Question 1

If fixed cost at quantity (Q) = 100 is $130, then

Accepted Answer

A)  fixed cost at Q = 0 is $0. 
B)  fixed cost at Q = 0 is less than $130. 
C)  fixed cost at Q = 200 is $260. 
D)  fixed cost at Q = 200 is $130. 
E)  it is impossible to calculate fixed costs at any other quantity. 
A)  fixed cost at Q = 0 is $0. 
B)  fixed cost at Q = 0 is less than $130. 
C)  fixed cost at Q = 200 is $260. 
D)  fixed cost at Q = 200 is $130. 
E)  it is impossible to calculate fixed costs at any other quantity. D

Question 2

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market.
 
Refer to Figure 8-14. If the firm produces 10 units of output, its total cost is

Accepted Answer

A)  7. 
B)  13. 
C)  70. 
D)  130. 
A)  7. 
B)  13. 
C)  70. 
D)  130. D

Question 3

As output is expanded, if MC is more than ATC ,

Accepted Answer

A)  ATC must be at its minimum. 
B)  ATC must be at its maximum. 
C)  ATC must be increasing. 
D)  ATC must be constant. 
A)  ATC must be at its minimum. 
B)  ATC must be at its maximum. 
C)  ATC must be increasing. 
D)  ATC must be constant. C

Question 4

Which of the following would cause a firm's cost curves to shift upward?

Accepted Answer

A)  a reduction in resource prices 
B)  a decrease in taxes 
C)  an improvement in technology 
D)  an increase in government regulations 
A)  a reduction in resource prices 
B)  a decrease in taxes 
C)  an improvement in technology 
D)  an increase in government regulations

Question 5

When costs that vary with the level of output are divided by the output, you have calculated

Accepted Answer

A)  total changing cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  average variable cost. 
A)  total changing cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  average variable cost.

Question 6

When total revenue minus total economic cost is equal to zero, the firm is

Accepted Answer

A)  earning above-average economic profit. 
B)  earning the normal profit rate. 
C)  losing too much money to stay in business. 
D)  earning abnormally low profits. 
A)  earning above-average economic profit. 
B)  earning the normal profit rate. 
C)  losing too much money to stay in business. 
D)  earning abnormally low profits.

Question 7

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be

Accepted Answer

A)  $25. 
B)  $2,500. 
C)  $5,000. 
D)  $7,500. 
A)  $25. 
B)  $2,500. 
C)  $5,000. 
D)  $7,500.

Question 8

A family has decided to go away for the summer. The monthly mortgage payment on the family's house is $1,000. Water, electricity, natural gas, and maintenance bills, to be paid by the family, will be $700 per month if the house is occupied and zero otherwise. If the family wishes to minimize losses from being away, it should rent the house for as much as the market will bear, as long as the monthly rent is above which of the following? (Assume wear and tear to be the same whether or not the house is occupied.)

Accepted Answer

A)  $300 
B)  $700 
C)  $1,000 
D)  $1,700 
A)  $300 
B)  $700 
C)  $1,000 
D)  $1,700

Question 9

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market.
 
Refer to Figure 8-14. The marginal cost of producing the tenth unit is

Accepted Answer

A)  7. 
B)  13. 
C)  70. 
D)  130. 
A)  7. 
B)  13. 
C)  70. 
D)  130.

Question 10

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

Accepted Answer

A)  You pay to have your car towed back to the repair shop because it was not fixed properly the first time. 
B)  You decide to get a master's degree because you cannot find a job in the field in which you majored. 
C)  You decide to purchase a piece of machinery for your business that will eliminate three employees' positions. 
D)  You study eight hours for a final exam even though there is no way now that you can pass the course. 
A)  You pay to have your car towed back to the repair shop because it was not fixed properly the first time. 
B)  You decide to get a master's degree because you cannot find a job in the field in which you majored. 
C)  You decide to purchase a piece of machinery for your business that will eliminate three employees' positions. 
D)  You study eight hours for a final exam even though there is no way now that you can pass the course.

