Question 1

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

Accepted Answer

A)  the average is increasing. 
B)  the average is decreasing. 
C)  the marginal is increasing. 
D)  the marginal is decreasing. 
E)  the total is decreasing. 
A)  the average is increasing. 
B)  the average is decreasing. 
C)  the marginal is increasing. 
D)  the marginal is decreasing. 
E)  the total is decreasing.

Question 2

When making choices, suppliers should not allow sunk costs to directly affect their current decisions because

Accepted Answer

A)  sunk costs do not reflect foregone opportunities accompanying current choices. 
B)  sunk costs will not influence the accounting costs of a firm. 
C)  sunk costs influence the demand for products, not the supply. 
D)  past choices fail to provide any information relevant to current decision making. 
A)  sunk costs do not reflect foregone opportunities accompanying current choices. 
B)  sunk costs will not influence the accounting costs of a firm. 
C)  sunk costs influence the demand for products, not the supply. 
D)  past choices fail to provide any information relevant to current decision making.

Question 3

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. Diminishing returns to the variable factor of production for this firm set in at

Accepted Answer

A)  Q = 6. 
B)  Q = 10. 
C)  Q = 15. 
D)  none of the above. 
A)  Q = 6. 
B)  Q = 10. 
C)  Q = 15. 
D)  none of the above.

Question 4

Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors rise,

Accepted Answer

A)  her accounting profit will rise. 
B)  her accounting profit will fall. 
C)  her explicit costs will rise. 
D)  her economic profit from textbooks will fall. 
E)  her economic profit from textbooks will rise. 
A)  her accounting profit will rise. 
B)  her accounting profit will fall. 
C)  her explicit costs will rise. 
D)  her economic profit from textbooks will fall. 
E)  her economic profit from textbooks will rise.

Question 5

Anne Teek works full time as the manager of her used furniture store in which she has invested $40,000. Last year, her total revenues were $90,000 and her costs were $60,000 for merchandise, gas, electricity, and other explicit-cost items. Ms. Teek pays herself a "competitive" salary of $30,000 per year. An economist would consider her profits for the year to be

Accepted Answer

A)  − $40,000. 
B)  $0. 
C)  $0 minus the opportunity cost of the $40,000 of capital invested in the store. 
D)  $30,000. 
A)  − $40,000. 
B)  $0. 
C)  $0 minus the opportunity cost of the $40,000 of capital invested in the store. 
D)  $30,000.

Question 6

During the short-run period of the production process, a firm will be

Accepted Answer

A)  unable to vary any of its factors of production. 
B)  able to vary only some of its factors of production. 
C)  able to vary all of its factors of production. 
D)  able to vary the size of its plant. 
A)  unable to vary any of its factors of production. 
B)  able to vary only some of its factors of production. 
C)  able to vary all of its factors of production. 
D)  able to vary the size of its plant.

Question 7

Use the figure to answer the following question(s).
Figure 8-11
 
The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

Accepted Answer

A)  $6. 
B)  $84. 
C)  $120. 
D)  $150. 
A)  $6. 
B)  $84. 
C)  $120. 
D)  $150.

Question 8

Figure 8-5  
Refer to Figure 8-5. Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC 1 to ATC 2?

Accepted Answer

A)  an increase in demand for steel bolts 
B)  an increase in the market price of steel bolts 
C)  diminishing returns for the variable factors used to produce steel bolts 
D)  an increase in the price of steel 
A)  an increase in demand for steel bolts 
B)  an increase in the market price of steel bolts 
C)  diminishing returns for the variable factors used to produce steel bolts 
D)  an increase in the price of steel

Question 9

In the short run, the marginal cost curve crosses the average total cost curve at

Accepted Answer

A)  a point just below the average fixed cost curve. 
B)  the minimum point on the average total cost curve. 
C)  the maximum point of the average variable cost curve. 
D)  all of the above points. 
A)  a point just below the average fixed cost curve. 
B)  the minimum point on the average total cost curve. 
C)  the maximum point of the average variable cost curve. 
D)  all of the above points.

Question 10

If variable cost at each output level doubles,

Accepted Answer

A)  ATC doubles. 
B)  AFC doubles. 
C)  MC remains unchanged. 
D)  MC doubles. 
E)  MC less than doubles. 
A)  ATC doubles. 
B)  AFC doubles. 
C)  MC remains unchanged. 
D)  MC doubles. 
E)  MC less than doubles.

Question 11

You purchased an automobile a year ago for $10,000. Its current market price is $6,000, and the expected market value one year from now is $4,000. 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)  $2,000 
B)  $2,600 
C)  $4,000 
D)  $6,000 
A)  $2,000 
B)  $2,600 
C)  $4,000 
D)  $6,000

Question 12

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. This firm minimizes its per-unit costs of production at an output level of

Accepted Answer

A)  Q = 6. 
B)  Q = 10. 
C)  Q = 15. 
D)  none of the above. 
A)  Q = 6. 
B)  Q = 10. 
C)  Q = 15. 
D)  none of the above.

