Question 1

The shape of the total cost curve is unrelated to the shape of the production function.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 13-1
Joe wants to start his own business. The business he wants to start will require that he purchase a factory that costs $400,000. Joe currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1.If Joe purchases the factory with his own money,what is the annual implicit opportunity cost of purchasing the factory?

Accepted Answer

A) $0 
B) $3,000 
C) $12,000 
D) $15,000 
A) $0 
B) $3,000 
C) $12,000 
D) $15,000

Question 3

The average total cost when 5 units of output are produced is $30,and the marginal cost of the sixth unit of output is $60.What is the average total cost when six units are produced?

Accepted Answer

A) $10 
B) $25 
C) $30 
D) $35 
A) $10 
B) $25 
C) $30 
D) $35

Question 4

For Firm A,when four units of output are produced,the total cost is $175 and the average variable cost is $33.75.What would the average fixed cost be if ten units were produced?

Accepted Answer

A) $4 
B) $10 
C) $40 
D) $135 
A) $4 
B) $10 
C) $40 
D) $135

Question 5

Marginal cost equals

Accepted Answer

A) total cost divided by quantity of output produced. 
B) total output divided by the change in total cost. 
C) the slope of the total cost curve. 
D) the slope of the line drawn from the origin to the total cost curve. 
A) total cost divided by quantity of output produced. 
B) total output divided by the change in total cost. 
C) the slope of the total cost curve. 
D) the slope of the line drawn from the origin to the total cost curve.

Question 6

In some cases,specialization allows larger factories to produce goods at a lower average cost than smaller factories.

Accepted Answer

A) True 
 B)False

Question 7

To an economist,it is conceivable that the objective that motivates an individual entrepreneur to start a business arises from

Accepted Answer

A) an innate love for the type of business that he or she starts. 
B) a desire to earn a profit. 
C) an altruistic desire to provide the world with a good product. 
D) All of the above are correct. 
A) an innate love for the type of business that he or she starts. 
B) a desire to earn a profit. 
C) an altruistic desire to provide the world with a good product. 
D) All of the above are correct.

Question 8

According to the mathematical laws that govern the relationship between average total cost and marginal cost,where must these two curves intersect?

Accepted Answer

The two curves will

Question 9

Which of the following expressions is correct?

Accepted Answer

A) accounting profit = economic profit + implicit costs 
B) accounting profit = total revenue - implicit costs 
C) economic profit = accounting profit + explicit costs 
D) economic profit = total revenue - implicit costs 
A) accounting profit = economic profit + implicit costs 
B) accounting profit = total revenue - implicit costs 
C) economic profit = accounting profit + explicit costs 
D) economic profit = total revenue - implicit costs

Question 10

Figure 13-6
The curves below reflect information about the cost structure of a firm.
  
-Refer to Figure 13-6.Which of the curves is most likely to represent average fixed cost?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 11

When calculating a firm's profit,an economist

Accepted Answer

A) will subtract only explicit costs from total revenue since these are the only costs that can be measured explicitly. 
B) will subtract only implicit costs from total revenue since these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C) will subtract only the opportunity costs from total revenue since these include both the implicit and explicit costs of the firm. 
D) will subtract only the marginal cost since the cost of the next unit is the only relevant cost. 
A) will subtract only explicit costs from total revenue since these are the only costs that can be measured explicitly. 
B) will subtract only implicit costs from total revenue since these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C) will subtract only the opportunity costs from total revenue since these include both the implicit and explicit costs of the firm. 
D) will subtract only the marginal cost since the cost of the next unit is the only relevant cost.

Question 12

Accountants keep track of the money that flows into and out of firms.

Accepted Answer

A) True 
 B)False

Question 13

Table 13-6
Adrian's Premium Chocolates produces boxes of chocolates for its mail order catalogue business. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs.
  
