Question 1

In many markets for personal services (such as shoe repair or lawn care)with low start-up costs,

Accepted Answer

A) production exhibits constant returns to scale 
B) economies of scale are exhausted rapidly 
C) economies of scale are exhausted slowly 
D) economies of scale are never exhausted 
E) there are only short-run costs,no long-run costs 
A) production exhibits constant returns to scale 
B) economies of scale are exhausted rapidly 
C) economies of scale are exhausted slowly 
D) economies of scale are never exhausted 
E) there are only short-run costs,no long-run costs

Question 2

If marginal cost is greater than average total cost then

Accepted Answer

A) profits are increasing 
B) economies of scale are becoming greater 
C) average total cost remains constant 
D) average total cost is increasing 
E) average total cost is decreasing 
A) profits are increasing 
B) economies of scale are becoming greater 
C) average total cost remains constant 
D) average total cost is increasing 
E) average total cost is decreasing

Question 3

When firms become so large that they have to add additional layers of management and decision making becomes more cumbersome,

Accepted Answer

A) economies of scale are said to occur 
B) marginal cost begins to fall in the short run 
C) marginal cost begins to rise in the short run 
D) the long-run average total cost curve is flat 
E) the long-run average total cost curve slopes upward 
A) economies of scale are said to occur 
B) marginal cost begins to fall in the short run 
C) marginal cost begins to rise in the short run 
D) the long-run average total cost curve is flat 
E) the long-run average total cost curve slopes upward

Question 4

If a firm is experiencing constant returns to scale

Accepted Answer

A) long-run average total cost neither rises nor falls as production increases 
B) average fixed cost is zero 
C) the increase in average variable cost is exactly offset by a decrease in average fixed cost 
D) the decrease in average variable cost is exactly offset by an increase in average fixed cost 
E) long-run average total cost is zero. 
A) long-run average total cost neither rises nor falls as production increases 
B) average fixed cost is zero 
C) the increase in average variable cost is exactly offset by a decrease in average fixed cost 
D) the decrease in average variable cost is exactly offset by an increase in average fixed cost 
E) long-run average total cost is zero.

Question 5

Consider a firm that needs one day to hire more labor,one week to increase its purchases of raw materials,and three months to change the amount of its capital.This firm's long run is

Accepted Answer

A) three months 
B) one week 
C) one day 
D) three months plus eight days 
E) three months plus one week 
A) three months 
B) one week 
C) one day 
D) three months plus eight days 
E) three months plus one week

Question 6

-In Figure 7-4,marginal product of labor is diminishing for levels of employment

Accepted Answer

A) between 0 and 35 workers 
B) equal to 35 workers 
C) between 35 and 80 workers 
D) greater than 80 workers 
E) none of the above 
A) between 0 and 35 workers 
B) equal to 35 workers 
C) between 35 and 80 workers 
D) greater than 80 workers 
E) none of the above

Question 7

In the short run,costs that arise from resources that cannot vary in quantity are known as ____________,whereas costs from inputs that can vary in quantity are known as ____________.

Accepted Answer

A) fixed costs;variable costs 
B) explicit costs;implicit costs 
C) opportunity costs;variable costs 
D) fixed costs;opportunity costs 
E) variable costs;fixed costs 
A) fixed costs;variable costs 
B) explicit costs;implicit costs 
C) opportunity costs;variable costs 
D) fixed costs;opportunity costs 
E) variable costs;fixed costs

Question 8

Fixed inputs are those whose

Accepted Answer

A) quantity changes as the level of output changes 
B) costs are irreversible 
C) quantity remains constant regardless of the level of output 
D) quantity determines the level of profit 
E) appearance was damaged while being transported,but has been fixed 
A) quantity changes as the level of output changes 
B) costs are irreversible 
C) quantity remains constant regardless of the level of output 
D) quantity determines the level of profit 
E) appearance was damaged while being transported,but has been fixed

Question 9

Average total cost is

Accepted Answer

A) the change in cost as output decreases 
B) the change in cost as output increases 
C) TC / quantity of output 
D) MC - TC 
E) AVC - AFC 
A) the change in cost as output decreases 
B) the change in cost as output increases 
C) TC / quantity of output 
D) MC - TC 
E) AVC - AFC

