Question 1

The change in total cost that results from the production of one additional unit is called:

Accepted Answer

A)  marginal revenue. 
B)  average variable cost. 
C)  marginal cost. 
D)  average total cost. 
A)  marginal revenue. 
B)  average variable cost. 
C)  marginal cost. 
D)  average total cost.

Question 2

Cash payments to a steel mill for steel used in production would be an example of:

Accepted Answer

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

Question 3

The total fixed cost remains constant as which of the following varies?

Accepted Answer

A)  cost of resources 
B)  time 
C)  output in a given period of time 
D)  profit 
A)  cost of resources 
B)  time 
C)  output in a given period of time 
D)  profit

Question 4

Exhibit 7-11 Short-run cost schedule for pizzeria's hourly production
 
In Exhibit 7-11, the pizzeria's fixed cost is equal to:

Accepted Answer

A)  $20. 
B)  $30. 
C)  $50. 
D)  $70. 
A)  $20. 
B)  $30. 
C)  $50. 
D)  $70.

Question 5

Distinguish the short run from the long run. Generally, what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?

Accepted Answer

The short run is any amount of time in w

Question 6

Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?

Accepted Answer

A)  The law of diminishing marginal utility. 
B)  The law of diminishing returns. 
C)  Return equalization principle. 
D)  The principal-agent problem. 
A)  The law of diminishing marginal utility. 
B)  The law of diminishing returns. 
C)  Return equalization principle. 
D)  The principal-agent problem.

Question 7

Exhibit 7-5 Workers and output data
 
In Exhibit 7-5, the marginal product of the second worker is:

Accepted Answer

A)  8. 
B)  10. 
C)  12. 
D)  20. 
A)  8. 
B)  10. 
C)  12. 
D)  20.

Question 8

Which of the following statements is true?

Accepted Answer

A)  TC = TFC − TVC 
B)  AVC = TC / Q 
C)  TFC = TC − TVC 
D)  MC equals the change in ATC divided by the change in Q. 
A)  TC = TFC − TVC 
B)  AVC = TC / Q 
C)  TFC = TC − TVC 
D)  MC equals the change in ATC divided by the change in Q.

Question 9

For a typical firm, the long-run average total cost curve:

Accepted Answer

A)  is lower than the short-run average total cost curves. 
B)  is tangent to each possible short-run average total cost curve at one point. 
C)  intersects each possible short-run average total cost curve at two points. 
D)  passes through the minimum points of all possible short-run average variable cost curves. 
A)  is lower than the short-run average total cost curves. 
B)  is tangent to each possible short-run average total cost curve at one point. 
C)  intersects each possible short-run average total cost curve at two points. 
D)  passes through the minimum points of all possible short-run average variable cost curves.

Question 10

Which of the following is an example of a fixed cost for a fishing company?

Accepted Answer

A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines.

Question 11

If the marginal cost of the 100th unit is $3.25, the total cost of producing 100 units is $825, and the fixed cost is $500,

Accepted Answer

A)  average variable cost is higher than marginal cost. 
B)  marginal cost is falling. 
C)  average variable cost is at its minimum. 
D)  average total cost is increasing. 
A)  average variable cost is higher than marginal cost. 
B)  marginal cost is falling. 
C)  average variable cost is at its minimum. 
D)  average total cost is increasing.

Question 12

Which of the following is an implication of the law of diminishing returns?

Accepted Answer

A)  Total output will decline as more workers are hired. 
B)  In the long run, average total cost will eventually decline as output is expanded. 
C)  In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. 
D)  A doubling of all inputs will lead to more than a doubling of output. 
A)  Total output will decline as more workers are hired. 
B)  In the long run, average total cost will eventually decline as output is expanded. 
C)  In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. 
D)  A doubling of all inputs will lead to more than a doubling of output.

Question 13

Which of the following factors of production is not variable in the long run?

Accepted Answer

A)  the size of the firm's plant. 
B)  property taxes on the assets of the firm. 
C)  highly trained labor. 
D)  All factors of production are variable in the long run. 
A)  the size of the firm's plant. 
B)  property taxes on the assets of the firm. 
C)  highly trained labor. 
D)  All factors of production are variable in the long run.

Question 14

Exhibit 7-14 Cost curves
 
In Exhibit 7-14, economies of scale only exist for output levels up to:

Accepted Answer

A)  1,000. 
B)  2,000. 
C)  3,000. 
D)  4,000. 
A)  1,000. 
B)  2,000. 
C)  3,000. 
D)  4,000.

Question 15

A car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to:

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns. 
D)  greater use of large-volume purchases. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns. 
D)  greater use of large-volume purchases.

Question 16

Exhibit 7-13 Cost curves
 
In Exhibit 7-13, TFC is shown by the graph labeled:

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 17

The marginal cost intersects the average variable cost

Accepted Answer

A)  and the average total cost through their upward-sloping sections. 
B)  in its upward-sloping section and the average total cost through its downward-sloping section. 
C)  through its minimum point and the average total cost through its maximum point. 
D)  and the average total cost through their minimum points. 
A)  and the average total cost through their upward-sloping sections. 
B)  in its upward-sloping section and the average total cost through its downward-sloping section. 
C)  through its minimum point and the average total cost through its maximum point. 
D)  and the average total cost through their minimum points.

Question 18

Economies of scale can be caused by all of the following except :

Accepted Answer

A)  price discounts for large scale purchases. 
B)  labor specialization. 
C)  use of more productive equipment. 
D)  increases in the firm's average total cost. 
A)  price discounts for large scale purchases. 
B)  labor specialization. 
C)  use of more productive equipment. 
D)  increases in the firm's average total cost.

Question 19

Economies of scale imply that within some range one can increase the size of operation and:

Accepted Answer

A)  total cost will decrease. 
B)  fixed cost will decrease. 
C)  average total cost will decrease. 
D)  average total cost will increase. 
A)  total cost will decrease. 
B)  fixed cost will decrease. 
C)  average total cost will decrease. 
D)  average total cost will increase.

Question 20

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

Accepted Answer

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

Exam 7: Production Costs

The change in total cost that results from the production of one additional unit is called:

Cash payments to a steel mill for steel used in production would be an example of:

The total fixed cost remains constant as which of the following varies?

Exhibit 7-11 Short-run cost schedule for pizzeria's hourly production In Exhibit 7-11, the pizzeria's fixed cost is equal to:

Distinguish the short run from the long run. Generally, what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?

Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?

Exhibit 7-5 Workers and output data In Exhibit 7-5, the marginal product of the second worker is:

Which of the following statements is true?

For a typical firm, the long-run average total cost curve:

Which of the following is an example of a fixed cost for a fishing company?

If the marginal cost of the 100th unit is $3.25, the total cost of producing 100 units is $825, and the fixed cost is $500,

Which of the following is an implication of the law of diminishing returns?

Which of the following factors of production is not variable in the long run?

Exhibit 7-14 Cost curves In Exhibit 7-14, economies of scale only exist for output levels up to:

A car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to:

Exhibit 7-13 Cost curves In Exhibit 7-13, TFC is shown by the graph labeled:

The marginal cost intersects the average variable cost

Economies of scale can be caused by all of the following except :

Economies of scale imply that within some range one can increase the size of operation and:

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

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

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