Question 1

Which of the following statements is true?

Accepted Answer

A)  In the long run, the average cost curve is always downward sloping. 
B)  In the long run, the quantities of all inputs are fixed. 
C)  In the long run, the firm's fixed costs are greater than its variable costs. 
D)  In the long run, all costs are variable costs. 
E)  In the long run, the total variable cost equals the total fixed cost. 
A)  In the long run, the average cost curve is always downward sloping. 
B)  In the long run, the quantities of all inputs are fixed. 
C)  In the long run, the firm's fixed costs are greater than its variable costs. 
D)  In the long run, all costs are variable costs. 
E)  In the long run, the total variable cost equals the total fixed cost.

Question 2

Dr.Khan starts his own dental practice after quitting his $150,000 job at The Mall Dental Clinic.His revenues for the first year are $500,000.He paid $90,000 in rent for the dental office,$60,000 for his office manager's salary,$24,000 for the dental hygienist,$150,000 for insurance,and $6,000 for other miscellaneous costs.The normal profit from running his business is $20,000.

Accepted Answer

A)  His accounting profit is $350,000. 
B)  His economic profit is $150,000. 
C)  His economic profit is zero. 
D)  His accounting profit is zero. 
E)  None of the above answers is correct. 
A)  His accounting profit is $350,000. 
B)  His economic profit is $150,000. 
C)  His economic profit is zero. 
D)  His accounting profit is zero. 
E)  None of the above answers is correct.

Question 3

The figure above shows a firm's average total cost and marginal cost curves.
-Based on the figure above,the firm's marginal product curve slopes upward at levels of output between ________ and the firm's average product curve slopes upward at levels of output between ________.

Accepted Answer

A)  4.0 and 7.0; 4.0 and 7.0 
B)  0 and 7.0; 4.0 and 7.0 
C)  4.0 and 7.0; 0 and 4.0 
D)  0 and 4.0; 0 and 7.0 
E)  More information is needed to answer the question. 
A)  4.0 and 7.0; 4.0 and 7.0 
B)  0 and 7.0; 4.0 and 7.0 
C)  4.0 and 7.0; 0 and 4.0 
D)  0 and 4.0; 0 and 7.0 
E)  More information is needed to answer the question.

Question 4

In economics,a "normal profit" is the return to

Accepted Answer

A)  labor. 
B)  capital. 
C)  land. 
D)  entrepreneurship. 
E)  Answers B and D are correct. 
A)  labor. 
B)  capital. 
C)  land. 
D)  entrepreneurship. 
E)  Answers B and D are correct.

Question 5

Are the short-run average total cost curve and the long-run average cost both U-shaped for the same reasons? If so,carefully explain these reasons.If not,explain why each curve is U-shaped.

Accepted Answer

The curves are U-shaped for quite differ

Question 6

$$\begin{array}{l}
\text { Output }\
\begin{array} { c c } 
\begin{array} { c } 
\text { (gallons of ice } \
\text { cream per hour) }
\end{array} & \begin{array} { c } 
\text { Total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 1 \
1 & 2 \
2 & 3 \
3 & 5 \
4 & 8 \
5 & 11
\end{array}
\end{array}$$
-The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table.Based on the table,which of the following is correct?

Accepted Answer

A)  The total fixed cost is $1. 
B)  The average fixed cost of 1 gallon is $1.00. 
C)  The average variable cost of 2 gallons of ice cream is $1.00 per gallon. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct. 
A)  The total fixed cost is $1. 
B)  The average fixed cost of 1 gallon is $1.00. 
C)  The average variable cost of 2 gallons of ice cream is $1.00 per gallon. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct.

Question 7

The U-shape of the average variable,average total,and marginal cost curves reflects

Accepted Answer

A)  increasing marginal returns. 
B)  decreasing marginal returns. 
C)  both increasing and decreasing marginal returns. 
D)  decreasing marginal product. 
E)  the point that implicit costs become a smaller fraction of total cost as output increases. 
A)  increasing marginal returns. 
B)  decreasing marginal returns. 
C)  both increasing and decreasing marginal returns. 
D)  decreasing marginal product. 
E)  the point that implicit costs become a smaller fraction of total cost as output increases.

Question 8

To produce more output in the short run,a firm must employ more of

Accepted Answer

A)  all its resources. 
B)  its fixed resources. 
C)  its variable resources. 
D)  the least costly resources regardless of whether they are fixed or variable. 
E)  Firms cannot produce more output in the short run. 
A)  all its resources. 
B)  its fixed resources. 
C)  its variable resources. 
D)  the least costly resources regardless of whether they are fixed or variable. 
E)  Firms cannot produce more output in the short run.

