Question 1

Which of the following must always be true as the quantity of output increases?

Accepted Answer

A) Marginal cost must rise. 
B) Average total cost must rise. 
C) Average variable cost must rise. 
D) Average fixed cost must fall. 
A) Marginal cost must rise. 
B) Average total cost must rise. 
C) Average variable cost must rise. 
D) Average fixed cost must fall.

Question 2

Table 13-9
  
-Refer to Table 13-9.What is average variable cost when output is 50 units?

Accepted Answer

A) $3.60 
B) $4.00 
C) $4.40 
D) $4.80 
A) $3.60 
B) $4.00 
C) $4.40 
D) $4.80

Question 3

John owns a shoe-shine business.His accountant most likely includes which of the following costs on his financial statements?

Accepted Answer

A) wages John could earn washing windows 
B) dividends John's money was earning in the stock market before John sold his stock and bought a shoe-shine booth 
C) the cost of shoe polish 
D) Both b and c are correct. 
A) wages John could earn washing windows 
B) dividends John's money was earning in the stock market before John sold his stock and bought a shoe-shine booth 
C) the cost of shoe polish 
D) Both b and c are correct.

Question 4

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False

Question 5

The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.

Accepted Answer

A) True 
 B)False

Question 6

The long-run average total cost curve is always

Accepted Answer

A) flatter than the short-run average total cost curve, but not necessarily horizontal. 
B) horizontal. 
C) falling as output increases. 
D) rising as output increases. 
A) flatter than the short-run average total cost curve, but not necessarily horizontal. 
B) horizontal. 
C) falling as output increases. 
D) rising as output increases.

Question 7

Some costs do not vary with the quantity of output produced.Those costs are called

Accepted Answer

A) marginal costs. 
B) average costs. 
C) fixed costs. 
D) incurred costs. 
A) marginal costs. 
B) average costs. 
C) fixed costs. 
D) incurred costs.

Question 8

The difference between accounting profit and economic profit relates to

Accepted Answer

A) the manner in which revenues are defined. 
B) how total revenue is calculated. 
C) the manner in which costs are defined. 
D) the price of the good in the market. 
A) the manner in which revenues are defined. 
B) how total revenue is calculated. 
C) the manner in which costs are defined. 
D) the price of the good in the market.

Question 9

At Bert's Bootery,the total cost of producing twenty pairs of boots is $400.The marginal cost of producing the twenty-first pair of boots is $83.We can conclude that the average

Accepted Answer

A) variable cost of 21 pairs of boots is $23. 
B) total cost of 21 pairs of boots is $23. 
C) total cost of 21 pairs of boots is $15.09. 
D) total cost of 21 pairs of boots cannot be calculated from the information given. 
A) variable cost of 21 pairs of boots is $23. 
B) total cost of 21 pairs of boots is $23. 
C) total cost of 21 pairs of boots is $15.09. 
D) total cost of 21 pairs of boots cannot be calculated from the information given.

Question 10

At what level of output will average variable cost equal average total cost?

Accepted Answer

A) When marginal cost equals average total cost 
B) For all levels of output in which average variable cost is falling 
C) When marginal cost equals average variable cost 
D) There is no level of output where this occurs, as long as fixed costs are positive. 
A) When marginal cost equals average total cost 
B) For all levels of output in which average variable cost is falling 
C) When marginal cost equals average variable cost 
D) There is no level of output where this occurs, as long as fixed costs are positive.

Question 11

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA).Johnny's cumulative GPA will be better next semester if he (i)	performs better than he did last semester.
(ii.	performs better than his cumulative GPA.
(iii)	gives an average performance.

Accepted Answer

A) (ii) only 
B) (iii) only 
C) (i) and (ii) 
D) (ii) and (iii) 
A) (ii) only 
B) (iii) only 
C) (i) and (ii) 
D) (ii) and (iii)

Question 12

Constant returns to scale occur when

Accepted Answer

A) long-run total costs are constant as output increases. 
B) long-run average total costs are constant as output increases. 
C) the firm's long-run average cost curve is falling as output increases. 
D) the firm's long-run average cost curve is rising as output increases. 
A) long-run total costs are constant as output increases. 
B) long-run average total costs are constant as output increases. 
C) the firm's long-run average cost curve is falling as output increases. 
D) the firm's long-run average cost curve is rising as output increases.

Question 13

A total-cost curve shows the relationship between the

Accepted Answer

A) quantity of an input used and the total cost of production. 
B) quantity of output produced and the total cost of production. 
C) total cost of production and profit. 
D) total cost of production and total revenue. 
A) quantity of an input used and the total cost of production. 
B) quantity of output produced and the total cost of production. 
C) total cost of production and profit. 
D) total cost of production and total revenue.