-Refer to Table 13-6.Adrian has received an order for 3,000 boxes of chocolates for next week.If she expects that the trend in the marginal product of labor will continue in the same direction,it is most likely that her best decision will be to

Accepted Answer

A) not commit to meeting the order until she can move to a larger room and hire more workers to box the chocolates. 
B) close her business until she is able to hire more productive workers. 
C) hire about 12 new workers and hope she can satisfy the order. 
D) commit to meeting the order and then take three weeks to complete the job. 
A) not commit to meeting the order until she can move to a larger room and hire more workers to box the chocolates. 
B) close her business until she is able to hire more productive workers. 
C) hire about 12 new workers and hope she can satisfy the order. 
D) commit to meeting the order and then take three weeks to complete the job.

Question 14

Figure 13-8
The figure below depicts average total cost functions for a firm that produces automobiles.
  
-Refer to Figure 13-8.At levels of output below M the firm experiences

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) economic profit. 
D) accounting profit. 
A) economies of scale. 
B) diseconomies of scale. 
C) economic profit. 
D) accounting profit.

Question 15

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Accepted Answer

A) True 
 B)False

Question 16

Figure 13-9
  
-Refer to Figure 13-9.The firm experiences diseconomies of scale if it changes its level of output

Accepted Answer

A) from Q₁ to Q₂. 
B) from Q₂ to Q₃. 
C) from Q₃ to Q₄. 
D) from Q₄ to Q₅. 
A) from Q₁ to Q₂. 
B) from Q₂ to Q₃. 
C) from Q₃ to Q₄. 
D) from Q₄ to Q₅.

Question 17

Economists normally assume that the goal of a firm is to (i)	sell as much of their product as possible.
(ii)	set the price of their product as high as possible.
(iii)	maximize profit.

Accepted Answer

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

Question 18

The minimum points of the average variable cost and average total cost curves occur where

Accepted Answer

A) the marginal cost curve lies below the average variable cost and average total cost curves. 
B) the marginal cost curve intersects those curves. 
C) the average variable cost and average total cost curves intersect. 
D) the slope of total cost is the smallest. 
A) the marginal cost curve lies below the average variable cost and average total cost curves. 
B) the marginal cost curve intersects those curves. 
C) the average variable cost and average total cost curves intersect. 
D) the slope of total cost is the smallest.

Question 19

Table 13-3
  
-Refer to Table 13-3.Assume Gallo's currently employs 2 workers.What is the marginal product of labor when Gallo's adds a 3rd worker?

Accepted Answer

A) 5 corks 
B) 10 corks 
C) 20 corks 
D) 25 corks 
A) 5 corks 
B) 10 corks 
C) 20 corks 
D) 25 corks

Question 20

Scenario 13-3
Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat.
-Refer to Scenario 13-3.What is the total opportunity cost of the day that Farmer Tony incurred for his spring day in the field planting wheat?

Accepted Answer

A) $130 
B) $250 
C) $300 
D) $380 
A) $130 
B) $250 
C) $300 
D) $380

Exam 13: The Costs of Production

The shape of the total cost curve is unrelated to the shape of the production function.

The average total cost when 5 units of output are produced is $30,and the marginal cost of the sixth unit of output is $60.What is the average total cost when six units are produced?

For Firm A,when four units of output are produced,the total cost is $175 and the average variable cost is $33.75.What would the average fixed cost be if ten units were produced?

Marginal cost equals

In some cases,specialization allows larger factories to produce goods at a lower average cost than smaller factories.

To an economist,it is conceivable that the objective that motivates an individual entrepreneur to start a business arises from

According to the mathematical laws that govern the relationship between average total cost and marginal cost,where must these two curves intersect?

Which of the following expressions is correct?

Figure 13-6 The curves below reflect information about the cost structure of a firm. -Refer to Figure 13-6.Which of the curves is most likely to represent average fixed cost?

When calculating a firm's profit,an economist

Accountants keep track of the money that flows into and out of firms.

Figure 13-8 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-8.At levels of output below M the firm experiences

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Figure 13-9 -Refer to Figure 13-9.The firm experiences diseconomies of scale if it changes its level of output

Economists normally assume that the goal of a firm is to (i) sell as much of their product as possible. (ii) set the price of their product as high as possible. (iii) maximize profit.

The minimum points of the average variable cost and average total cost curves occur where

Table 13-3 -Refer to Table 13-3.Assume Gallo's currently employs 2 workers.What is the marginal product of labor when Gallo's adds a 3rd worker?

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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