Question 9

Average total cost is equal to

Accepted Answer

A)  average fixed cost + average variable cost. 
B)  total cost ÷ quantity. 
C)  the change in total cost when output changes by one unit. 
D)  Answers A and B are correct. 
E)  Answers A and C are correct. 
A)  average fixed cost + average variable cost. 
B)  total cost ÷ quantity. 
C)  the change in total cost when output changes by one unit. 
D)  Answers A and B are correct. 
E)  Answers A and C are correct.

Question 10

As we observe the cost curves graph,we see that the

Accepted Answer

A)  MC curve intersects the ATC curve at its maximum. 
B)  MC curve cannot be U-shaped. 
C)  ATC curve always has a negative slope. 
D)  MC curve intersects the AVC curve and ATC curve at their minimums. 
E)  MC constantly falls as output increases. 
A)  MC curve intersects the ATC curve at its maximum. 
B)  MC curve cannot be U-shaped. 
C)  ATC curve always has a negative slope. 
D)  MC curve intersects the AVC curve and ATC curve at their minimums. 
E)  MC constantly falls as output increases.

Question 11

The portion of the long-run average cost curve in which economies of scale are experienced shows that as output increases,the

Accepted Answer

A)  average total cost decreases. 
B)  average total cost increases. 
C)  marginal cost increases. 
D)  marginal cost decreases. 
E)  average variable cost is constant and the average fixed cost decreases. 
A)  average total cost decreases. 
B)  average total cost increases. 
C)  marginal cost increases. 
D)  marginal cost decreases. 
E)  average variable cost is constant and the average fixed cost decreases.

Question 12

Which of the following always decreases when output increases?

Accepted Answer

A)  total fixed cost 
B)  marginal cost 
C)  average variable cost 
D)  average fixed cost 
E)  total cost 
A)  total fixed cost 
B)  marginal cost 
C)  average variable cost 
D)  average fixed cost 
E)  total cost

Question 13

Jeremiah runs a bullfrog farm in Frogville,Oklahoma.Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker.Jeremiah must be

Accepted Answer

A)  experiencing increasing marginal returns to labor. 
B)  producing at a point where the average product of labor decreases as more workers are employed. 
C)  producing at a point below his total product curve. 
D)  mistaken because the law of decreasing returns points out that it cannot be the case that the marginal product increases as more workers are employed. 
E)  producing at a point where the average product of labor exceeds the marginal product of labor. 
A)  experiencing increasing marginal returns to labor. 
B)  producing at a point where the average product of labor decreases as more workers are employed. 
C)  producing at a point below his total product curve. 
D)  mistaken because the law of decreasing returns points out that it cannot be the case that the marginal product increases as more workers are employed. 
E)  producing at a point where the average product of labor exceeds the marginal product of labor.

Question 14

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (lawns mowed per hour) }
\end{array} \
\hline 0 & 0 \
1 & 2 \
2 & 5 \
3 & 8 \
4 & 15 \
5 & 22 \
6 & 26 \
7 & 28
\end{array}$$
-The table above shows the total product schedule for Rick's Lawn Service,a yard care company.The total product schedule shows

Accepted Answer

A)  increasing marginal returns when the 6th worker is hired. 
B)  decreasing marginal returns when the 1st worker is hired. 
C)  first increasing and then decreasing marginal returns. 
D)  output first increases then increases. 
E)  only decreasing marginal returns. 
A)  increasing marginal returns when the 6th worker is hired. 
B)  decreasing marginal returns when the 1st worker is hired. 
C)  first increasing and then decreasing marginal returns. 
D)  output first increases then increases. 
E)  only decreasing marginal returns.

Question 15

Average total cost equals

Accepted Answer

A)  marginal cost divided by output. 
B)  average fixed cost plus average variable cost. 
C)  total fixed cost plus total variable cost. 
D)  marginal cost plus opportunity cost. 
E)  marginal cost multiplied by the quantity of output. 
A)  marginal cost divided by output. 
B)  average fixed cost plus average variable cost. 
C)  total fixed cost plus total variable cost. 
D)  marginal cost plus opportunity cost. 
E)  marginal cost multiplied by the quantity of output.

Question 16

When a firm becomes so large it is difficult to coordinate and control,it is most likely that

Accepted Answer

A)  economies of scale have begun. 
B)  diseconomies of scale have begun. 
C)  average total cost begins to fall. 
D)  long-run average costs become negative. 
E)  there are increasing marginal returns to increasing the firm's plant size. 
A)  economies of scale have begun. 
B)  diseconomies of scale have begun. 
C)  average total cost begins to fall. 
D)  long-run average costs become negative. 
E)  there are increasing marginal returns to increasing the firm's plant size.

Question 17

The marginal product of labor equals the change in ________ from a one-unit increase in the quantity of labor.

