Question 1

A normal profit is

Accepted Answer

A)  part of a firm's opportunity cost. 
B)  equal to total revenue minus total opportunity cost. 
C)  the same as economic profit. 
D)  the same as accounting profit. 
E)  almost always zero if the company is run efficiently. 
A)  part of a firm's opportunity cost. 
B)  equal to total revenue minus total opportunity cost. 
C)  the same as economic profit. 
D)  the same as accounting profit. 
E)  almost always zero if the company is run efficiently.

Question 2

Which of the following variables do you need to know to calculate marginal cost?
i.change in total cost
ii.marginal product of labor
iii.change in quantity of labor used
iv.change in output

Accepted Answer

A)  i and ii 
B)  i and iv 
C)  ii and iv 
D)  i, iii, and iv 
E)  Only ii 
A)  i and ii 
B)  i and iv 
C)  ii and iv 
D)  i, iii, and iv 
E)  Only ii

Question 3

Denise owns a plant that produces watch parts in Ohio.Denise noticed that when she hired the last worker,that worker's marginal product exceeded the marginal product of the previous worker.As a result,when the last worker was hired,Denise's average product of labor

Accepted Answer

A)  decreased. 
B)  increased. 
C)  did not change. 
D)  perhaps changed, but there is not enough information to determine whether or not it did change. 
E)  equals the marginal product of labor. 
A)  decreased. 
B)  increased. 
C)  did not change. 
D)  perhaps changed, but there is not enough information to determine whether or not it did change. 
E)  equals the marginal product of labor.

Question 4

The long-run average cost curve

Accepted Answer

A)  is an upside down U-shape. 
B)  is constructed using the short-run marginal cost curves. 
C)  shows economies and diseconomies of scale. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  is an upside down U-shape. 
B)  is constructed using the short-run marginal cost curves. 
C)  shows economies and diseconomies of scale. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 5

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 6

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 are 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 are correct.

Question 7

The cost that a firm pays in money to hire a resource is referred to as ________ cost.

Accepted Answer

A)  a minimized 
B)  a maximized 
C)  an explicit 
D)  an implicit 
E)  a total 
A)  a minimized 
B)  a maximized 
C)  an explicit 
D)  an implicit 
E)  a total

Question 8

Which of the following is true?

Accepted Answer

A)  Profit as calculated by accountants and economic profit are not necessarily equal. 
B)  Profit as calculated by accountants is always smaller than economic profit. 
C)  Economic profit ignores implicit costs. 
D)  The Internal Revenue Service taxes the firm's economic profit but not its normal profit. 
E)  The Internal Revenue Service taxes the firm's normal profit but not its economic profit. 
A)  Profit as calculated by accountants and economic profit are not necessarily equal. 
B)  Profit as calculated by accountants is always smaller than economic profit. 
C)  Economic profit ignores implicit costs. 
D)  The Internal Revenue Service taxes the firm's economic profit but not its normal profit. 
E)  The Internal Revenue Service taxes the firm's normal profit but not its economic profit.

Question 9

Jay set up his hot dog stand near the business district.His total variable cost includes the

Accepted Answer

A)  annual insurance for the hot dog stand. 
B)  cost of buying the hot dog stand. 
C)  cost of the hot dogs and condiments. 
D)  interest he pays on the funds he borrowed to pay for advertising. 
E)  revenue he gets when he sells his first hot dog each day. 
A)  annual insurance for the hot dog stand. 
B)  cost of buying the hot dog stand. 
C)  cost of the hot dogs and condiments. 
D)  interest he pays on the funds he borrowed to pay for advertising. 
E)  revenue he gets when he sells his first hot dog each day.

Question 10

What are economies of scale? What is the main source of economies of scale?

Accepted Answer

Economies of scale are features of the f

Question 11

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

Accepted Answer

A)  Labor's marginal product has increased. 
B)  Diseconomies of scale were absent in the larger plant. 
C)  The firm's scale initially was so large that it experienced diseconomies of scale. 
D)  The firm's scale initially was too small to experience economies of scale. 
E)  Its long-run marginal cost was smaller with the larger plant than with the smaller plant. 
A)  Labor's marginal product has increased. 
B)  Diseconomies of scale were absent in the larger plant. 
C)  The firm's scale initially was so large that it experienced diseconomies of scale. 
D)  The firm's scale initially was too small to experience economies of scale. 
E)  Its long-run marginal cost was smaller with the larger plant than with the smaller plant.

Question 12

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 is 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 is increasing marginal returns to increasing the firm's plant size.

Question 13

If the average product of labor curve is rising,
i.the average variable cost curve is falling.
ii.the marginal cost curve is definitely falling.
iii.the marginal product curve has reached its maximum.

Accepted Answer

A)  i and iii 
B)  i only 
C)  ii and iii 
D)  i, ii, and iii 
E)  ii only 
A)  i and iii 
B)  i only 
C)  ii and iii 
D)  i, ii, and iii 
E)  ii only

Question 14

Which of the following is an example of an implicit cost?

Accepted Answer

A)  wages paid to employees 
B)  interest paid to a bank on a building loan 
C)  the cost of using capital an owner donates to the business 
D)  dollars paid to a supplier for materials used in production 
E)  liability insurance payments made only once a year 
A)  wages paid to employees 
B)  interest paid to a bank on a building loan 
C)  the cost of using capital an owner donates to the business 
D)  dollars paid to a supplier for materials used in production 
E)  liability insurance payments made only once a year

Question 15

Economies of scale can occur as a result of which of the following?

