Question 1

Which of the following is most likely to be a fixed cost for a business?

Accepted Answer

A)  expenditures on low-skill labor. 
B)  shipping charges for the delivery of products. 
C)  managerial salaries. 
D)  property taxes on the firm's buildings. 
A)  expenditures on low-skill labor. 
B)  shipping charges for the delivery of products. 
C)  managerial salaries. 
D)  property taxes on the firm's buildings.

Question 2

Which of the following is an explicit cost?

Accepted Answer

A)  The opportunity cost of an owner/entrepreneur's time invested in the firm. 
B)  The opportunity cost of the money the business owner/entrepreneur has invested in the firm. 
C)  The wages paid to workers. 
D)  None of the above. 
A)  The opportunity cost of an owner/entrepreneur's time invested in the firm. 
B)  The opportunity cost of the money the business owner/entrepreneur has invested in the firm. 
C)  The wages paid to workers. 
D)  None of the above.

Question 3

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.

Question 4

Exhibit 6-8  Costs schedules for producing pizza   By filling in the blanks in Exhibit 6-8, the marginal cost of the fourth pizza is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $17. 
D)  $23. 
E)  $40. 
A)  $10. 
B)  $15. 
C)  $17. 
D)  $23. 
E)  $40.

Question 5

Which of the following are implicit costs for a typical firm?

Accepted Answer

A)  Insurance costs. 
B)  Electricity costs. 
C)  Opportunity costs of capital owned and used by the firm. 
D)  Cost of labor hired by the firm. 
E)  The cost of raw materials. 
A)  Insurance costs. 
B)  Electricity costs. 
C)  Opportunity costs of capital owned and used by the firm. 
D)  Cost of labor hired by the firm. 
E)  The cost of raw materials.

Question 6

The average fixed cost of a firm equal:

Accepted Answer

A)  implicit costs divided by output. 
B)  explicit costs divided by output. 
C)  total cost minus variable cost. 
D)  total cost minus total variable cost divided by output. 
A)  implicit costs divided by output. 
B)  explicit costs divided by output. 
C)  total cost minus variable cost. 
D)  total cost minus total variable cost divided by output.

Question 7

A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:

Accepted Answer

A)  6,000 bushels per acre per year. 
B)  5,000 bushels per acre per year. 
C)  1,000 bushels per acre per year. 
D)  11,000 bushels per acre per year. 
A)  6,000 bushels per acre per year. 
B)  5,000 bushels per acre per year. 
C)  1,000 bushels per acre per year. 
D)  11,000 bushels per acre per year.

Question 8

Diseconomies of scale exist for all of the following reasons except:

Accepted Answer

A)  bureaucratic inefficiencies. 
B)  management problems. 
C)  failures in information flows. 
D)  firm size is too small. 
E)  organizational problems. 
A)  bureaucratic inefficiencies. 
B)  management problems. 
C)  failures in information flows. 
D)  firm size is too small. 
E)  organizational problems.

Question 9

Suppose Joe Rich owns his own company and does not pay himself a salary. This means the salary he could have earned in alternative employment is considered an implicit cost for the firm.

Accepted Answer

A) True 
 B)False

Question 10

Economic profit equals accounting profit minus implicit costs.

Accepted Answer

A) True 
 B)False

Question 11

Suppose when a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day. When it adds a third station, but no more workers, it is able to wash 150 cars per day. The marginal product of the third washing station appears is:

Accepted Answer

A)  100 cars per day. 
B)  150 cars per day. 
C)  5 cars per day. 
D)  50 cars per day. 
A)  100 cars per day. 
B)  150 cars per day. 
C)  5 cars per day. 
D)  50 cars per day.

Question 12

Which of the following will become smaller and smaller as the firm expands output?

Accepted Answer

A)  average total cost. 
B)  average fixed cost . 
C)  marginal cost. 
D)  total fixed cost . 
A)  average total cost. 
B)  average fixed cost . 
C)  marginal cost. 
D)  total fixed cost .

