Question 1

Last month,Sally spent $3,000 in repairing her old car.Now her car requires an additional $2,000 in repairs.She could get a comparable car for $2,500.She should

Accepted Answer

A) repair her car because the money she has already spent repairing the car ($3,000)exceeds the price of the new car ($2,500) 
B) buy a new car because sunk costs should be ignored in decision making 
C) buy a new car because the price of the new car ($2,500)is less than the total amount she would spend on her current car ($5,000) 
D) repair her car since the cost of repairing it is lower than the cost of buying another car 
E) repair the car or buy a comparable one because the opportunity costs are the same 
A) repair her car because the money she has already spent repairing the car ($3,000)exceeds the price of the new car ($2,500) 
B) buy a new car because sunk costs should be ignored in decision making 
C) buy a new car because the price of the new car ($2,500)is less than the total amount she would spend on her current car ($5,000) 
D) repair her car since the cost of repairing it is lower than the cost of buying another car 
E) repair the car or buy a comparable one because the opportunity costs are the same

Question 2

If minimum efficient scale is small relative to the maximum potential market,

Accepted Answer

A) relatively large firms will have a cost advantage over relatively small firms 
B) the market price will be low 
C) relatively small firms will have a cost advantage over relatively large firms 
D) the market price will be high 
E) only one firm will survive in the long run. 
A) relatively large firms will have a cost advantage over relatively small firms 
B) the market price will be low 
C) relatively small firms will have a cost advantage over relatively large firms 
D) the market price will be high 
E) only one firm will survive in the long run.

Question 3

The vertical distance between a firm's total cost curve and its total variable cost curve

Accepted Answer

A) is zero 
B) is negative when the firm incurs fixed costs in the short run 
C) represents total fixed costs 
D) represents marginal costs 
E) represents average fixed costs 
A) is zero 
B) is negative when the firm incurs fixed costs in the short run 
C) represents total fixed costs 
D) represents marginal costs 
E) represents average fixed costs

Question 4

The "short run" may vary in length from industry to industry.

Accepted Answer

A) True 
 B)False

Question 5

A lumpy input is one that

Accepted Answer

A) is infinitely divisible 
B) is not smooth 
C) can only be adjusted in large amounts 
D) can not be legally employed 
E) can be easily adjusted in small amounts 
A) is infinitely divisible 
B) is not smooth 
C) can only be adjusted in large amounts 
D) can not be legally employed 
E) can be easily adjusted in small amounts

Question 6

-For the total product curve shown in Figure 7-3,the marginal product of hiring the fifth unit of labor is

Accepted Answer

A) 200 
B) 50 
C) 20 
D) 1,000 
E) 1 
A) 200 
B) 50 
C) 20 
D) 1,000 
E) 1

Question 7

The Marginal Cost curve will

Accepted Answer

A) cut ATC at the minimum of ATC but cut AVC at a point to the left of the minimum of AVC. 
B) cut ATC at the minimum of ATC but cut AVC at a point to the right of the minimum of AVC. 
C) cut AVC at the minimum of AVC but cut ATC at a point to the left of the minimum of ATC. 
D) cut AVC at the minimum of AVC but cut ATC at a point to the right of the minimum of ATC. 
E) cut both ATC and AVC at their respective minimums 
A) cut ATC at the minimum of ATC but cut AVC at a point to the left of the minimum of AVC. 
B) cut ATC at the minimum of ATC but cut AVC at a point to the right of the minimum of AVC. 
C) cut AVC at the minimum of AVC but cut ATC at a point to the left of the minimum of ATC. 
D) cut AVC at the minimum of AVC but cut ATC at a point to the right of the minimum of ATC. 
E) cut both ATC and AVC at their respective minimums

Question 8

Variable costs are

Accepted Answer

A) the same as sunk costs 
B) irrelevant to decision making,because they are sunk 
C) the costs of inputs that vary with the level of production 
D) the costs of inputs that do not vary with the level of production 
E) the additional total cost associated with producing an additional unit of output 
A) the same as sunk costs 
B) irrelevant to decision making,because they are sunk 
C) the costs of inputs that vary with the level of production 
D) the costs of inputs that do not vary with the level of production 
E) the additional total cost associated with producing an additional unit of output

Question 9

Average variable 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) TVC / quantity of output 
E) AFC + AVC 
A) the change in cost as output decreases 
B) the change in cost as output increases 
C) TC / quantity of output 
D) TVC / quantity of output 
E) AFC + AVC

Question 10

If the physical plant for a corporation is considered to be a fixed input,then

Accepted Answer

A) it is held constant in the long run 
B) it can be changed in the long run 
C) labor must be a variable input 
D) technology must be changing 
E) the firm will lose money in the short run,except under perfect competition 
A) it is held constant in the long run 
B) it can be changed in the long run 
C) labor must be a variable input 
D) technology must be changing 
E) the firm will lose money in the short run,except under perfect competition

Question 11

In comparing long-run and short-run costs,which of the following statements is true at each level of output?