Question 13

Use the figure to answer the following question(s).
Figure 8-1
 
According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

Accepted Answer

A)  10 
B)  16 
C)  48 
D)  60 
A)  10 
B)  16 
C)  48 
D)  60

Question 14

One advantage of team production over contracting out is that

Accepted Answer

A)  the cost of negotiating and enforcing contracts is generally lower with team production than with contracting out. 
B)  the principal agent problem is eliminated by team production but cannot be addressed in contracting out. 
C)  costs are always lower with team production because of the elimination of transactions costs. 
D)  efficiency is always greater with team production. 
A)  the cost of negotiating and enforcing contracts is generally lower with team production than with contracting out. 
B)  the principal agent problem is eliminated by team production but cannot be addressed in contracting out. 
C)  costs are always lower with team production because of the elimination of transactions costs. 
D)  efficiency is always greater with team production.

Question 15

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

Accepted Answer

A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs. 
A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs.

Question 16

If a firm enlarges its factory size and realizes higher average costs of production then

Accepted Answer

A)  it has experienced economies of scale. 
B)  it has experienced diseconomies of scale. 
C)  it has experienced constant returns to scale. 
D)  the long-run average cost curve slopes downward. 
E)  the long-run average cost curve shifts upward. 
A)  it has experienced economies of scale. 
B)  it has experienced diseconomies of scale. 
C)  it has experienced constant returns to scale. 
D)  the long-run average cost curve slopes downward. 
E)  the long-run average cost curve shifts upward.

Question 17

Larger firms will often have lower minimum per-unit costs than smaller firms because

Accepted Answer

A)  employee shirking is less of a problem. 
B)  large-scale output allows greater specialization for both labor and machines in the production process. 
C)  mass production techniques, with high setup and development costs, are appropriate only when a small output is planned. 
D)  all of the above are correct. 
A)  employee shirking is less of a problem. 
B)  large-scale output allows greater specialization for both labor and machines in the production process. 
C)  mass production techniques, with high setup and development costs, are appropriate only when a small output is planned. 
D)  all of the above are correct.

Question 18

When an economist says a firm is earning zero economic profit, this implies that the firm

Accepted Answer

A)  will be forced out of business in the near future unless market conditions change. 
B)  is earning a zero rate of return on its assets. 
C)  is earning as high a rate of return now as could be earned in other industries. 
D)  has an accounting profit of zero. 
A)  will be forced out of business in the near future unless market conditions change. 
B)  is earning a zero rate of return on its assets. 
C)  is earning as high a rate of return now as could be earned in other industries. 
D)  has an accounting profit of zero.

Question 19

Whenever average total cost exceeds marginal cost,

Accepted Answer

A)  average total cost is rising. 
B)  average total cost is falling. 
C)  marginal cost is rising. 
D)  marginal cost is falling. 
A)  average total cost is rising. 
B)  average total cost is falling. 
C)  marginal cost is rising. 
D)  marginal cost is falling.

Question 20

Economic profit is

Accepted Answer

A)  total revenues minus variable costs. 
B)  total revenues minus private costs. 
C)  total revenues minus explicit costs. 
D)  total revenues minus total costs. 
A)  total revenues minus variable costs. 
B)  total revenues minus private costs. 
C)  total revenues minus explicit costs. 
D)  total revenues minus total costs.

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

When making choices, suppliers should not allow sunk costs to directly affect their current decisions because

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. Diminishing returns to the variable factor of production for this firm set in at

Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors rise,

During the short-run period of the production process, a firm will be

Use the figure to answer the following question(s). Figure 8-11 The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

Figure 8-5 Refer to Figure 8-5. Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC ₁ to ATC ₂?

In the short run, the marginal cost curve crosses the average total cost curve at

If variable cost at each output level doubles,

You purchased an automobile a year ago for $10,000. Its current market price is $6,000, and the expected market value one year from now is $4,000. 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)?

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. This firm minimizes its per-unit costs of production at an output level of

Use the figure to answer the following question(s). Figure 8-1 According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

One advantage of team production over contracting out is that

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

If a firm enlarges its factory size and realizes higher average costs of production then

Larger firms will often have lower minimum per-unit costs than smaller firms because

When an economist says a firm is earning zero economic profit, this implies that the firm

Whenever average total cost exceeds marginal cost,

Economic profit is

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

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

When making choices, suppliers should not allow sunk costs to directly affect their current decisions because

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. Diminishing returns to the variable factor of production for this firm set in at

Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors rise,

During the short-run period of the production process, a firm will be

Use the figure to answer the following question(s). Figure 8-11 The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

Figure 8-5 Refer to Figure 8-5. Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC 1 to ATC 2?

In the short run, the marginal cost curve crosses the average total cost curve at

If variable cost at each output level doubles,

You purchased an automobile a year ago for $10,000. Its current market price is $6,000, and the expected market value one year from now is $4,000. 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)?

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. This firm minimizes its per-unit costs of production at an output level of

Use the figure to answer the following question(s). Figure 8-1 According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

One advantage of team production over contracting out is that

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

If a firm enlarges its factory size and realizes higher average costs of production then

Larger firms will often have lower minimum per-unit costs than smaller firms because

When an economist says a firm is earning zero economic profit, this implies that the firm

Whenever average total cost exceeds marginal cost,

Economic profit is

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

Figure 8-5 Refer to Figure 8-5. Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC ₁ to ATC ₂?