Question 10

Total cost is

Accepted Answer

A) fixed cost plus variable cost 
B) irrelevant to decision making 
C) marginal cost plus fixed cost 
D) total product minus total input 
E) the additional cost associated with producing an additional unit 
A) fixed cost plus variable cost 
B) irrelevant to decision making 
C) marginal cost plus fixed cost 
D) total product minus total input 
E) the additional cost associated with producing an additional unit

Question 11

The change in total output when one additional unit of labor is hired is known as the

Accepted Answer

A) capacity utilization rate 
B) average product of labor 
C) marginal product of labor 
D) total product of labor 
E) marginal output of labor 
A) capacity utilization rate 
B) average product of labor 
C) marginal product of labor 
D) total product of labor 
E) marginal output of labor

Question 12

If Papagna's Pizza Parlor knows that the marginal cost of the 500ᵗʰ pizza is $3.00 and that the average total cost of making 499 pizzas is $3.30,then

Accepted Answer

A) average costs are rising at Q = 500 
B) average costs are falling at Q = 500 
C) total costs are falling at Q = 500 
D) average variable costs must be falling 
E) average variable costs must be rising 
A) average costs are rising at Q = 500 
B) average costs are falling at Q = 500 
C) total costs are falling at Q = 500 
D) average variable costs must be falling 
E) average variable costs must be rising

Question 13

If firms in a market have been prohibited from reaching the minimum efficient scale,

Accepted Answer

A) the market is probably perfectly competitive. 
B) the market is probably a monopoly. 
C) mergers will result if the restrictions are eliminated. 
D) the LRATC curve has been shifting upward. 
E) the LRATC curve has been shifting downward. 
A) the market is probably perfectly competitive. 
B) the market is probably a monopoly. 
C) mergers will result if the restrictions are eliminated. 
D) the LRATC curve has been shifting upward. 
E) the LRATC curve has been shifting downward.

Question 14

Sunk costs should be ignored in decision making because they

Accepted Answer

A) increase the cost of the transaction 
B) lead to an increase in the opportunity cost of any decision 
C) have already been paid 
D) often exceed marginal and average costs 
E) are usually negligible when compared with the explicit costs of decisions 
A) increase the cost of the transaction 
B) lead to an increase in the opportunity cost of any decision 
C) have already been paid 
D) often exceed marginal and average costs 
E) are usually negligible when compared with the explicit costs of decisions

Question 15

-In Figure 7-4,marginal product of labor is increasing for levels of employment

Accepted Answer

A) between 0 and 35 workers 
B) equal to 35 workers 
C) between 35 and 80 workers 
D) greater than 80 workers 
E) none of the above 
A) between 0 and 35 workers 
B) equal to 35 workers 
C) between 35 and 80 workers 
D) greater than 80 workers 
E) none of the above

Question 16

If the marginal product of labor is positive and increasing,then the total product of labor curve is

Accepted Answer

A) constant 
B) upward sloping and becoming steeper 
C) downward sloping and becoming flatter 
D) lies above the total cost curve 
E) lies below the total cost curve 
A) constant 
B) upward sloping and becoming steeper 
C) downward sloping and becoming flatter 
D) lies above the total cost curve 
E) lies below the total cost curve

Question 17

Marginal cost is

Accepted Answer

A) the increase in total cost from producing one more unit of output 
B) total variable cost per unit of output 
C) fixed cost per marginal unit 
D) average total cost divided by the quantity of inputs used 
E) total cost per unit of output 
A) the increase in total cost from producing one more unit of output 
B) total variable cost per unit of output 
C) fixed cost per marginal unit 
D) average total cost divided by the quantity of inputs used 
E) total cost per unit of output

Question 18

If a firm increases its output level by 50 percent and,as a result,long-run total cost rises by 40 percent,the firm is experiencing

Accepted Answer

A) diseconomies of scale 
B) constant returns to scale 
C) economies of scale 
D) increasing marginal returns 
E) diminishing marginal returns 
A) diseconomies of scale 
B) constant returns to scale 
C) economies of scale 
D) increasing marginal returns 
E) diminishing marginal returns

Question 19

-Figure 7-8 shows three different cost curves,labeled A,B,and C.Which of these curves is most likely to represent marginal cost?

