Question 1

Which of the following would cause a firm's cost curve to shift downward?

Accepted Answer

A)  a decrease in resource prices 
B)  an increase in taxes 
C)  an increase in demand for the firm's product 
D)  a reduction in output 
A)  a decrease in resource prices 
B)  an increase in taxes 
C)  an increase in demand for the firm's product 
D)  a reduction in output

Question 2

Use the figure to answer the following question(s).
Figure 8-4
 
The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-4. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 3

Marginal cost is defined as the increase in total cost resulting from an increase in

Accepted Answer

A)  one unit of output. 
B)  output of 100 units. 
C)  a firm's plant size. 
D)  one unit of labor. 
A)  one unit of output. 
B)  output of 100 units. 
C)  a firm's plant size. 
D)  one unit of labor.

Question 4

The rate of return that owners of capital must receive in order to induce them to continue supplying the capital is often referred to as

Accepted Answer

A)  accounting profit. 
B)  the normal or market rate of return. 
C)  economic profit. 
D)  the accounting rate of return. 
A)  accounting profit. 
B)  the normal or market rate of return. 
C)  economic profit. 
D)  the accounting rate of return.

Question 5

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 fixed cost is

Accepted Answer

A)  6. 
B)  60. 
C)  70. 
D)  130. 
A)  6. 
B)  60. 
C)  70. 
D)  130.

Question 6

A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500. Insurance, license, and operating costs for the year were $1,500. What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?

Accepted Answer

A)  $3,500 
B)  $5,000 
C)  $6,000 
D)  $8,500 
A)  $3,500 
B)  $5,000 
C)  $6,000 
D)  $8,500

Question 7

The upward-sloping portion of a long-run average total cost curve is the result of

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing returns. 
D)  the existence of fixed resources. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing returns. 
D)  the existence of fixed resources.

Question 8

Automobile companies typically make some of the parts for cars (for example, the body and engine) but not others (for example, the tires). Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

Accepted Answer

A)  when the specifications (size, style, etc.) of the inputs change frequently 
B)  when the inputs being produced have little value 
C)  when market prices have not been established for the inputs 
D)  when it is relatively easy to measure the quantity and quality of the input 
A)  when the specifications (size, style, etc.) of the inputs change frequently 
B)  when the inputs being produced have little value 
C)  when market prices have not been established for the inputs 
D)  when it is relatively easy to measure the quantity and quality of the input

Question 9

The minimum points of the average variable cost and average total cost curves occur where

Accepted Answer

A)  the marginal cost curve lies below the average variable cost and average total cost curves. 
B)  the marginal cost curve intersects those curves. 
C)  the average variable cost and average total cost curves intersect. 
D)  the slope of total cost is the smallest. 
A)  the marginal cost curve lies below the average variable cost and average total cost curves. 
B)  the marginal cost curve intersects those curves. 
C)  the average variable cost and average total cost curves intersect. 
D)  the slope of total cost is the smallest.

Question 10

Approximately three-fourths of all U.S. firms are

Accepted Answer

A)  corporations. 
B)  proprietorships. 
C)  partnerships. 
D)  consumer cooperatives. 
A)  corporations. 
B)  proprietorships. 
C)  partnerships. 
D)  consumer cooperatives.

Question 11

Which of the following is characteristic of the corporate form of ownership?

Accepted Answer

A)  unlimited liability 
B)  easy transferability of ownership rights 
C)  no divisible ownership rights 
D)  absence of the principal-agent problem 
A)  unlimited liability 
B)  easy transferability of ownership rights 
C)  no divisible ownership rights 
D)  absence of the principal-agent problem

Question 12

In the short run, which are most important in determining changes in output?

Accepted Answer

A)  marginal costs and marginal revenue. 
B)  total costs and total revenue. 
C)  average costs and total revenue. 
D)  fixed costs. 
A)  marginal costs and marginal revenue. 
B)  total costs and total revenue. 
C)  average costs and total revenue. 
D)  fixed costs.

Question 13

Which of the following would increase a firm's average total costs?

Accepted Answer

A)  economies of scale 
B)  an increase in input prices 
C)  an improvement in technology 
D)  an increase in demand for the firm's product 
A)  economies of scale 
B)  an increase in input prices 
C)  an improvement in technology 
D)  an increase in demand for the firm's product

Question 14

Use the figure to answer the following question(s).
Figure 8-6
 
At what output does the firm depicted in Figure 8-6 minimize its per-unit cost of production?

Accepted Answer

A)  q 1 
B)  q 2 
C)  q 3 
D)  an output beyond q 3 
A)  q 1 
B)  q 2 
C)  q 3 
D)  an output beyond q 3

Question 15

The law of diminishing marginal returns explains the general shape of the firm's

Accepted Answer

A)  long-run cost curves. 
B)  short-run cost curves. 
C)  both short-run and long-run cost curves. 
D)  The law of diminishing returns has nothing to do with cost curves. 
A)  long-run cost curves. 
B)  short-run cost curves. 
C)  both short-run and long-run cost curves. 
D)  The law of diminishing returns has nothing to do with cost curves.