Question 13

A farm is able to produce 10,000 bushels of peanuts per season on 10 acres. Assume it adds one more acre and is able to produce 12,000 bushels per season. The marginal product of the additional acre of land for this farm is:

Accepted Answer

A)  10,000 bushels per acre per year. 
B)  1,200 bushels per acre per year. 
C)  2,000 bushels per acre per year. 
D)  12,000 bushels per acre per year. 
A)  10,000 bushels per acre per year. 
B)  1,200 bushels per acre per year. 
C)  2,000 bushels per acre per year. 
D)  12,000 bushels per acre per year.

Question 14

Exhibit 6-2  Cost schedule for pizza production   Exhibit 6-2 shows the labor, energy, and materials cost of making various quantities of pizzas. The table shows that the energy cost of making pizzas will:

Accepted Answer

A)  increase at a decreasing rate. 
B)  decrease at a decreasing rate. 
C)  decrease at an increasing rate. 
D)  increase at an increasing rate. 
E)  increase at a constant rate. 
A)  increase at a decreasing rate. 
B)  decrease at a decreasing rate. 
C)  decrease at an increasing rate. 
D)  increase at an increasing rate. 
E)  increase at a constant rate.

Question 15

Economies of scale are created by greater efficiency of capital and by:

Accepted Answer

A)  longer chains of command in management. 
B)  better wages for labor. 
C)  smaller plant sizes. 
D)  increased specialization of labor. 
A)  longer chains of command in management. 
B)  better wages for labor. 
C)  smaller plant sizes. 
D)  increased specialization of labor.

Question 16

Exhibit 6-12  Cost schedule for producing pizza   By filling in the blanks in Exhibit 6-12, the ATC of 4 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
E)  $78. 
A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
E)  $78.

Question 17

Exhibit 6-10  Short-run cost schedule for book publisher's hourly production   In Exhibit 6-10, the marginal cost of increasing production from 2 to 3 cases of books is:

Accepted Answer

A)  $100. 
B)  $150. 
C)  $450. 
D)  $800. 
A)  $100. 
B)  $150. 
C)  $450. 
D)  $800.

Question 18

Use the table below to answer the following question.   What is the average total cost at an output level of four units?

Accepted Answer

A)  $1,200. 
B)  $1,400. 
C)  $1,500. 
D)  $2,000. 
A)  $1,200. 
B)  $1,400. 
C)  $1,500. 
D)  $2,000.

Question 19

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 20

Exhibit 6-8  Costs schedules for producing pizza   By filling in the blanks in Exhibit 6-8, the average variable cost of producing 4 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $40. 
E)  $85. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $40. 
E)  $85.

Exam 6: Production Costs

Which of the following is most likely to be a fixed cost for a business?

Which of the following is an explicit cost?

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

Exhibit 6-8 Costs schedules for producing pizza By filling in the blanks in Exhibit 6-8, the marginal cost of the fourth pizza is shown to be equal to:

Which of the following are implicit costs for a typical firm?

The average fixed cost of a firm equal:

A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:

Diseconomies of scale exist for all of the following reasons except:

Suppose Joe Rich owns his own company and does not pay himself a salary. This means the salary he could have earned in alternative employment is considered an implicit cost for the firm.

Economic profit equals accounting profit minus implicit costs.

Suppose when a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day. When it adds a third station, but no more workers, it is able to wash 150 cars per day. The marginal product of the third washing station appears is:

Which of the following will become smaller and smaller as the firm expands output?

A farm is able to produce 10,000 bushels of peanuts per season on 10 acres. Assume it adds one more acre and is able to produce 12,000 bushels per season. The marginal product of the additional acre of land for this farm is:

Exhibit 6-2 Cost schedule for pizza production Exhibit 6-2 shows the labor, energy, and materials cost of making various quantities of pizzas. The table shows that the energy cost of making pizzas will:

Economies of scale are created by greater efficiency of capital and by:

Exhibit 6-12 Cost schedule for producing pizza By filling in the blanks in Exhibit 6-12, the ATC of 4 pizzas is shown to be equal to:

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production In Exhibit 6-10, the marginal cost of increasing production from 2 to 3 cases of books is:

Use the table below to answer the following question. What is the average total cost at an output level of four units?

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

Exhibit 6-8 Costs schedules for producing pizza By filling in the blanks in Exhibit 6-8, the average variable cost of producing 4 pizzas is shown to be equal to:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters