Question 1

Which of the following statements is false?

Accepted Answer

A) The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units. 
B) The total variable cost of seven units equals the average variable cost of seven units times seven. 
C) If marginal cost is rising, then average variable cost must be rising. 
D) The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable cost of four units. 
A) The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units. 
B) The total variable cost of seven units equals the average variable cost of seven units times seven. 
C) If marginal cost is rising, then average variable cost must be rising. 
D) The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable cost of four units.

Question 2

If the average total cost curve is falling,what is necessarily true of the marginal cost curve? If the average total cost curve is rising,what is necessarily true of the marginal cost curve?

Accepted Answer

When average total cost curve

Question 3

Average total cost (ATC)is calculated as follows:

Accepted Answer

A) ATC = (change in total cost)/(change in quantity of output). 
B) ATC = (change in total cost)/(change in quantity of input). 
C) ATC = total cost/quantity of output. 
D) ATC = total cost/quantity of input. 
A) ATC = (change in total cost)/(change in quantity of output). 
B) ATC = (change in total cost)/(change in quantity of input). 
C) ATC = total cost/quantity of output. 
D) ATC = total cost/quantity of input.

Question 4

Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own catering business.To buy the necessary equipment,she withdrew $20,000 from her savings,(which paid 3 percent interest)and borrowed $30,000 from her uncle,whom she pays 3 percent interest per year.Last year she paid $25,000 for ingredients and had revenue of $60,000.She asked Louis the accountant and Greg the economist to calculate her profit for her.

Accepted Answer

A) Louis says her profit is $34,100 and Greg says her profit is $6,500. 
B) Louis says her profit is $34,100 and Greg says she lost $6,500. 
C) Louis says her profit is $35,000 and Greg says she lost $5,000. 
D) Louis says her profit is $33,500 and Greg says her profit is 33,500. 
A) Louis says her profit is $34,100 and Greg says her profit is $6,500. 
B) Louis says her profit is $34,100 and Greg says she lost $6,500. 
C) Louis says her profit is $35,000 and Greg says she lost $5,000. 
D) Louis says her profit is $33,500 and Greg says her profit is 33,500.

Question 5

Marginal cost is equal to average total cost when

Accepted Answer

A) average variable cost is falling. 
B) average fixed cost is rising. 
C) marginal cost is at its minimum. 
D) average total cost is at its minimum. 
A) average variable cost is falling. 
B) average fixed cost is rising. 
C) marginal cost is at its minimum. 
D) average total cost is at its minimum.

Question 6

Scenario 13-2
Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000.
-Refer to Scenario 13-2.Zach's economic profit for the year was

Accepted Answer

A) $-506,000. 
B) $-6,000. 
C) $3,000. 
D) $6,000. 
A) $-506,000. 
B) $-6,000. 
C) $3,000. 
D) $6,000.

Question 7

Industrial organization is the study of how

Accepted Answer

A) labor unions organize workers in industries. 
B) profitable firms are in organized industries. 
C) industries organize for political advantage. 
D) firms' decisions regarding prices and quantities depend on the market conditions they face. 
A) labor unions organize workers in industries. 
B) profitable firms are in organized industries. 
C) industries organize for political advantage. 
D) firms' decisions regarding prices and quantities depend on the market conditions they face.

Question 8

Table 13-8
  
-Refer to Table 13-8.What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Accepted Answer

A) $2.12 
B) $3.13 
C) $20.00 
D) $24.37 
A) $2.12 
B) $3.13 
C) $20.00 
D) $24.37

Question 9

Economists normally assume that the goal of a firm is to

Accepted Answer

A) maximize its total revenue. 
B) maximize its profit. 
C) minimize its explicit costs. 
D) minimize its total cost. 
A) maximize its total revenue. 
B) maximize its profit. 
C) minimize its explicit costs. 
D) minimize its total cost.

Question 10

Table 13-5
  
-Refer to Table 13-5.The average variable cost of producing four widgets is

Accepted Answer

A) $2.00 
B) $2.50 
C) $3.33 
D) $5.00 
A) $2.00 
B) $2.50 
C) $3.33 
D) $5.00

Question 11

The total cost curve gets steeper as output increases due to

Accepted Answer

A) diseconomies of scale. 
B) economies of scale. 
C) diminishing marginal product. 
D) increasing returns to scale. 
A) diseconomies of scale. 
B) economies of scale. 
C) diminishing marginal product. 
D) increasing returns to scale.