Question 11

Ron works for Betty at Betty's Pizza Palace. Betty has many work rules, and Ron believes if there were fewer rules and more flexibility, he could do a better job. Betty probably has the rules because

Accepted Answer

A)  Ron, like her other employees, is a residual claimant. 
B)  due to the principal-agent problem, some employees are likely to shirk when the owner is absent. 
C)  she is maximizing sales rather than profits. 
D)  with regard to their jobs, employees seldom know what is best. 
A)  Ron, like her other employees, is a residual claimant. 
B)  due to the principal-agent problem, some employees are likely to shirk when the owner is absent. 
C)  she is maximizing sales rather than profits. 
D)  with regard to their jobs, employees seldom know what is best.

Question 12

If the firm's fixed costs double while variable costs are unchanged, then

Accepted Answer

A)  marginal cost more than doubles. 
B)  marginal cost doubles. 
C)  marginal cost remains unchanged. 
D)  average total cost remains unchanged. 
E)  average variable cost doubles. 
A)  marginal cost more than doubles. 
B)  marginal cost doubles. 
C)  marginal cost remains unchanged. 
D)  average total cost remains unchanged. 
E)  average variable cost doubles.

Question 13

The marginal cost of a good is

Accepted Answer

A)  lower for competitive firms than for monopolists. 
B)  the cost of an additional unit. 
C)  equal to fixed cost at high output levels. 
D)  equal to variable cost when the firm is maximizing profit. 
A)  lower for competitive firms than for monopolists. 
B)  the cost of an additional unit. 
C)  equal to fixed cost at high output levels. 
D)  equal to variable cost when the firm is maximizing profit.

Question 14

Which of the following is true?

Accepted Answer

A)  Under the partnership form of business organization, the owners are not personally liable for the debts of the business. 
B)  When employees are paid by the hour, their incentive to shirk is removed. 
C)  The limited liability of stockholders under the corporate business structure makes it easier to raise equity capital. 
D)  Under the corporate form of business organization, the owners of the firm are personally liable for its debts. 
A)  Under the partnership form of business organization, the owners are not personally liable for the debts of the business. 
B)  When employees are paid by the hour, their incentive to shirk is removed. 
C)  The limited liability of stockholders under the corporate business structure makes it easier to raise equity capital. 
D)  Under the corporate form of business organization, the owners of the firm are personally liable for its debts.

Question 15

Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were

Accepted Answer

A)  $35,000. 
B)  $5,000. 
C)  $2,000. 
D)  zero. 
A)  $35,000. 
B)  $5,000. 
C)  $2,000. 
D)  zero.

Question 16

Bart operates a lemonade stand in front of his house. His father works at the Springfield Nuclear Power Plant. Which of the following is most likely to be true?

Accepted Answer

A)  The long run is the same for the power plant as it is for the lemonade stand. 
B)  The long run is longer for the power plant than it is for the lemonade stand. 
C)  The long run is shorter for the power plant than it is for the lemonade stand. 
D)  We cannot compare the long runs because these are different businesses. 
E)  It's impossible for the power plant short run to be shorter than the lemonade stand's long run. 
A)  The long run is the same for the power plant as it is for the lemonade stand. 
B)  The long run is longer for the power plant than it is for the lemonade stand. 
C)  The long run is shorter for the power plant than it is for the lemonade stand. 
D)  We cannot compare the long runs because these are different businesses. 
E)  It's impossible for the power plant short run to be shorter than the lemonade stand's long run.

Question 17

The table below presents the schedule of total costs for Sharpie's Pencil Company.
 
Beyond 110,000 units, the per-unit marginal cost of producing an additional 10,000 pencils is

Accepted Answer

A)  5 cents. 
B)  5.5 cents. 
C)  6 cents. 
D)  7 cents. 
A)  5 cents. 
B)  5.5 cents. 
C)  6 cents. 
D)  7 cents.

