Question 1

The total fixed cost curve:

Accepted Answer

A)  varies with the quantity of inputs used. 
B)  decreases with output. 
C)  increases with output. 
D)  remains constant regardless of output. 
A)  varies with the quantity of inputs used. 
B)  decreases with output. 
C)  increases with output. 
D)  remains constant regardless of output.

Question 2

Exhibit 7-15 Long-run average cost
 
Given the short-run average total cost curves in Exhibit 7-15, what level of output per week minimizes average total cost?

Accepted Answer

A)  500 units. 
B)  1,000 units. 
C)  1,500 units. 
D)  2,000 units. 
A)  500 units. 
B)  1,000 units. 
C)  1,500 units. 
D)  2,000 units.

Question 3

If the total cost of producing 10 jets is $28 million and the total cost of producing 11 jets is $30 million, this firm is experiencing

Accepted Answer

A)  economies of scale in the range of 10 to 11 jets. 
B)  constant returns to scale in the range of 10 to 11 jets. 
C)  diseconomies of scale in the range of 10 to 11 jets. 
D)  increasing average variable costs in the range of 10 to 11 jets. 
A)  economies of scale in the range of 10 to 11 jets. 
B)  constant returns to scale in the range of 10 to 11 jets. 
C)  diseconomies of scale in the range of 10 to 11 jets. 
D)  increasing average variable costs in the range of 10 to 11 jets.

Question 4

Implicit costs are:

Accepted Answer

A)  the opportunity costs of using resources owned by the entrepreneur in his/her own business. 
B)  payments the business owner must make on borrowed funds. 
C)  costs which vary as the level of output varies. 
D)  those payments the business owner makes in cash. 
A)  the opportunity costs of using resources owned by the entrepreneur in his/her own business. 
B)  payments the business owner must make on borrowed funds. 
C)  costs which vary as the level of output varies. 
D)  those payments the business owner makes in cash.

Question 5

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns to a fixed factor of production. 
D)  the principal agent problem is generally less severe for larger firms. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns to a fixed factor of production. 
D)  the principal agent problem is generally less severe for larger firms.

Question 6

The long run is a planning period:

Accepted Answer

A)  during which the firm can vary all inputs including its plant size. 
B)  less than six months. 
C)  less than one year. 
D)  less than five years. 
A)  during which the firm can vary all inputs including its plant size. 
B)  less than six months. 
C)  less than one year. 
D)  less than five years.

Question 7

Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys their goods in large quantities and therefore at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices and free parking. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that:

Accepted Answer

A)  consumers are boycotting local retailers. 
B)  Wal-Mart engages in illegal acts of monopolization. 
C)  there are diseconomies of scale in retail sales. 
D)  there are economies of scale in retail sales. 
E)  Wal-Mart is managed by ruthless business people. 
A)  consumers are boycotting local retailers. 
B)  Wal-Mart engages in illegal acts of monopolization. 
C)  there are diseconomies of scale in retail sales. 
D)  there are economies of scale in retail sales. 
E)  Wal-Mart is managed by ruthless business people.

Question 8

Unlike implicit costs, explicit costs:

Accepted Answer

A)  reflect opportunity costs. 
B)  include the value of the owner's time. 
C)  are not included in the accounting statement of the firm. 
D)  are actual cash payments. 
A)  reflect opportunity costs. 
B)  include the value of the owner's time. 
C)  are not included in the accounting statement of the firm. 
D)  are actual cash payments.

Question 9

Exhibit 7-14 Cost curves
 
In Exhibit 7-14, a firm finds that it is experiencing numerous managerial and information problems. The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Accepted Answer

A)  between 0 and 1,000. 
B)  between 1,000 and 2,000. 
C)  between 2,000 and 3,000. 
D)  between 3,000 and 4,000. 
A)  between 0 and 1,000. 
B)  between 1,000 and 2,000. 
C)  between 2,000 and 3,000. 
D)  between 3,000 and 4,000.

Question 10

Exhibit 7-12 Cost schedule for producing pizza
 
In Exhibit 7-12, the AFC of 4 pizzas is:

Accepted Answer

A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40.

Question 11

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.

Exam 7: Production Costs

The total fixed cost curve:

Exhibit 7-15 Long-run average cost Given the short-run average total cost curves in Exhibit 7-15, what level of output per week minimizes average total cost?

If the total cost of producing 10 jets is $28 million and the total cost of producing 11 jets is $30 million, this firm is experiencing

Implicit costs are:

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:

The long run is a planning period:

Unlike implicit costs, explicit costs:

Exhibit 7-14 Cost curves In Exhibit 7-14, a firm finds that it is experiencing numerous managerial and information problems. The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Exhibit 7-12 Cost schedule for producing pizza In Exhibit 7-12, the AFC of 4 pizzas 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:

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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