Accepted Answer

A) long-run total cost is always less than short-run total costs 
B) long-run total cost cannot exceed short-run total cost 
C) long-run and short-run total costs are equal when fixed costs are large 
D) firms usually make decisions about production levels based on long-run costs rather than short-run costs 
E) short-run total cost cannot exceed long-run total cost 
A) long-run total cost is always less than short-run total costs 
B) long-run total cost cannot exceed short-run total cost 
C) long-run and short-run total costs are equal when fixed costs are large 
D) firms usually make decisions about production levels based on long-run costs rather than short-run costs 
E) short-run total cost cannot exceed long-run total cost

Question 12

Which of the following formulas is not correct?

Accepted Answer

A) ATC = AVC + (TFC/Q) 
B) TVC = TC/Q 
C) TC = TFC + TVC 
D) AFC = TFC/Q 
E) TVC = AVC × Q 
A) ATC = AVC + (TFC/Q) 
B) TVC = TC/Q 
C) TC = TFC + TVC 
D) AFC = TFC/Q 
E) TVC = AVC × Q

Question 13

Which of the following is irrelevant when deciding whether to undertake an action?

Accepted Answer

A) opportunity costs 
B) implicit costs 
C) sunk costs 
D) implicit costs and explicit costs 
E) fixed costs and implicit costs 
A) opportunity costs 
B) implicit costs 
C) sunk costs 
D) implicit costs and explicit costs 
E) fixed costs and implicit costs

Question 14

Which of the following always decreases as output increases?

Accepted Answer

A) ATC 
B) MC 
C) AFC 
D) TC 
E) TVC 
A) ATC 
B) MC 
C) AFC 
D) TC 
E) TVC

Question 15

As a firm increases its output in the short run,

Accepted Answer

A) it also varies its technology 
B) it increases all of its inputs 
C) it increases its plant size 
D) it increases only one of its inputs 
E) at least one of its inputs is fixed 
A) it also varies its technology 
B) it increases all of its inputs 
C) it increases its plant size 
D) it increases only one of its inputs 
E) at least one of its inputs is fixed

Question 16

In the short run,

Accepted Answer

A) at least one of the firm's inputs is fixed 
B) customer tastes and preferences are fixed 
C) the firm may vary all inputs 
D) sunk costs are variable 
E) government intervention is inevitable 
A) at least one of the firm's inputs is fixed 
B) customer tastes and preferences are fixed 
C) the firm may vary all inputs 
D) sunk costs are variable 
E) government intervention is inevitable

Question 17

A corporation has been steadily losing money on one of its product lines.The factory used to produce that brand cost $20 million to build.The firm now is considering an offer to buy that factory for $15 million.Which of the following statements about the decision to sell or not is correct?

Accepted Answer

A) The firm should turn down the purchase offer because the factory cost more than $15 million to build. 
B) The $20 million spent on the factory is a sunk cost that should not affect the decision. 
C) The $20 million spent on the factory is an implicit cost that should be included in the decision. 
D) The firm should sell the factory only if it can reduce its costs elsewhere by $5 million. 
E) The firm's opportunity cost would be $35 million if it decides to sell the factory. 
A) The firm should turn down the purchase offer because the factory cost more than $15 million to build. 
B) The $20 million spent on the factory is a sunk cost that should not affect the decision. 
C) The $20 million spent on the factory is an implicit cost that should be included in the decision. 
D) The firm should sell the factory only if it can reduce its costs elsewhere by $5 million. 
E) The firm's opportunity cost would be $35 million if it decides to sell the factory.