Accepted Answer

A) curve A 
B) curve B 
C) curve C 
D) neither A,B,nor C 
E) cannot be determined without more information 
A) curve A 
B) curve B 
C) curve C 
D) neither A,B,nor C 
E) cannot be determined without more information

Question 20

Samantha has been working for a law firm and earning an annual salary of $90,000.She decides to open her own practice.Her annual expenses will include $15,000 for office rent,$3,000 for equipment rental,$1,000 for supplies,$1,200 for utilities,and a $35,000 salary for a secretary/bookkeeper.Samantha will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $1,000.Assuming that there are no additional expenses,Samantha's annual implicit costs will equal

Accepted Answer

A) $55,200 
B) $221,400 
C) $91,000 
D) $146,200 
E) $145,200 
A) $55,200 
B) $221,400 
C) $91,000 
D) $146,200 
E) $145,200

In many markets for personal services (such as shoe repair or lawn care)with low start-up costs,

If marginal cost is greater than average total cost then

When firms become so large that they have to add additional layers of management and decision making becomes more cumbersome,

If a firm is experiencing constant returns to scale

Consider a firm that needs one day to hire more labor,one week to increase its purchases of raw materials,and three months to change the amount of its capital.This firm's long run is

-In Figure 7-4,marginal product of labor is diminishing for levels of employment

In the short run,costs that arise from resources that cannot vary in quantity are known as ,whereas costs from inputs that can vary in quantity are known as .

Fixed inputs are those whose

Average total cost is

Total cost is

The change in total output when one additional unit of labor is hired is known as the

If Papagna's Pizza Parlor knows that the marginal cost of the 500ᵗʰ pizza is $3.00 and that the average total cost of making 499 pizzas is $3.30,then

If firms in a market have been prohibited from reaching the minimum efficient scale,

Sunk costs should be ignored in decision making because they

-In Figure 7-4,marginal product of labor is increasing for levels of employment

If the marginal product of labor is positive and increasing,then the total product of labor curve is

Marginal cost is

If a firm increases its output level by 50 percent and,as a result,long-run total cost rises by 40 percent,the firm is experiencing

-Figure 7-8 shows three different cost curves,labeled A,B,and C.Which of these curves is most likely to represent marginal cost?

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 7: Production and Cost

In many markets for personal services (such as shoe repair or lawn care)with low start-up costs,

If marginal cost is greater than average total cost then

When firms become so large that they have to add additional layers of management and decision making becomes more cumbersome,

If a firm is experiencing constant returns to scale

Consider a firm that needs one day to hire more labor,one week to increase its purchases of raw materials,and three months to change the amount of its capital.This firm's long run is

-In Figure 7-4,marginal product of labor is diminishing for levels of employment

In the short run,costs that arise from resources that cannot vary in quantity are known as ____________,whereas costs from inputs that can vary in quantity are known as ____________.

Fixed inputs are those whose

Average total cost is

Total cost is

The change in total output when one additional unit of labor is hired is known as the

If Papagna's Pizza Parlor knows that the marginal cost of the 500ᵗʰ pizza is $3.00 and that the average total cost of making 499 pizzas is $3.30,then

If firms in a market have been prohibited from reaching the minimum efficient scale,

Sunk costs should be ignored in decision making because they

-In Figure 7-4,marginal product of labor is increasing for levels of employment

If the marginal product of labor is positive and increasing,then the total product of labor curve is

Marginal cost is

If a firm increases its output level by 50 percent and,as a result,long-run total cost rises by 40 percent,the firm is experiencing

-Figure 7-8 shows three different cost curves,labeled A,B,and C.Which of these curves is most likely to represent marginal cost?

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

In the short run,costs that arise from resources that cannot vary in quantity are known as ,whereas costs from inputs that can vary in quantity are known as .