Question 18

Andy wants to maximize his grade-point average. Having spent six hours studying for his final exam in economics, Andy calculates his grade and discovers that even with a perfect score on the final, he will not pass the course. He decides to study two more hours so he will not have wasted the first six hours. Is this a good decision? Why or why not?

Accepted Answer

The six hours spent studying for the exa

Question 19

Use the figure to answer the following question(s).
Figure 8-1
 
What is the firm's total cost in Figure 8-1 when it produces four units?

Accepted Answer

A)  11 
B)  15 
C)  60 
D)  75 
A)  11 
B)  15 
C)  60 
D)  75

Question 20

Use the figure to answer the following question(s).
Figure 8-11
 
Which of the following is true for a firm with the costs illustrated in Figure 8-11?

Accepted Answer

A)  Marginal costs exceed average total cost when output is 15. 
B)  Marginal costs exceed average total cost when output is 20. 
C)  Marginal costs exceed average total cost when output is 25. 
D)  The firm's total fixed cost exceeds 40. 
A)  Marginal costs exceed average total cost when output is 15. 
B)  Marginal costs exceed average total cost when output is 20. 
C)  Marginal costs exceed average total cost when output is 25. 
D)  The firm's total fixed cost exceeds 40.

If fixed cost at quantity (Q) = 100 is $130, then

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market. Refer to Figure 8-14. If the firm produces 10 units of output, its total cost is

As output is expanded, if MC is more than ATC ,

Which of the following would cause a firm's cost curves to shift upward?

When costs that vary with the level of output are divided by the output, you have calculated

When total revenue minus total economic cost is equal to zero, the firm is

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market. Refer to Figure 8-14. The marginal cost of producing the tenth unit is

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

Ron works for Betty at Betty's Pizza Palace. Betty has many work rules, and Ron believes if there were fewer rules and more flexibility, he could do a better job. Betty probably has the rules because

If the firm's fixed costs double while variable costs are unchanged, then

The marginal cost of a good is

Which of the following is true?

Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were

Bart operates a lemonade stand in front of his house. His father works at the Springfield Nuclear Power Plant. Which of the following is most likely to be true?

The table below presents the schedule of total costs for Sharpie's Pencil Company. Beyond 110,000 units, the per-unit marginal cost of producing an additional 10,000 pencils is

Use the figure to answer the following question(s). Figure 8-1 What is the firm's total cost in Figure 8-1 when it produces four units?

Use the figure to answer the following question(s). Figure 8-11 Which of the following is true for a firm with the costs illustrated in Figure 8-11?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

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Exam 8: Costs and the Supply of Goods

If fixed cost at quantity (Q) = 100 is $130, then

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market. Refer to Figure 8-14. If the firm produces 10 units of output, its total cost is

As output is expanded, if MC is more than ATC ,

Which of the following would cause a firm's cost curves to shift upward?

When costs that vary with the level of output are divided by the output, you have calculated

When total revenue minus total economic cost is equal to zero, the firm is

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market. Refer to Figure 8-14. The marginal cost of producing the tenth unit is

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

Ron works for Betty at Betty's Pizza Palace. Betty has many work rules, and Ron believes if there were fewer rules and more flexibility, he could do a better job. Betty probably has the rules because

If the firm's fixed costs double while variable costs are unchanged, then

The marginal cost of a good is

Which of the following is true?

Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were

Bart operates a lemonade stand in front of his house. His father works at the Springfield Nuclear Power Plant. Which of the following is most likely to be true?

The table below presents the schedule of total costs for Sharpie's Pencil Company. Beyond 110,000 units, the per-unit marginal cost of producing an additional 10,000 pencils is

Use the figure to answer the following question(s). Figure 8-1 What is the firm's total cost in Figure 8-1 when it produces four units?

Use the figure to answer the following question(s). Figure 8-11 Which of the following is true for a firm with the costs illustrated in Figure 8-11?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

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