Accepted Answer

A)  total product 
B)  average product 
C)  total cost 
D)  the slope of the average product curve 
E)  the wage rate 
A)  total product 
B)  average product 
C)  total cost 
D)  the slope of the average product curve 
E)  the wage rate

Question 18

If another worker is hired with a marginal product greater than the previously hired worker,which of the following will be true?

Accepted Answer

A)  total costs will decrease 
B)  fixed costs will decrease 
C)  marginal cost will increase 
D)  marginal cost will decrease 
E)  average fixed costs will increase 
A)  total costs will decrease 
B)  fixed costs will decrease 
C)  marginal cost will increase 
D)  marginal cost will decrease 
E)  average fixed costs will increase

Question 19

The return to entrepreneurship is known as

Accepted Answer

A)  economic profit. 
B)  normal profit. 
C)  opportunity revenue. 
D)  normal revenue. 
E)  explicit profit. 
A)  economic profit. 
B)  normal profit. 
C)  opportunity revenue. 
D)  normal revenue. 
E)  explicit profit.

Question 20

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

Accepted Answer

A)  0 and 1000 
B)  1000 and 3000 
C)  3000 and 4000 
D)  4000 and 4500 
E)  None of the above answers is correct. 
A)  0 and 1000 
B)  1000 and 3000 
C)  3000 and 4000 
D)  4000 and 4500 
E)  None of the above answers is correct.

Which of the following statements is true?

The figure above shows a firm's average total cost and marginal cost curves. -Based on the figure above,the firm's marginal product curve slopes upward at levels of output between and the firm's average product curve slopes upward at levels of output between .

In economics,a "normal profit" is the return to

Are the short-run average total cost curve and the long-run average cost both U-shaped for the same reasons? If so,carefully explain these reasons.If not,explain why each curve is U-shaped.

Output (gallons of ice cream per hour) Total cost (dollars) 0 1 1 2 2 3 3 5 4 8 5 11 -The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table.Based on the table,which of the following is correct?

The U-shape of the average variable,average total,and marginal cost curves reflects

To produce more output in the short run,a firm must employ more of

Average total cost is equal to

As we observe the cost curves graph,we see that the

The portion of the long-run average cost curve in which economies of scale are experienced shows that as output increases,the

Which of the following always decreases when output increases?

Jeremiah runs a bullfrog farm in Frogville,Oklahoma.Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker.Jeremiah must be

Quantity of labor (workers) Total product (lawns mowed per hour) 0 0 1 2 2 5 3 8 4 15 5 22 6 26 7 28 -The table above shows the total product schedule for Rick's Lawn Service,a yard care company.The total product schedule shows

Average total cost equals

When a firm becomes so large it is difficult to coordinate and control,it is most likely that

The marginal product of labor equals the change in ________ from a one-unit increase in the quantity of labor.

If another worker is hired with a marginal product greater than the previously hired worker,which of the following will be true?

The return to entrepreneurship is known as

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

Which of the following statements is true?

The figure above shows a firm's average total cost and marginal cost curves. -Based on the figure above,the firm's marginal product curve slopes upward at levels of output between ________ and the firm's average product curve slopes upward at levels of output between ________.

In economics,a "normal profit" is the return to

Are the short-run average total cost curve and the long-run average cost both U-shaped for the same reasons? If so,carefully explain these reasons.If not,explain why each curve is U-shaped.

Output (gallons of ice cream per hour) Total cost (dollars) 0 1 1 2 2 3 3 5 4 8 5 11 -The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table.Based on the table,which of the following is correct?

The U-shape of the average variable,average total,and marginal cost curves reflects

To produce more output in the short run,a firm must employ more of

Average total cost is equal to

As we observe the cost curves graph,we see that the

The portion of the long-run average cost curve in which economies of scale are experienced shows that as output increases,the

Which of the following always decreases when output increases?

Jeremiah runs a bullfrog farm in Frogville,Oklahoma.Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker.Jeremiah must be

Quantity of labor (workers) Total product (lawns mowed per hour) 0 0 1 2 2 5 3 8 4 15 5 22 6 26 7 28 -The table above shows the total product schedule for Rick's Lawn Service,a yard care company.The total product schedule shows

Average total cost equals

When a firm becomes so large it is difficult to coordinate and control,it is most likely that

The marginal product of labor equals the change in ________ from a one-unit increase in the quantity of labor.

If another worker is hired with a marginal product greater than the previously hired worker,which of the following will be true?

The return to entrepreneurship is known as

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

The figure above shows a firm's average total cost and marginal cost curves. -Based on the figure above,the firm's marginal product curve slopes upward at levels of output between and the firm's average product curve slopes upward at levels of output between .