Question 1

Exhibit 6-12  Cost schedule for producing pizza   By filling in the blanks in Exhibit 6-12, the marginal cost of the fourth pizza is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $11. 
C)  $12. 
D)  $13. 
E)  $14. 
A)  $10. 
B)  $11. 
C)  $12. 
D)  $13. 
E)  $14.

Question 2

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.

Question 3

If marginal product is at a maximum, then marginal cost is at a minimum.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 6-14  Cost curves   In Exhibit 6-14, economies of scale only exist for output levels up to:

Accepted Answer

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

Question 5

Exhibit 6-17  Long-run average cost curve   In Exhibit 6-17, economies of scale exist up to:

Accepted Answer

A)  Q1 units of output per week. 
B)  Q2 units of output per week. 
C)  Q3 units of output. 
D)  Q4 units of output. 
A)  Q1 units of output per week. 
B)  Q2 units of output per week. 
C)  Q3 units of output. 
D)  Q4 units of output.

Question 6

If the total variable cost curve for a firm is S-shaped, what is the shape of the total cost curve for that firm?

Accepted Answer

A)  U-shaped 
B)  Flat. 
C)  Hill-shaped. 
D)  S-shaped. 
E)  There is not enough information. 
A)  U-shaped 
B)  Flat. 
C)  Hill-shaped. 
D)  S-shaped. 
E)  There is not enough information.

Question 7

Exhibit 6-3  A marginal product curve   As shown in Exhibit 6-3, the law of diminishing returns applies where there are:

Accepted Answer

A)  more than 5 workers per day. 
B)  more than 4 workers per day. 
C)  more than 3 workers per day. 
D)  between 0 and 5 workers per day. 
A)  more than 5 workers per day. 
B)  more than 4 workers per day. 
C)  more than 3 workers per day. 
D)  between 0 and 5 workers per day.

Question 8

Exhibit 6-17  Long-run average cost curve   If the firm represented in Exhibit 6-17 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

Accepted Answer

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

Question 9

Implicit costs are best thought of as:

Accepted Answer

A)  variable costs. 
B)  marginal costs. 
C)  accounting costs. 
D)  opportunity costs. 
E)  sunk costs. 
A)  variable costs. 
B)  marginal costs. 
C)  accounting costs. 
D)  opportunity costs. 
E)  sunk costs.

Question 10

Which of the following statements is true ?

Accepted Answer

A)  The law of diminishing returns states that beyond some point the marginal product of a variable resource continues to rise. 
B)  The marginal product is the change in total output by adding one additional unit of a fixed input. 
C)  Fixed costs are costs which vary with the output level. 
D)  When marginal productivity of a variable input is falling then marginal costs of production must be rising. 
E)  When marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls. 
A)  The law of diminishing returns states that beyond some point the marginal product of a variable resource continues to rise. 
B)  The marginal product is the change in total output by adding one additional unit of a fixed input. 
C)  Fixed costs are costs which vary with the output level. 
D)  When marginal productivity of a variable input is falling then marginal costs of production must be rising. 
E)  When marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls.

Question 11

When marginal cost is below average total cost:

Accepted Answer

A)  total cost is falling. 
B)  total cost is rising. 
C)  average total cost is falling. 
D)  average fixed cost is rising. 
E)  total variable cost is falling. 
A)  total cost is falling. 
B)  total cost is rising. 
C)  average total cost is falling. 
D)  average fixed cost is rising. 
E)  total variable cost is falling.

Question 12

If a firm's marginal cost exceeds its average cost, then its average cost must be rising.

Accepted Answer

A) True 
 B)False

Question 13

What is the shape of the average fixed cost curve for a firm in the short run?

Accepted Answer

A)  U-shaped. 
B)  A curve that constantly increases as output expands and eventually approaches infinity at high rates of output. 
C)  A vertical line. 
D)  A curve that declines as output expands and approaches the horizontal-axis when output is large. 
A)  U-shaped. 
B)  A curve that constantly increases as output expands and eventually approaches infinity at high rates of output. 
C)  A vertical line. 
D)  A curve that declines as output expands and approaches the horizontal-axis when output is large.

Question 14

The law of diminishing returns applies to which of the following segments of the marginal product of labor curve?