Question 12

In the long run,

Accepted Answer

A) inputs that were fixed in the short run remain fixed. 
B) inputs that were fixed in the short run become variable. 
C) inputs that were variable in the short run become fixed. 
D) variable inputs are rarely used. 
A) inputs that were fixed in the short run remain fixed. 
B) inputs that were fixed in the short run become variable. 
C) inputs that were variable in the short run become fixed. 
D) variable inputs are rarely used.

Question 13

Figure 13-8
The figure below depicts average total cost functions for a firm that produces automobiles.
  
-Refer to Figure 13-8.Which curve represents the long-run average total cost?

Accepted Answer

A) ATCA 
B) ATCB 
C) ATCC 
D) ATCD 
A) ATCA 
B) ATCB 
C) ATCC 
D) ATCD

Question 14

If marginal cost is below average total cost,then average total cost

Accepted Answer

A) is constant. 
B) is falling. 
C) is rising. 
D) may rise or fall depending on the size of fixed costs. 
A) is constant. 
B) is falling. 
C) is rising. 
D) may rise or fall depending on the size of fixed costs.

Question 15

Table 13-8
  
-Refer to Table 13-8.What is the variable cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Accepted Answer

A) $120 
B) $140 
C) $155 
D) $160 
A) $120 
B) $140 
C) $155 
D) $160

Question 16

The marginal cost curve crosses the average total cost curve at

Accepted Answer

A) the efficient scale. 
B) the minimum point on the average total cost curve. 
C) a point where the marginal cost curve is rising. 
D) All of the above are correct. 
A) the efficient scale. 
B) the minimum point on the average total cost curve. 
C) a point where the marginal cost curve is rising. 
D) All of the above are correct.

Question 17

Economists and accountants both include forgone income as a cost to a small business owner.

Accepted Answer

A) True 
 B)False

Question 18

Table 13-8
  
-Refer to Table 13-8.What is the marginal cost of the 2nd gigaplot at Jimmy's Gigaplot factory?

Accepted Answer

A) $14 
B) $15 
C) $28 
D) $34 
A) $14 
B) $15 
C) $28 
D) $34

Question 19

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Accepted Answer

A) output is not variable. 
B) the number of workers used to produce the firm's product is fixed. 
C) the size of the factory is fixed. 
D) there are no fixed costs. 
A) output is not variable. 
B) the number of workers used to produce the firm's product is fixed. 
C) the size of the factory is fixed. 
D) there are no fixed costs.

Question 20

Economists normally assume that the goal of a firm is to (i)	make profit as large as possible even if it means reducing output.
(ii)	make profit as large as possible even if it means incurring a higher total cost.
(iii)	make revenue as large as possible.

Accepted Answer

A) (i) and (ii) are true. 
B) (i) and (iii) are true. 
C) (ii) and (iii) are true. 
D) (i), (ii), and (iii) are true. 
A) (i) and (ii) are true. 
B) (i) and (iii) are true. 
C) (ii) and (iii) are true. 
D) (i), (ii), and (iii) are true.

Exam 13: The Costs of Production

Which of the following statements is false?

If the average total cost curve is falling,what is necessarily true of the marginal cost curve? If the average total cost curve is rising,what is necessarily true of the marginal cost curve?

Average total cost (ATC)is calculated as follows:

Marginal cost is equal to average total cost when

Industrial organization is the study of how

Table 13-8 -Refer to Table 13-8.What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Economists normally assume that the goal of a firm is to

Table 13-5 -Refer to Table 13-5.The average variable cost of producing four widgets is

The total cost curve gets steeper as output increases due to

In the long run,

Figure 13-8 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-8.Which curve represents the long-run average total cost?

If marginal cost is below average total cost,then average total cost

Table 13-8 -Refer to Table 13-8.What is the variable cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

The marginal cost curve crosses the average total cost curve at

Economists and accountants both include forgone income as a cost to a small business owner.

Table 13-8 -Refer to Table 13-8.What is the marginal cost of the 2nd gigaplot at Jimmy's Gigaplot factory?

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Economists normally assume that the goal of a firm is to (i) make profit as large as possible even if it means reducing output. (ii) make profit as large as possible even if it means incurring a higher total cost. (iii) make revenue as large as possible.

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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