A)  area CFQ0 
B)  area ADEB 
C)  area ADQ0 
D)  area BEQ0

Question 19

A factory producing CD players finds that its output varies with the number of workers employed each week in the following way: TABLE 7-2
  
-Refer to Table 7-2. When does marginal product begin to diminish?

Accepted Answer

A)  with the first worker employed 
B)  with the second worker employed 
C)  with the third worker employed 
D)  with the fourth worker employed 
A)  with the first worker employed 
B)  with the second worker employed 
C)  with the third worker employed 
D)  with the fourth worker employed

Question 20

What is total cost?

Accepted Answer

A)  the sum of total variable cost and marginal cost 
B)  the sum of average fixed cost and marginal cost 
C)  the sum of total variable cost and total fixed cost 
D)  the sum of total fixed cost and average variable cost 
A)  the sum of total variable cost and marginal cost 
B)  the sum of average fixed cost and marginal cost 
C)  the sum of total variable cost and total fixed cost 
D)  the sum of total fixed cost and average variable cost

FIGURE 7-1 -Refer to Figure 7-1. When does marginal product begin to diminish?

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

Refer to Table 7-4. What is the marginal cost of producing a third watch?

Which of the following best describes total variable costs?

TABLE 7-5 -Refer to Table 7-5. How much are total fixed costs?

FIGURE 7-3 -Refer to Figure 7-3. Which is the average fixed cost curve?

The average total cost of producing laptop computers in a factory is $500 at the current output level of 100 units per week. If fixed costs equal $10 000, which of the following statements regarding cost is accurate?

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

When calculating the marginal product of capital, which of the following conditions must be met?

What will a new (superior) technology cause in the short run?

What will an increase in advertising expenditures cause in the long run?

A firm is operating at a scale where diseconomies of scale are present. Why is the firm NOT operating efficiently?

Ray Tucker has run his company, Tucker's Towing and Wrecking, for two years and has made an accounting profit of $34 000 each year. As long as Tucker's Towing continues to make accounting profits, it is rational to remain in the towing business.

Average variable cost equals total variable cost divided by output.

FIGURE 7-4 -Refer to Figure 7-4. At output level 0Q, what is average fixed cost equal to?

If Rocco's Rib Joint took in $35 000 in revenue last week and had out-of-pocket expenses of $31 500, which of the following best describes Rocco's profits last week?

FIGURE 7-4 -Refer to Figure 7-4. At output level 0Q, what is total variable cost equal to?

A factory producing CD players finds that its output varies with the number of workers employed each week in the following way: TABLE 7-2 -Refer to Table 7-2. When does marginal product begin to diminish?

What is total cost?

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

Exam 7: Production and Costs

FIGURE 7-1 -Refer to Figure 7-1. When does marginal product begin to diminish?

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

Refer to Table 7-4. What is the marginal cost of producing a third watch?

Which of the following best describes total variable costs?

TABLE 7-5 -Refer to Table 7-5. How much are total fixed costs?

FIGURE 7-3 -Refer to Figure 7-3. Which is the average fixed cost curve?

The average total cost of producing laptop computers in a factory is $500 at the current output level of 100 units per week. If fixed costs equal $10 000, which of the following statements regarding cost is accurate?

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

When calculating the marginal product of capital, which of the following conditions must be met?

What will a new (superior) technology cause in the short run?

What will an increase in advertising expenditures cause in the long run?

A firm is operating at a scale where diseconomies of scale are present. Why is the firm NOT operating efficiently?

Ray Tucker has run his company, Tucker's Towing and Wrecking, for two years and has made an accounting profit of $34 000 each year. As long as Tucker's Towing continues to make accounting profits, it is rational to remain in the towing business.

Average variable cost equals total variable cost divided by output.

FIGURE 7-4 -Refer to Figure 7-4. At output level 0Q, what is average fixed cost equal to?

If Rocco's Rib Joint took in $35 000 in revenue last week and had out-of-pocket expenses of $31 500, which of the following best describes Rocco's profits last week?

FIGURE 7-4 -Refer to Figure 7-4. At output level 0Q, what is total variable cost equal to?

A factory producing CD players finds that its output varies with the number of workers employed each week in the following way: TABLE 7-2 -Refer to Table 7-2. When does marginal product begin to diminish?

What is total cost?

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