Accepted Answer

A)  The entire curve. 
B)  The downward-sloping segment only. 
C)  The upward sloping segment only. 
D)  The point where labor input is zero. 
A)  The entire curve. 
B)  The downward-sloping segment only. 
C)  The upward sloping segment only. 
D)  The point where labor input is zero.

Question 15

Which of the following best describes average variable cost?

Accepted Answer

A)  The change in total cost when one additional unit of output is produced. 
B)  Total cost divided by the quantity of output produced. 
C)  Total variable cost divided by the quantity of output produced. 
D)  Total fixed cost divided by the quantity of output produced. 
E)  Costs that do not vary as output varies. 
A)  The change in total cost when one additional unit of output is produced. 
B)  Total cost divided by the quantity of output produced. 
C)  Total variable cost divided by the quantity of output produced. 
D)  Total fixed cost divided by the quantity of output produced. 
E)  Costs that do not vary as output varies.

Question 16

Exhibit 6-5  Workers and output data   In Exhibit 6-5, diminishing returns set in when the ____ worker is hired.

Accepted Answer

A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth 
A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth

Question 17

Explicit costs would include

Accepted Answer

A)  rent. 
B)  the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business. 
C)  the loss of rent on a building the business owner owns and uses in his/her business. 
D)  the opportunity costs of the business owner's time. 
E)  the use of tools owned by the business owner and dedicated to the business. 
A)  rent. 
B)  the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business. 
C)  the loss of rent on a building the business owner owns and uses in his/her business. 
D)  the opportunity costs of the business owner's time. 
E)  the use of tools owned by the business owner and dedicated to the business.

Question 18

The vertical distance between the average total cost curve and the average variable cost curve at any given output level equals average fixed cost at that particular output level.

Accepted Answer

A) True 
 B)False

Question 19

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. 
E)  the payments the business owner makes for public relations , such as donations to charity. 
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. 
E)  the payments the business owner makes for public relations , such as donations to charity.

Question 20

Exhibit 6-14  Cost curves   In Exhibit 6-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

Accepted Answer

A)  Diseconomies of scale; constant returns to scale; economies of scale. 
B)  Constant returns to scale; economies of scale; diseconomies of scale. 
C)  Economies of scale; constant returns to scale; diseconomies of scale. 
D)  Diseconomies of scale; economies of scale; constant returns to scale. 
E)  Economies of scale; diseconomies of scale; constant returns to scale. 
A)  Diseconomies of scale; constant returns to scale; economies of scale. 
B)  Constant returns to scale; economies of scale; diseconomies of scale. 
C)  Economies of scale; constant returns to scale; diseconomies of scale. 
D)  Diseconomies of scale; economies of scale; constant returns to scale. 
E)  Economies of scale; diseconomies of scale; constant returns to scale.

Exam 6: Production Costs

Exhibit 6-12 Cost schedule for producing pizza By filling in the blanks in Exhibit 6-12, the marginal cost of the fourth pizza is shown to be equal to:

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:

If marginal product is at a maximum, then marginal cost is at a minimum.

Exhibit 6-14 Cost curves In Exhibit 6-14, economies of scale only exist for output levels up to:

Exhibit 6-17 Long-run average cost curve In Exhibit 6-17, economies of scale exist up to:

If the total variable cost curve for a firm is S-shaped, what is the shape of the total cost curve for that firm?

Exhibit 6-3 A marginal product curve As shown in Exhibit 6-3, the law of diminishing returns applies where there are:

Exhibit 6-17 Long-run average cost curve If the firm represented in Exhibit 6-17 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

Implicit costs are best thought of as:

Which of the following statements is true ?

When marginal cost is below average total cost:

If a firm's marginal cost exceeds its average cost, then its average cost must be rising.

What is the shape of the average fixed cost curve for a firm in the short run?

The law of diminishing returns applies to which of the following segments of the marginal product of labor curve?

Which of the following best describes average variable cost?

Exhibit 6-5 Workers and output data In Exhibit 6-5, diminishing returns set in when the ____ worker is hired.

Explicit costs would include

The vertical distance between the average total cost curve and the average variable cost curve at any given output level equals average fixed cost at that particular output level.

Implicit costs are:

Exhibit 6-14 Cost curves In Exhibit 6-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

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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