Question 18

-Figure 7-6 shows the total cost for six different levels of output for a particular firm.Total fixed cost (TFC)if five units of output are produced is

Accepted Answer

A) $1,700 
B) $540 
C) $1,000 
D) $100 
E) $2,700 
A) $1,700 
B) $540 
C) $1,000 
D) $100 
E) $2,700

Question 19

Along its long-run total cost curve,a firm is producing

Accepted Answer

A) at the output level for each plant size that has the lowest cost 
B) at the minimum points of its various total cost curves 
C) each level of output using the input mix that has the lowest cost 
D) each level of output using the fewest possible inputs 
E) at the output level for each plant size that uses the fewest possible inputs 
A) at the output level for each plant size that has the lowest cost 
B) at the minimum points of its various total cost curves 
C) each level of output using the input mix that has the lowest cost 
D) each level of output using the fewest possible inputs 
E) at the output level for each plant size that uses the fewest possible inputs

Question 20

At a firm's current output level of 200 units per week,it has 10 employees at a weekly wage of $500 each.Raw materials,which are ordered and delivered daily,cost $1,000 per week.The weekly cost of the firm's capital is $1,250.Which of the following statements is correct?

Accepted Answer

A) Total variable cost is $5,000;total fixed cost is $2,250;total cost is $7,250. 
B) Total variable cost is $6,000;total fixed cost is $1,250;total cost is $7,250. 
C) Total variable cost is $1,250;total fixed cost is $6,000;total cost is $7,250. 
D) Total variable cost is $2,250;total fixed cost is $500;total cost is $2,750. 
E) Total variable cost is $1,500;total fixed cost is $1,250;total cost is $2,750. 
A) Total variable cost is $5,000;total fixed cost is $2,250;total cost is $7,250. 
B) Total variable cost is $6,000;total fixed cost is $1,250;total cost is $7,250. 
C) Total variable cost is $1,250;total fixed cost is $6,000;total cost is $7,250. 
D) Total variable cost is $2,250;total fixed cost is $500;total cost is $2,750. 
E) Total variable cost is $1,500;total fixed cost is $1,250;total cost is $2,750.

Last month,Sally spent $3,000 in repairing her old car.Now her car requires an additional $2,000 in repairs.She could get a comparable car for $2,500.She should

If minimum efficient scale is small relative to the maximum potential market,

The vertical distance between a firm's total cost curve and its total variable cost curve

The "short run" may vary in length from industry to industry.

A lumpy input is one that

-For the total product curve shown in Figure 7-3,the marginal product of hiring the fifth unit of labor is

The Marginal Cost curve will

Variable costs are

Average variable cost is

If the physical plant for a corporation is considered to be a fixed input,then

In comparing long-run and short-run costs,which of the following statements is true at each level of output?

Which of the following formulas is not correct?

Which of the following is irrelevant when deciding whether to undertake an action?

Which of the following always decreases as output increases?

As a firm increases its output in the short run,

In the short run,

A corporation has been steadily losing money on one of its product lines.The factory used to produce that brand cost $20 million to build.The firm now is considering an offer to buy that factory for $15 million.Which of the following statements about the decision to sell or not is correct?

-Figure 7-6 shows the total cost for six different levels of output for a particular firm.Total fixed cost (TFC)if five units of output are produced is

Along its long-run total cost curve,a firm is producing

At a firm's current output level of 200 units per week,it has 10 employees at a weekly wage of $500 each.Raw materials,which are ordered and delivered daily,cost $1,000 per week.The weekly cost of the firm's capital is $1,250.Which of the following statements is correct?

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

Last month,Sally spent $3,000 in repairing her old car.Now her car requires an additional $2,000 in repairs.She could get a comparable car for $2,500.She should

If minimum efficient scale is small relative to the maximum potential market,

The vertical distance between a firm's total cost curve and its total variable cost curve

The "short run" may vary in length from industry to industry.

A lumpy input is one that

-For the total product curve shown in Figure 7-3,the marginal product of hiring the fifth unit of labor is

The Marginal Cost curve will

Variable costs are

Average variable cost is

If the physical plant for a corporation is considered to be a fixed input,then

In comparing long-run and short-run costs,which of the following statements is true at each level of output?

Which of the following formulas is not correct?

Which of the following is irrelevant when deciding whether to undertake an action?

Which of the following always decreases as output increases?

As a firm increases its output in the short run,

In the short run,

A corporation has been steadily losing money on one of its product lines.The factory used to produce that brand cost $20 million to build.The firm now is considering an offer to buy that factory for $15 million.Which of the following statements about the decision to sell or not is correct?

-Figure 7-6 shows the total cost for six different levels of output for a particular firm.Total fixed cost (TFC)if five units of output are produced is

Along its long-run total cost curve,a firm is producing

At a firm's current output level of 200 units per week,it has 10 employees at a weekly wage of $500 each.Raw materials,which are ordered and delivered daily,cost $1,000 per week.The weekly cost of the firm's capital is $1,250.Which of the following statements is correct?

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