Question 16

If a firm's per-unit costs fall as it produces a larger output,

Accepted Answer

A)  average variable cost must also decline as output expands. 
B)  marginal cost must also decline as output expands. 
C)  average fixed cost must be less than average variable costs. 
D)  marginal cost must be less than average total cost. 
A)  average variable cost must also decline as output expands. 
B)  marginal cost must also decline as output expands. 
C)  average fixed cost must be less than average variable costs. 
D)  marginal cost must be less than average total cost.

Question 17

Which of the following is a difference between corporations and partnerships?

Accepted Answer

A)  Partnerships are subject to double taxation; corporations are not. 
B)  With partnerships, ownership rights are divisible and easily transferable; this is not true for corporations. 
C)  Corporate owners face limited liability; owners of partnerships do not. 
D)  Corporations always have more owners than partnerships. 
A)  Partnerships are subject to double taxation; corporations are not. 
B)  With partnerships, ownership rights are divisible and easily transferable; this is not true for corporations. 
C)  Corporate owners face limited liability; owners of partnerships do not. 
D)  Corporations always have more owners than partnerships.

Question 18

Which of the following is true?

Accepted Answer

A)  Economic profits are generally lower than accounting profits. 
B)  Economic profits are generally greater than accounting profits. 
C)  Economic profits are generally equal to accounting profits. 
D)  Economic profits plus accounting profits must equal zero. 
A)  Economic profits are generally lower than accounting profits. 
B)  Economic profits are generally greater than accounting profits. 
C)  Economic profits are generally equal to accounting profits. 
D)  Economic profits plus accounting profits must equal zero.

Question 19

The optimal plant size depends on

Accepted Answer

A)  whether the firm confronts diminishing returns on its fixed factors of production. 
B)  the output the firm expects to produce. 
C)  whether the plant uses capital-intensive or labor-intensive production techniques. 
D)  the preferences of the individual firm owners. 
A)  whether the firm confronts diminishing returns on its fixed factors of production. 
B)  the output the firm expects to produce. 
C)  whether the plant uses capital-intensive or labor-intensive production techniques. 
D)  the preferences of the individual firm owners.

Question 20

Costs that a firm remaining in business will still incur even if it halts current production are called

Accepted Answer

A)  fixed costs. 
B)  variable costs. 
C)  implicit costs. 
D)  explicit costs. 
A)  fixed costs. 
B)  variable costs. 
C)  implicit costs. 
D)  explicit costs.

Which of the following would cause a firm's cost curve to shift downward?

Use the figure to answer the following question(s). Figure 8-4 The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-4. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Marginal cost is defined as the increase in total cost resulting from an increase in

The rate of return that owners of capital must receive in order to induce them to continue supplying the capital is often referred to as

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 fixed cost is

A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500. Insurance, license, and operating costs for the year were $1,500. What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?

The upward-sloping portion of a long-run average total cost curve is the result of

Automobile companies typically make some of the parts for cars (for example, the body and engine) but not others (for example, the tires). Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

The minimum points of the average variable cost and average total cost curves occur where

Approximately three-fourths of all U.S. firms are

Which of the following is characteristic of the corporate form of ownership?

In the short run, which are most important in determining changes in output?

Which of the following would increase a firm's average total costs?

Use the figure to answer the following question(s). Figure 8-6 At what output does the firm depicted in Figure 8-6 minimize its per-unit cost of production?

The law of diminishing marginal returns explains the general shape of the firm's

If a firm's per-unit costs fall as it produces a larger output,

Which of the following is a difference between corporations and partnerships?

Which of the following is true?

The optimal plant size depends on

Costs that a firm remaining in business will still incur even if it halts current production are called

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

Filters

Exam 8: Costs and the Supply of Goods

Which of the following would cause a firm's cost curve to shift downward?

Use the figure to answer the following question(s). Figure 8-4 The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-4. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Marginal cost is defined as the increase in total cost resulting from an increase in

The rate of return that owners of capital must receive in order to induce them to continue supplying the capital is often referred to as

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 fixed cost is

A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500. Insurance, license, and operating costs for the year were $1,500. What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?

The upward-sloping portion of a long-run average total cost curve is the result of

Automobile companies typically make some of the parts for cars (for example, the body and engine) but not others (for example, the tires). Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

The minimum points of the average variable cost and average total cost curves occur where

Approximately three-fourths of all U.S. firms are

Which of the following is characteristic of the corporate form of ownership?

In the short run, which are most important in determining changes in output?

Which of the following would increase a firm's average total costs?

Use the figure to answer the following question(s). Figure 8-6 At what output does the firm depicted in Figure 8-6 minimize its per-unit cost of production?

The law of diminishing marginal returns explains the general shape of the firm's

If a firm's per-unit costs fall as it produces a larger output,

Which of the following is a difference between corporations and partnerships?

Which of the following is true?

The optimal plant size depends on

Costs that a firm remaining in business will still incur even if it halts current production are called

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

Filters