Question 14

The average fixed cost curve

Accepted Answer

A) always declines with increased levels of output. 
B) always rises with increased levels of output. 
C) declines as long as it is above marginal cost. 
D) declines as long as it is below marginal cost. 
A) always declines with increased levels of output. 
B) always rises with increased levels of output. 
C) declines as long as it is above marginal cost. 
D) declines as long as it is below marginal cost.

Question 15

Bob Edwards owns a bagel shop.Bob hires an economist who assesses the shape of the bagel shop's average total cost (ATC)curve as a function of the number of bagels produced.The results indicate a U-shaped average total cost curve.Bob's economist explains that ATC is U-shaped for two reasons.The first is the existence of diminishing marginal product,which causes it to rise.What would be the second reason? Assume that the marginal cost curve is linear.(Hint: The second reason relates to average fixed cost)

Accepted Answer

Average fixed cost always decl

Question 16

Consider the following information about baseball production at Bob's Baseball Factory:  
Bob pays all his workers the same wage and labor is his only variable cost.From this information we can conclude that Bob's average variable cost decreases

Accepted Answer

A) as output rises from 0 to 10, but rises after that. 
B) as output rises from 0 to 26, but rises after that. 
C) as output rises from 0 to 33, but increases after that. 
D) continually as output rises. 
A) as output rises from 0 to 10, but rises after that. 
B) as output rises from 0 to 26, but rises after that. 
C) as output rises from 0 to 33, but increases after that. 
D) continually as output rises.

Question 17

Table 13-9
  
-Refer to Table 13-9.What is average fixed cost when output is 40 units?

Accepted Answer

A) $1.00 
B) $3.32 
C) $5.00 
D) $8.00 
A) $1.00 
B) $3.32 
C) $5.00 
D) $8.00

Question 18

Table 13-7
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.
  
-Refer to Table 13-7.What is the marginal cost of creating the tenth instructional module in a given month?

Accepted Answer

A) $900 
B) $1,250 
C) $2,500 
D) $3,060 
A) $900 
B) $1,250 
C) $2,500 
D) $3,060

Question 19

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Accepted Answer

A) The $20 million payment that the firm pays each year for accounting services 
B) The cost of the steel that is used in producing automobiles 
C) The rent that the firm pays for office space in a suburb of St.Louis 
D) All of the above are correct. 
A) The $20 million payment that the firm pays each year for accounting services 
B) The cost of the steel that is used in producing automobiles 
C) The rent that the firm pays for office space in a suburb of St.Louis 
D) All of the above are correct.

Question 20

To an economist,the field of industrial organization answers which of the following questions?

Accepted Answer

A) Why are consumers subject to the law of demand? 
B) Why do firms experience falling marginal product of labor? 
C) How does the difference in the number of firms affect prices and the efficiency of market outcomes? 
D) Why do firms consider production costs when determining product supply? 
A) Why are consumers subject to the law of demand? 
B) Why do firms experience falling marginal product of labor? 
C) How does the difference in the number of firms affect prices and the efficiency of market outcomes? 
D) Why do firms consider production costs when determining product supply?

Exam 13: The Costs of Production

Which of the following must always be true as the quantity of output increases?

Table 13-9 -Refer to Table 13-9.What is average variable cost when output is 50 units?

John owns a shoe-shine business.His accountant most likely includes which of the following costs on his financial statements?

The cost of producing an additional unit of a good is not the same as the average cost of the good.

The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.

The long-run average total cost curve is always

Some costs do not vary with the quantity of output produced.Those costs are called

The difference between accounting profit and economic profit relates to

At Bert's Bootery,the total cost of producing twenty pairs of boots is $400.The marginal cost of producing the twenty-first pair of boots is $83.We can conclude that the average

At what level of output will average variable cost equal average total cost?

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA).Johnny's cumulative GPA will be better next semester if he (i) performs better than he did last semester. (ii. performs better than his cumulative GPA. (iii) gives an average performance.

Constant returns to scale occur when

A total-cost curve shows the relationship between the

The average fixed cost curve

Consider the following information about baseball production at Bob's Baseball Factory: Bob pays all his workers the same wage and labor is his only variable cost.From this information we can conclude that Bob's average variable cost decreases

Table 13-9 -Refer to Table 13-9.What is average fixed cost when output is 40 units?

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

To an economist,the field of industrial organization answers which of the following questions?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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