Question 1

The long run is defined as

Accepted Answer

A)  any time after six months. 
B)  any time after one year. 
C)  the period of time when all resources are fixed. 
D)  the period of time when most (more than 50 percent) resources are variable. 
E)  the period of time when all resources are variable. 
A)  any time after six months. 
B)  any time after one year. 
C)  the period of time when all resources are fixed. 
D)  the period of time when most (more than 50 percent) resources are variable. 
E)  the period of time when all resources are variable.

Question 2

An insurance agent rents a building and has a three-year lease.An increase in the rent for the building increases the agent's

Accepted Answer

A)  total cost and average variable cost. 
B)  total variable cost and average variable cost. 
C)  total fixed cost and total variable cost. 
D)  total fixed cost and average fixed cost. 
E)  total variable cost and total cost. 
A)  total cost and average variable cost. 
B)  total variable cost and average variable cost. 
C)  total fixed cost and total variable cost. 
D)  total fixed cost and average fixed cost. 
E)  total variable cost and total cost.

Question 3

One of the major reasons for the U-shaped average total cost curve is the fact that

Accepted Answer

A)  there are increasing returns from labor regardless of the number of workers employed. 
B)  there eventually are decreasing returns from labor as more workers are employed. 
C)  prices fall as output increases. 
D)  the average fixed cost increases as more output is produced. 
E)  the variable cost decreases as more output is produced. 
A)  there are increasing returns from labor regardless of the number of workers employed. 
B)  there eventually are decreasing returns from labor as more workers are employed. 
C)  prices fall as output increases. 
D)  the average fixed cost increases as more output is produced. 
E)  the variable cost decreases as more output is produced.

Question 4

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (frijoles) }
\end{array} & \begin{array} { c } 
\text { Total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 0 & 1,000 \
\hline 5 & 1,000 & 3,000 \
\hline 10 & 3,000 & 5,000 \
\hline 15 & 4,000 & 7,000 \
\hline 20 & 4,500 & 9,000 \
\hline
\end{array}$$
-The above table gives some production and cost information for Flaming Fernando's,a restaurant that sells Fiery Frijoles.What is the average total cost of producing 4,500 frijoles?

Accepted Answer

A)  $2 
B)  $225 
C)  $9,000 
D)  $8,000 
E)  More information is needed to determine the answer. 
A)  $2 
B)  $225 
C)  $9,000 
D)  $8,000 
E)  More information is needed to determine the answer.

Question 5

$$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (dogs groomed per week) }
\end{array} \
\hline 0 & 0 \
1 & 40 \
2 & 100 \
3 & 150 \
4 & 190 \
5 & 220 \
6 & 240
\end{array}$$
-Anna owns a dog grooming salon in Brunswick,Georgia.The above table has Anna's total product schedule.Anna pays each worker $300 per week and she pays rent of $600 a week for her salon.These are her only costs.When Anna has a staff of 2 workers,her average total cost equals

Accepted Answer

A)  $2,400. 
B)  $300. 
C)  $10.00. 
D)  $12.00. 
E)  $1,200. 
A)  $2,400. 
B)  $300. 
C)  $10.00. 
D)  $12.00. 
E)  $1,200.

Question 6

Normal profit is a(n)________ cost because ________.

Accepted Answer

A)  implicit; it represents the cost of not running another firm 
B)  explicit; a firm must pay income taxes on its profit 
C)  implicit; it represents the cost of economic depreciation 
D)  accounting; wages are considered an explicit cost 
E)  depreciation; the equipment the firm owns wears out over time 
A)  implicit; it represents the cost of not running another firm 
B)  explicit; a firm must pay income taxes on its profit 
C)  implicit; it represents the cost of economic depreciation 
D)  accounting; wages are considered an explicit cost 
E)  depreciation; the equipment the firm owns wears out over time

Question 7

As a typical firm increases its output,its marginal cost

Accepted Answer

A)  is constant. 
B)  decreases at first and then increases. 
C)  increases at first and then decreases. 
D)  decreases. 
E)  is negative at first and then positive. 
A)  is constant. 
B)  decreases at first and then increases. 
C)  increases at first and then decreases. 
D)  decreases. 
E)  is negative at first and then positive.

Question 8

Accountants calculate

Accepted Answer

A)  economic depreciation as part of the firm's cost. 
B)  depreciation using Internal Revenue Service rules. 
C)  the opportunity cost of all the resources the firm uses. 
D)  all the firm's implicit costs but only a few of its explicit costs. 
E)  All of the above answers are correct. 
A)  economic depreciation as part of the firm's cost. 
B)  depreciation using Internal Revenue Service rules. 
C)  the opportunity cost of all the resources the firm uses. 
D)  all the firm's implicit costs but only a few of its explicit costs. 
E)  All of the above answers are correct.

Question 9

Ajax Manufacturing has a fixed scale of plant with the levels of total product given in the table for different levels of labor.Complete the table by calculating the average product and marginal product.
 $$\begin{array}{l}
\text { Quantity of labor Total Average Marginal }\
\begin{array} { c c c c } 
\text { (workers) } & \text { product } & \text { product } & \text { product } \
\hline 0 & 0 & \mathrm { xX } & - \
1 & 24 & - & - \
2 & 50 & - & - \
3 & 74 & - & - \
4 & 94 & - & - \
5 & 110 & - & - \
6 & 122 & - & - \
7 & 130 & - & - \
8 & 134 & - & - \
9 & 134 & - & -
\end{array}
\end{array}$$

Accepted Answer

\[\begin{array} { c c c c } 
\begin{arra

Question 10

If average variable costs increase as output increases,then

Accepted Answer

A)  total fixed cost must be increasing also. 
B)  marginal cost must be greater than average variable cost. 
C)  total cost must be constant. 
D)  output must be zero. 
E)  average total cost must be increasing also. 
A)  total fixed cost must be increasing also. 
B)  marginal cost must be greater than average variable cost. 
C)  total cost must be constant. 
D)  output must be zero. 
E)  average total cost must be increasing also.

Question 11

The opportunity cost of owning and using a firm's capital is defined as the capital's

Accepted Answer

A)  variable cost. 
B)  fixed cost. 
C)  economic depreciation. 
D)  nonpayment depreciation. 
E)  explicit cost. 
A)  variable cost. 
B)  fixed cost. 
C)  economic depreciation. 
D)  nonpayment depreciation. 
E)  explicit cost.

Question 12

$$\begin{array}{l}
\text { Labor }\
\begin{array} { c c } 
\text { (workers) } & \text { Output } \
\hline 0 & 0 \
1 & 20 \
2 & 50 \
3 & 70 \
4 & 80 \
5 & 85
\end{array}
\end{array}$$
-The table above shows a total product schedule.Suppose that labor costs $20 per worker and fixed costs are $60.The average variable cost of producing 80 units equals ________ per unit.

Accepted Answer

A)  $0.75 
B)  $1.00 
C)  $1.75 
D)  $20 
E)  $0.25 
A)  $0.75 
B)  $1.00 
C)  $1.75 
D)  $20 
E)  $0.25

Question 13

$$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (dogs groomed per week) }
\end{array} \
\hline 0 & 0 \
1 & 40 \
2 & 100 \
3 & 150 \
4 & 190 \
5 & 220 \
6 & 240
\end{array}$$
-Anna owns a dog grooming salon in Brunswick,Georgia.The above table has Anna's total product schedule.Anna pays each worker $300 per week and she pays rent of $600 a week for her salon.These are her only costs.When Anna has a staff of 2 workers,her total cost equals

Accepted Answer

A)  $1,200. 
B)  $300. 
C)  $10.00. 
D)  $12.00. 
E)  $600. 
A)  $1,200. 
B)  $300. 
C)  $10.00. 
D)  $12.00. 
E)  $600.

Question 14

The total product is 10 units.The average total cost is $30 and the average fixed cost is $10.What is the amount of the total variable cost?

Accepted Answer

A)  $20 
B)  $200 
C)  $300 
D)  $10 
E)  It is impossible to determine with the information given. 
A)  $20 
B)  $200 
C)  $300 
D)  $10 
E)  It is impossible to determine with the information given.

Question 15

Bill is an economics professor who earns $40,000 teaching but decides to leave and fulfill his dream of catering barbecues.During his first year of barbecuing he earned total revenue of $60,000.He spent $30,000 on food and supplies.He also paid his wife $10,000 to help serve food.The normal profit for an entrepreneur running a barbecue business is $3,000.He also rented an industrial grill/fry truck for $12,000.An accountant would conclude that Bill's profit was

Accepted Answer

A)  $30,000. 
B)  $20,000. 
C)  $8,000. 
D)  -$2,000. 
E)  $40,000. 
A)  $30,000. 
B)  $20,000. 
C)  $8,000. 
D)  -$2,000. 
E)  $40,000.

Question 16

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Output } \
\text { (pizzas per hour) }
\end{array} & \begin{array} { c } 
\text { Total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 20 \
1 & 35 \
2 & 49 \
3 & 61 \
4 & 71 \
5 & 79 \
6 & 85 \
\hline
\end{array}$$
-Paulette owns a pizza parlor.Her total cost schedule is in the above table.Her total fixed cost is equal to

Accepted Answer

A)  $20. 
B)  $35. 
C)  $79. 
D)  $85. 
E)  Some amount, but more information is needed to determine her fixed cost. 
A)  $20. 
B)  $35. 
C)  $79. 
D)  $85. 
E)  Some amount, but more information is needed to determine her fixed cost.

Question 17

What is the relationship between the marginal product of labor and the marginal cost?

Accepted Answer

Initially,as each additional unit of lab

Question 18

Which of the following contributes to increasing marginal returns?

Accepted Answer

A)  decreasing implicit costs 
B)  increasing explicit costs 
C)  specialization of labor 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  decreasing implicit costs 
B)  increasing explicit costs 
C)  specialization of labor 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 19

The short run is the time frame

Accepted Answer

A)  during which the quantities of all resources are fixed. 
B)  that is less than a year. 
C)  during which the quantities of some resources are fixed. 
D)  during which the quantities of all resources are variable. 
E)  during which all costs are implicit costs. 
A)  during which the quantities of all resources are fixed. 
B)  that is less than a year. 
C)  during which the quantities of some resources are fixed. 
D)  during which the quantities of all resources are variable. 
E)  during which all costs are implicit costs.

Question 20

-The table above has the total product schedule for an imaginary good called a widget.Each unit of labor costs $25 and the total cost of capital is $100.
a.Use this information to complete the table.In the table,TFC is the total fixed cost,TVC is the total variable cost,TC is the total cost,AFC is the average fixed cost,AVC is the average variable cost,ATC is the average total cost,and MC is the marginal cost.
   
b.Suppose that labor becomes twice as expensive (so that one unit of labor now costs $50)but nothing else changes.Complete the above table with the new cost schedules.If you plotted the cost curves,how would the increased wage rate affect the cost curves?

Accepted Answer

@#IMG-DLM& 
a.The completed table is above.All the

The long run is defined as

An insurance agent rents a building and has a three-year lease.An increase in the rent for the building increases the agent's

One of the major reasons for the U-shaped average total cost curve is the fact that

Normal profit is a(n) cost because .

As a typical firm increases its output,its marginal cost

Accountants calculate

If average variable costs increase as output increases,then

The opportunity cost of owning and using a firm's capital is defined as the capital's

Labor (workers) Output 0 0 1 20 2 50 3 70 4 80 5 85 -The table above shows a total product schedule.Suppose that labor costs $20 per worker and fixed costs are $60.The average variable cost of producing 80 units equals ________ per unit.

The total product is 10 units.The average total cost is $30 and the average fixed cost is $10.What is the amount of the total variable cost?

Output (pizzas per hour) Total cost (dollars) 0 20 1 35 2 49 3 61 4 71 5 79 6 85 -Paulette owns a pizza parlor.Her total cost schedule is in the above table.Her total fixed cost is equal to

What is the relationship between the marginal product of labor and the marginal cost?

Which of the following contributes to increasing marginal returns?

The short run is the time frame

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 14: Production and Cost

The long run is defined as

An insurance agent rents a building and has a three-year lease.An increase in the rent for the building increases the agent's

One of the major reasons for the U-shaped average total cost curve is the fact that

Normal profit is a(n)________ cost because ________.

As a typical firm increases its output,its marginal cost

Accountants calculate

If average variable costs increase as output increases,then

The opportunity cost of owning and using a firm's capital is defined as the capital's

Labor (workers) Output 0 0 1 20 2 50 3 70 4 80 5 85 -The table above shows a total product schedule.Suppose that labor costs $20 per worker and fixed costs are $60.The average variable cost of producing 80 units equals ________ per unit.

The total product is 10 units.The average total cost is $30 and the average fixed cost is $10.What is the amount of the total variable cost?

Output (pizzas per hour) Total cost (dollars) 0 20 1 35 2 49 3 61 4 71 5 79 6 85 -Paulette owns a pizza parlor.Her total cost schedule is in the above table.Her total fixed cost is equal to

What is the relationship between the marginal product of labor and the marginal cost?

Which of the following contributes to increasing marginal returns?

The short run is the time frame

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Normal profit is a(n) cost because .