Accepted Answer

A)  increasing marginal returns as the firm increases its size 
B)  lower fixed cost as the firm increases its size 
C)  management difficulties as the firm increases its size 
D)  greater specialization of labor and capital as the firm increases its size 
E)  increased total cost when the firm increases its size 
A)  increasing marginal returns as the firm increases its size 
B)  lower fixed cost as the firm increases its size 
C)  management difficulties as the firm increases its size 
D)  greater specialization of labor and capital as the firm increases its size 
E)  increased total cost when the firm increases its size

Question 16

The vertical distance between the total cost curve and the total variable cost curve ________ as output increases and the vertical distance between the average total cost curve and average variable cost curve ________ as output increases.

Accepted Answer

A)  is constant; decreases 
B)  decreases; is constant 
C)  increases; decreases 
D)  decreases; increases 
E)  decreases; decreases 
A)  is constant; decreases 
B)  decreases; is constant 
C)  increases; decreases 
D)  decreases; increases 
E)  decreases; decreases

Question 17

Increasing marginal returns occur when the

Accepted Answer

A)  average product of an additional worker is less than the average product of the previous worker. 
B)  marginal product of an additional worker exceeds the marginal product of the previous worker. 
C)  marginal product of labor is less than the average product of labor. 
D)  total output of the firm is at its maximum. 
E)  total product curve is horizontal. 
A)  average product of an additional worker is less than the average product of the previous worker. 
B)  marginal product of an additional worker exceeds the marginal product of the previous worker. 
C)  marginal product of labor is less than the average product of labor. 
D)  total output of the firm is at its maximum. 
E)  total product curve is horizontal.

Question 18

Once production has reached the maximum average product of labor,if production increases then

Accepted Answer

A)  average fixed cost rises. 
B)  total costs decrease. 
C)  total product decreases. 
D)  decreasing marginal returns occur. 
E)  the plant size must be increased. 
A)  average fixed cost rises. 
B)  total costs decrease. 
C)  total product decreases. 
D)  decreasing marginal returns occur. 
E)  the plant size must be increased.

Question 19

In the long run all costs are variable costs.Why?

Accepted Answer

The long run is defined as the time fram

Question 20

If total fixed cost increases,which of the following will NOT change?

Accepted Answer

A)  total cost 
B)  average fixed cost 
C)  marginal cost 
D)  average total cost 
E)  ALL costs increase when total fixed cost increases. 
A)  total cost 
B)  average fixed cost 
C)  marginal cost 
D)  average total cost 
E)  ALL costs increase when total fixed cost increases.

A normal profit is

Which of the following variables do you need to know to calculate marginal cost? i.change in total cost ii.marginal product of labor iii.change in quantity of labor used iv.change in output

Denise owns a plant that produces watch parts in Ohio.Denise noticed that when she hired the last worker,that worker's marginal product exceeded the marginal product of the previous worker.As a result,when the last worker was hired,Denise's average product of labor

The long-run average cost curve

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

The cost that a firm pays in money to hire a resource is referred to as ________ cost.

Which of the following is true?

Jay set up his hot dog stand near the business district.His total variable cost includes the

What are economies of scale? What is the main source of economies of scale?

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

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

If the average product of labor curve is rising, i.the average variable cost curve is falling. ii.the marginal cost curve is definitely falling. iii.the marginal product curve has reached its maximum.

Which of the following is an example of an implicit cost?

Economies of scale can occur as a result of which of the following?

The vertical distance between the total cost curve and the total variable cost curve as output increases and the vertical distance between the average total cost curve and average variable cost curve as output increases.

Increasing marginal returns occur when the

Once production has reached the maximum average product of labor,if production increases then

In the long run all costs are variable costs.Why?

If total fixed cost increases,which of the following will NOT change?

Getting Started

The Usand 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

A normal profit is

Which of the following variables do you need to know to calculate marginal cost? i.change in total cost ii.marginal product of labor iii.change in quantity of labor used iv.change in output

Denise owns a plant that produces watch parts in Ohio.Denise noticed that when she hired the last worker,that worker's marginal product exceeded the marginal product of the previous worker.As a result,when the last worker was hired,Denise's average product of labor

The long-run average cost curve

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

The cost that a firm pays in money to hire a resource is referred to as ________ cost.

Which of the following is true?

Jay set up his hot dog stand near the business district.His total variable cost includes the

What are economies of scale? What is the main source of economies of scale?

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

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

If the average product of labor curve is rising, i.the average variable cost curve is falling. ii.the marginal cost curve is definitely falling. iii.the marginal product curve has reached its maximum.

Which of the following is an example of an implicit cost?

Economies of scale can occur as a result of which of the following?

The vertical distance between the total cost curve and the total variable cost curve ________ as output increases and the vertical distance between the average total cost curve and average variable cost curve ________ as output increases.

Increasing marginal returns occur when the

Once production has reached the maximum average product of labor,if production increases then

In the long run all costs are variable costs.Why?

If total fixed cost increases,which of the following will NOT change?

Getting Started

The Usand 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 vertical distance between the total cost curve and the total variable cost curve as output increases and the vertical distance between the average total cost curve and average variable cost curve as output increases.