Question 1

Economic profit is equal to total revenue minus the

Accepted Answer

A)  explicit cost of producing goods and services. 
B)  opportunity cost of producing goods and services. 
C)  accounting cost of producing goods and services. 
D)  implicit cost of producing goods and services. 
A)  explicit cost of producing goods and services. 
B)  opportunity cost of producing goods and services. 
C)  accounting cost of producing goods and services. 
D)  implicit cost of producing goods and services.

Question 2

If a production function shows declining marginal product of an input as the quantity of the input increases,then the production function exhibits

Accepted Answer

A)  diminishing profitability. 
B)  increasing returns to scale. 
C)  increasing marginal product. 
D)  decreasing marginal product. 
A)  diminishing profitability. 
B)  increasing returns to scale. 
C)  increasing marginal product. 
D)  decreasing marginal product.

Question 3

Figure 13-5
  
-Refer to Figure 13-5.Which curve is most likely to represent average total cost?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 4

An example of an explicit cost would be the wages that a business owner pays her employees.

Accepted Answer

A) True 
 B)False

Question 5

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False

Question 6

Table 13-10
Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs.
  
-Refer to Table 13-10.Eileen has received an order for 3,000 boxes of earrings for next week.If she expects that the trend in the marginal product of labor will continue in the same direction,it is most likely that her best decision will be to

Accepted Answer

A)  not commit to meeting the order until she can move to a larger room and hire more workers to produce the earrings. 
B)  close her business until she is able to hire more productive workers. 
C)  hire about 12 new workers and hope she can satisfy the order. 
D)  commit to meeting the order and then take three weeks to complete the job. 
A)  not commit to meeting the order until she can move to a larger room and hire more workers to produce the earrings. 
B)  close her business until she is able to hire more productive workers. 
C)  hire about 12 new workers and hope she can satisfy the order. 
D)  commit to meeting the order and then take three weeks to complete the job.

Question 7

Which of the following statements is correct?

Accepted Answer

A)  Opportunity costs equal explicit minus implicit costs. 
B)  Economists consider opportunity costs to be included in a firm's total revenues. 
C)  Economists consider opportunity costs to be included in a firm's costs of production. 
D)  All of the above are correct. 
A)  Opportunity costs equal explicit minus implicit costs. 
B)  Economists consider opportunity costs to be included in a firm's total revenues. 
C)  Economists consider opportunity costs to be included in a firm's costs of production. 
D)  All of the above are correct.

Question 8

Suppose that for a particular business there are no implicit costs.Then

Accepted Answer

A)  accounting profit will be greater than economic profit. 
B)  accounting profit will be the same as economic profit. 
C)  accounting profit will be less than economic profit. 
D)  the relationship between accounting profit and economic profit cannot be determined without more information. 
A)  accounting profit will be greater than economic profit. 
B)  accounting profit will be the same as economic profit. 
C)  accounting profit will be less than economic profit. 
D)  the relationship between accounting profit and economic profit cannot be determined without more information.

Question 9

Table 13-3
  
-Refer to Table 13-3.The marginal product of the third worker is

Accepted Answer

A)  230 units. 
B)  100 units. 
C)  77 units. 
D)  60 units. 
A)  230 units. 
B)  100 units. 
C)  77 units. 
D)  60 units.

Question 10

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Accepted Answer

A) True 
 B)False

Question 11

In the long run Irene's Ice Cream Parlor incurs total costs of $2,500 when output is 1,250 units and $4,000 when output is 1,500 units.For this range of output,Irine's exhibits

Accepted Answer

A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  efficient scale. 
A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  efficient scale.

Question 12

Figure 13-1
  
-Refer to Figure 13-1.Which of the following could explain why the total product curve would shift from TP1 to TP2?

Accepted Answer

A)  There is less capital equipment available to the firm. 
B)  Labor skills have become rusty and outdated in the firm. 
C)  The firm has developed improved production technology. 
D)  The firm is now receiving a higher price for its product. 
A)  There is less capital equipment available to the firm. 
B)  Labor skills have become rusty and outdated in the firm. 
C)  The firm has developed improved production technology. 
D)  The firm is now receiving a higher price for its product.

Question 13

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.
  
-Refer to Figure 13-9.At levels of output less than M,the firm experiences

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  both diminishing marginal productivity and coordination problems. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  both diminishing marginal productivity and coordination problems.

Question 14

Marginal cost increases as the quantity of output increases.This reflects the property of

Accepted Answer

A)  increasing total cost. 
B)  diminishing total cost. 
C)  increasing marginal product. 
D)  diminishing marginal product. 
A)  increasing total cost. 
B)  diminishing total cost. 
C)  increasing marginal product. 
D)  diminishing marginal product.

Question 15

Accounting profit is greater than or equal to economic profit.

Accepted Answer

A) True 
 B)False

Question 16

A student might describe information about the costs of production as

Accepted Answer

A)  dry and technical. 
B)  boring. 
C)  crucial to understanding firms and market structures. 
D)  All of the above could be correct. 
A)  dry and technical. 
B)  boring. 
C)  crucial to understanding firms and market structures. 
D)  All of the above could be correct.

Question 17

Table 13-7
The Flying Elvis Copter Rides
  
-Refer to Table 13-7.What is the value of O?

Accepted Answer

A)  $40 
B)  $140 
C)  $360 
D)  $410 
A)  $40 
B)  $140 
C)  $360 
D)  $410

Question 18

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 19

A certain firm produces and sells potato chips.Last year it sold 3 million bags of chips at a price of $3 per bag.For last year,the firm's

Accepted Answer

A)  accounting profit was $9 million. 
B)  economic profit was $9 million. 
C)  total revenue was $9 million. 
D)  explicit costs was $9 million. 
A)  accounting profit was $9 million. 
B)  economic profit was $9 million. 
C)  total revenue was $9 million. 
D)  explicit costs was $9 million.

Question 20

In the long run,a factory is usually considered a fixed input.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production.

Economic profit is equal to total revenue minus the

If a production function shows declining marginal product of an input as the quantity of the input increases,then the production function exhibits

Figure 13-5 -Refer to Figure 13-5.Which curve is most likely to represent average total cost?

An example of an explicit cost would be the wages that a business owner pays her employees.

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Which of the following statements is correct?

Suppose that for a particular business there are no implicit costs.Then

Table 13-3 -Refer to Table 13-3.The marginal product of the third worker is

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

In the long run Irene's Ice Cream Parlor incurs total costs of $2,500 when output is 1,250 units and $4,000 when output is 1,500 units.For this range of output,Irine's exhibits

Figure 13-1 -Refer to Figure 13-1.Which of the following could explain why the total product curve would shift from TP1 to TP2?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.At levels of output less than M,the firm experiences

Marginal cost increases as the quantity of output increases.This reflects the property of

Accounting profit is greater than or equal to economic profit.

A student might describe information about the costs of production as

Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7.What is the value of O?

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

A certain firm produces and sells potato chips.Last year it sold 3 million bags of chips at a price of $3 per bag.For last year,the firm's

In the long run,a factory is usually considered a fixed input.

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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