Question 1

Which of the following must be true if average total costs are declining?

Accepted Answer

A)  Marginal cost is less than average total cost. 
B)  Marginal cost is less than average variable cost. 
C)  Marginal cost is greater than average total cost. 
D)  Marginal cost equals average total cost. 
A)  Marginal cost is less than average total cost. 
B)  Marginal cost is less than average variable cost. 
C)  Marginal cost is greater than average total cost. 
D)  Marginal cost equals average total cost.

Question 2

Since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization. This is an example of

Accepted Answer

A)  an external benefit. 
B)  economies of scale. 
C)  the principal-agent problem. 
D)  sunk costs. 
A)  an external benefit. 
B)  economies of scale. 
C)  the principal-agent problem. 
D)  sunk costs.

Question 3

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Accepted Answer

The obvious explicit costs would include

Question 4

Figure 8-13  
Movement from point b to point c in Figure 8-13 indicates that the firm is experiencing

Accepted Answer

A)  economies of scale. 
B)  increasing average cost. 
C)  economies of cost. 
D)  a decrease in average plant size. 
E)  diseconomies of scale. 
A)  economies of scale. 
B)  increasing average cost. 
C)  economies of cost. 
D)  a decrease in average plant size. 
E)  diseconomies of scale.

Question 5

When a firm increases its plant size in the long run and its per-unit costs fall, this is called

Accepted Answer

A)  diminishing returns and is shown by the downward-sloping portion of the MP curve (or the upward-sloping portion of the MC curve). 
B)  constant returns to scale and is shown by the flat portion of the LRATC curve. 
C)  diseconomies of scale and is shown by the upward-sloping portion of the LRATC curve. 
D)  economies of scale and is shown by the downward-sloping portion of the LRATC curve. 
A)  diminishing returns and is shown by the downward-sloping portion of the MP curve (or the upward-sloping portion of the MC curve). 
B)  constant returns to scale and is shown by the flat portion of the LRATC curve. 
C)  diseconomies of scale and is shown by the upward-sloping portion of the LRATC curve. 
D)  economies of scale and is shown by the downward-sloping portion of the LRATC curve.

Question 6

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

Accepted Answer

A)  8 units. 
B)  10 units. 
C)  22 units. 
D)  30 units. 
A)  8 units. 
B)  10 units. 
C)  22 units. 
D)  30 units.

Question 7

Use the figure to answer the following question(s).
Figure 8-8
 
In Figure 8-8, which output minimizes per-unit cost?

Accepted Answer

A)  4 
B)  6 
C)  7 
D)  8 
A)  4 
B)  6 
C)  7 
D)  8

Question 8

Which of the following provides the strongest evidence that the corporate form of business structure is relatively cost efficient in many industries?

Accepted Answer

A)  the ability of the corporate business structure to compete effectively in most industries with other forms of business structure 
B)  the fact that nearly three of every four businesses in the United States is an individual proprietorship 
C)  the fact that economic theory indicates corporate managers have some leeway to pursue their own interests at the expense of greedy capitalists 
D)  the ability of some corporate managers to achieve high salaries even though the firms they are directing are not earning economic profit 
A)  the ability of the corporate business structure to compete effectively in most industries with other forms of business structure 
B)  the fact that nearly three of every four businesses in the United States is an individual proprietorship 
C)  the fact that economic theory indicates corporate managers have some leeway to pursue their own interests at the expense of greedy capitalists 
D)  the ability of some corporate managers to achieve high salaries even though the firms they are directing are not earning economic profit

Question 9

Which of the following is most likely to be an implicit cost of production?

Accepted Answer

A)  property taxes on a building owned by the firm 
B)  transportation costs paid to a trucking supplier 
C)  rental payments for a building utilized by the company and rented from another party 
D)  interest income foregone on funds invested in the firm by the owners 
A)  property taxes on a building owned by the firm 
B)  transportation costs paid to a trucking supplier 
C)  rental payments for a building utilized by the company and rented from another party 
D)  interest income foregone on funds invested in the firm by the owners

Question 10

If the ABC Company decides to take over the XYZ Corporation by purchasing all of the stock of XYZ, what does this tell us about the view ABC holds of XYZ?

Accepted Answer

ABC must believe that the XYZ stock unde

Question 11

Use the figure to answer the following question(s).
Figure 8-10
 
Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20 
A)  $5 
B)  $10 
C)  $15 
D)  $20

Question 12

You purchased an automobile two years ago for $10,000. Its current market price is $5,000, and the expected market value one year from now is $4,500. If the interest rate is 10 percent, how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)?

Accepted Answer

A)  $500 
B)  $1,000 
C)  $1,500 
D)  $5,000 
A)  $500 
B)  $1,000 
C)  $1,500 
D)  $5,000

Question 13

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing costs per unit of output. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing costs per unit of output.

