Question 1

Exhibit 6-12  Cost schedule for producing pizza   By filling in the blanks in Exhibit 6-12, the ATC of 3 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40. 
A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40.

Question 2

Exhibit 6-12  Cost schedule for producing pizza   By filling in the blanks in Exhibit 6-12, the AVC of 3 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40. 
A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40.

Question 3

A downward-sloping portion of a long-run average total cost curve is the result of:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing returns. 
D)  the existence of fixed resources. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing returns. 
D)  the existence of fixed resources.

Question 4

Which of the following is true at the point where diminishing returns set in?

Accepted Answer

A)  Both marginal product and marginal cost are at a maximum. 
B)  Both marginal product and marginal cost are at a minimum. 
C)  Marginal product is at a maximum and marginal cost at a minimum. 
D)  Marginal product is at a minimum and marginal cost at a maximum. 
A)  Both marginal product and marginal cost are at a maximum. 
B)  Both marginal product and marginal cost are at a minimum. 
C)  Marginal product is at a maximum and marginal cost at a minimum. 
D)  Marginal product is at a minimum and marginal cost at a maximum.

Question 5

Marginal cost is calculated by dividing the change in total cost by the change in total output.

Accepted Answer

A) True 
 B)False

Question 6

In order for the law of diminishing returns to be present, we must have:

Accepted Answer

A)  at least one factor of production to be fixed. 
B)  output decreasing as more laborers are hired. 
C)  the price of labor increasing as more workers are hired. 
D)  simultaneous changes in labor and capital. 
E)  double the output when labor input is doubled. 
A)  at least one factor of production to be fixed. 
B)  output decreasing as more laborers are hired. 
C)  the price of labor increasing as more workers are hired. 
D)  simultaneous changes in labor and capital. 
E)  double the output when labor input is doubled.

Question 7

The sum of the explicit and implicit costs incurred in the production process is called

Accepted Answer

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

Question 8

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 9

Exhibit 6-7  Cost schedule for a firm   In Exhibit 6-7, by filling in the blanks it can be determined that the total cost of the second unit of output is:

Accepted Answer

A)  0. 
B)  700. 
C)  1,000. 
D)  1,200. 
E)  1,800. 
A)  0. 
B)  700. 
C)  1,000. 
D)  1,200. 
E)  1,800.

Question 10

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true .

Accepted Answer

A)  Average total cost is declining. 
B)  Average total cost is constant. 
C)  Average total cost is rising. 
D)  Average total cost is less than average fixed cost. 
A)  Average total cost is declining. 
B)  Average total cost is constant. 
C)  Average total cost is rising. 
D)  Average total cost is less than average fixed cost.

Question 11

Which of the following is not an explicit cost?

Accepted Answer

A)  Salaries. 
B)  Sales taxes. 
C)  Utilities, such as gas and electricity. 
D)  Insurance. 
E)  The firm owner's time. 
A)  Salaries. 
B)  Sales taxes. 
C)  Utilities, such as gas and electricity. 
D)  Insurance. 
E)  The firm owner's time.

Question 12

During the short run, a firm has enough time to adjust:

Accepted Answer

A)  its technology. 
B)  its fixed inputs. 
C)  its variable inputs. 
D)  all of its inputs-both fixed and variable. 
A)  its technology. 
B)  its fixed inputs. 
C)  its variable inputs. 
D)  all of its inputs-both fixed and variable.

Question 13

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. 
E)  more cost-efficient methods of marketing. 
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. 
E)  more cost-efficient methods of marketing.

Question 14

During the course of a week, McDonald's has enough time to hire or layoff workers, but it does not have enough time to expand its kitchen or add an additional seating area. In this situation, McDonald's:

Accepted Answer

A)  has no fixed costs. 
B)  is in the short run. 
C)  suffers an economic loss. 
D)  earns a large profit. 
A)  has no fixed costs. 
B)  is in the short run. 
C)  suffers an economic loss. 
D)  earns a large profit.

Question 15

The minimum point on the marginal cost curve corresponds to the:

Accepted Answer

A)  maximum point on the total cost curve. 
B)  minimum point on the total cost curve. 
C)  inflection point on the total variable cost curve. 
D)  midpoint of the total cost curve. 
A)  maximum point on the total cost curve. 
B)  minimum point on the total cost curve. 
C)  inflection point on the total variable cost curve. 
D)  midpoint of the total cost curve.

Question 16

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's:

Accepted Answer

A)  economic profit. 
B)  accounting profit. 
C)  opportunity cost of capital. 
D)  long-run average total cost. 
A)  economic profit. 
B)  accounting profit. 
C)  opportunity cost of capital. 
D)  long-run average total cost.

Question 17

Exhibit 6-17  Long-run average cost curve   In Exhibit 6-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units.

Question 18

If a firm's long-run average cost curve is rising, it is experiencing:

Accepted Answer

A)  a constant return to scale. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  none of the above. 
A)  a constant return to scale. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  none of the above.

Question 19

Exhibit 6-1  Production of pizza data   Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the fifth employee equals:

Accepted Answer

A)  4. 
B)  18. 
C)  19. 
D)  3. 
E)  1. 
A)  4. 
B)  18. 
C)  19. 
D)  3. 
E)  1.

Question 20

An economist left her $100,000-a-year teaching position to work full-time in her own consulting business. In the first year, she had total revenue of $200,000 and business expenses of $100,000. She made a(n):

Accepted Answer

A)  economic profit. 
B)  economic loss. 
C)  implicit profit. 
D)  accounting loss but not an economic loss. 
E)  zero economic profit. 
A)  economic profit. 
B)  economic loss. 
C)  implicit profit. 
D)  accounting loss but not an economic loss. 
E)  zero economic profit.

Exam 6: Production Costs

Exhibit 6-12 Cost schedule for producing pizza By filling in the blanks in Exhibit 6-12, the ATC of 3 pizzas is shown to be equal to:

Exhibit 6-12 Cost schedule for producing pizza By filling in the blanks in Exhibit 6-12, the AVC of 3 pizzas is shown to be equal to:

A downward-sloping portion of a long-run average total cost curve is the result of:

Which of the following is true at the point where diminishing returns set in?

Marginal cost is calculated by dividing the change in total cost by the change in total output.

In order for the law of diminishing returns to be present, we must have:

The sum of the explicit and implicit costs incurred in the production process is called

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

Exhibit 6-7 Cost schedule for a firm In Exhibit 6-7, by filling in the blanks it can be determined that the total cost of the second unit of output is:

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true .

Which of the following is not an explicit cost?

During the short run, a firm has enough time to adjust:

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

During the course of a week, McDonald's has enough time to hire or layoff workers, but it does not have enough time to expand its kitchen or add an additional seating area. In this situation, McDonald's:

The minimum point on the marginal cost curve corresponds to the:

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's:

Exhibit 6-17 Long-run average cost curve In Exhibit 6-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

If a firm's long-run average cost curve is rising, it is experiencing:

Exhibit 6-1 Production of pizza data Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the fifth employee equals:

An economist left her $100,000-a-year teaching position to work full-time in her own consulting business. In the first year, she had total revenue of $200,000 and business expenses of $100,000. She made a(n):

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

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