Question 14

The law of diminishing returns states that

Accepted Answer

A)  as we continually add variable factors to a fixed amount of other resources, output eventually increases at a decreasing rate. 
B)  as we increase plant size, costs must diminish. 
C)  the additional output generated by the employment of additional units of a variable input eventually decline. 
D)  both a and c are correct. 
A)  as we continually add variable factors to a fixed amount of other resources, output eventually increases at a decreasing rate. 
B)  as we increase plant size, costs must diminish. 
C)  the additional output generated by the employment of additional units of a variable input eventually decline. 
D)  both a and c are correct.

Question 15

Which of the following reflects diseconomies of scale?

Accepted Answer

A)  Marginal product decreases as output increases. 
B)  Short-run marginal cost increases as output increases. 
C)  Long-run marginal cost increases as output increases. 
D)  Short-run average cost increases as output increases. 
E)  As output doubles, long-run total cost more than doubles. 
A)  Marginal product decreases as output increases. 
B)  Short-run marginal cost increases as output increases. 
C)  Long-run marginal cost increases as output increases. 
D)  Short-run average cost increases as output increases. 
E)  As output doubles, long-run total cost more than doubles.

Question 16

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

Accepted Answer

A)  $5. 
B)  $500. 
C)  $1,000. 
D)  $5,000. 
A)  $5. 
B)  $500. 
C)  $1,000. 
D)  $5,000.

Question 17

Which of the following is most likely to be true of economic and accounting profits?

Accepted Answer

A)  Economic profits are less than accounting profits. 
B)  Accounting profits are less than economic profits. 
C)  Economic profits plus accounting profits equal zero. 
D)  Accounting profits minus economic profits equal zero. 
A)  Economic profits are less than accounting profits. 
B)  Accounting profits are less than economic profits. 
C)  Economic profits plus accounting profits equal zero. 
D)  Accounting profits minus economic profits equal zero.

Question 18

Which of the following is always true?

Accepted Answer

A)  When marginal costs are less than average total costs, average total costs will be decreasing. 
B)  When average fixed costs are falling, marginal costs must be less than average fixed costs. 
C)  When average fixed costs are rising, marginal costs must be greater than average total costs. 
D)  When marginal costs are greater than average total costs, average total costs will be decreasing. 
A)  When marginal costs are less than average total costs, average total costs will be decreasing. 
B)  When average fixed costs are falling, marginal costs must be less than average fixed costs. 
C)  When average fixed costs are rising, marginal costs must be greater than average total costs. 
D)  When marginal costs are greater than average total costs, average total costs will be decreasing.

Question 19

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 average total cost is

Accepted Answer

A)  6. 
B)  7. 
C)  12. 
D)  13. 
A)  6. 
B)  7. 
C)  12. 
D)  13.

Question 20

The short run is a time period of insufficient length for the firm to change its

Accepted Answer

A)  output. 
B)  amount of labor employed. 
C)  plant size and heavy equipment. 
D)  price. 
A)  output. 
B)  amount of labor employed. 
C)  plant size and heavy equipment. 
D)  price.

Which of the following must be true if average total costs are declining?

Since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization. This is an example of

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Figure 8-13 Movement from point b to point c in Figure 8-13 indicates that the firm is experiencing

When a firm increases its plant size in the long run and its per-unit costs fall, this is called

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

Use the figure to answer the following question(s). Figure 8-8 In Figure 8-8, which output minimizes per-unit cost?

Which of the following provides the strongest evidence that the corporate form of business structure is relatively cost efficient in many industries?

Which of the following is most likely to be an implicit cost of production?

If the ABC Company decides to take over the XYZ Corporation by purchasing all of the stock of XYZ, what does this tell us about the view ABC holds of XYZ?

Use the figure to answer the following question(s). Figure 8-10 Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

You purchased an automobile two years ago for $10,000. Its current market price is $5,000, and the expected market value one year from now is $4,500. If the interest rate is 10 percent, how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)?

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

The law of diminishing returns states that

Which of the following reflects diseconomies of scale?

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

Which of the following is most likely to be true of economic and accounting profits?

Which of the following is always true?

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 average total cost is

The short run is a time period of insufficient length for the firm to change its

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

Which of the following must be true if average total costs are declining?

Since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization. This is an example of

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Figure 8-13 Movement from point b to point c in Figure 8-13 indicates that the firm is experiencing

When a firm increases its plant size in the long run and its per-unit costs fall, this is called

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

Use the figure to answer the following question(s). Figure 8-8 In Figure 8-8, which output minimizes per-unit cost?

Which of the following provides the strongest evidence that the corporate form of business structure is relatively cost efficient in many industries?

Which of the following is most likely to be an implicit cost of production?

If the ABC Company decides to take over the XYZ Corporation by purchasing all of the stock of XYZ, what does this tell us about the view ABC holds of XYZ?

Use the figure to answer the following question(s). Figure 8-10 Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

The law of diminishing returns states that

Which of the following reflects diseconomies of scale?

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

Which of the following is most likely to be true of economic and accounting profits?

Which of the following is always true?

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 average total cost is

The short run is a time period of insufficient length for the firm to change its

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