Question 1

A business owned by a single individual who is fully liable for its debts is called

Accepted Answer

A) a corporation. 
B) a proprietorship. 
C) a partnership. 
D) an agency. 
A) a corporation. 
B) a proprietorship. 
C) a partnership. 
D) an agency.

Question 2

Takeover bids (and the potential for such bids)

Accepted Answer

A) increase the incentive of corporate managers to perform efficiently. 
B) increase the likelihood that managers will be able to gain at the expense of stockholders. 
C) are more likely to occur when a company is producing efficiently and operating profitably. 
D) serve no useful economic purpose. 
A) increase the incentive of corporate managers to perform efficiently. 
B) increase the likelihood that managers will be able to gain at the expense of stockholders. 
C) are more likely to occur when a company is producing efficiently and operating profitably. 
D) serve no useful economic purpose.

Question 3

In the long run,a firm might experience rising per-unit costs due to

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) the law of supply. 
D) the law of diminishing marginal returns. 
A) economies of scale. 
B) diseconomies of scale. 
C) the law of supply. 
D) the law of diminishing marginal returns.

Question 4

Figure 8-3
  
-Using Figure 8-3,calculate the total variable cost of producing three units.

Accepted Answer

A) $10 
B) $15 
C) $30 
D) $45 
A) $10 
B) $15 
C) $30 
D) $45

Question 5

Figure 8-10
  
-Using Figure 8-10,calculate the firm's approximate total cost when average total cost is at a minimum.

Accepted Answer

A) $60 
B) $80 
C) $100 
D) $120 
A) $60 
B) $80 
C) $100 
D) $120

Question 6

The average fixed costs of a firm equal

Accepted Answer

A) implicit costs divided by output. 
B) explicit costs divided by output. 
C) total cost minus variable cost. 
D) (total cost minus variable cost)divided by output. 
A) implicit costs divided by output. 
B) explicit costs divided by output. 
C) total cost minus variable cost. 
D) (total cost minus variable cost)divided by output.

Question 7

The increase in total output that results from a unit increase in the employment of a variable input is equal to the input's

Accepted Answer

A) total product. 
B) marginal product. 
C) average product. 
D) marginal cost. 
A) total product. 
B) marginal product. 
C) average product. 
D) marginal cost.

Question 8

Which of the following explains why business owners have a strong incentive to strive for operational efficiency?

Accepted Answer

A) they recognize that operational efficiency promotes the public interest. 
B) since the owners are residual income claimants,increased efficiency will mean a higher income for the owners. 
C) if production is not conducted efficiently,the firm will ship jobs and capital out of the domestic market in order to be able to compete effectively. 
D) Increased operational efficiency allows the firm to receive government tax breaks. 
A) they recognize that operational efficiency promotes the public interest. 
B) since the owners are residual income claimants,increased efficiency will mean a higher income for the owners. 
C) if production is not conducted efficiently,the firm will ship jobs and capital out of the domestic market in order to be able to compete effectively. 
D) Increased operational efficiency allows the firm to receive government tax breaks.

Question 9

A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500.Insurance,license,and operating costs for the year were $1,500.What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?

Accepted Answer

A) $3,500 
B) $5,000 
C) $6,000 
D) $8,500 
A) $3,500 
B) $5,000 
C) $6,000 
D) $8,500

Question 10

Which of the following factors is most likely to shift the cost curves of an Iowa corn farmer downward?

Accepted Answer

A) an increase in the price of fertilizer 
B) an increase in the tax on diesel fuel,which is used by the farmer 
C) the development of a new,more efficient corn harvester 
D) the adoption of a regulation requiring farmers to treat their crops with three new pesticides. 
A) an increase in the price of fertilizer 
B) an increase in the tax on diesel fuel,which is used by the farmer 
C) the development of a new,more efficient corn harvester 
D) the adoption of a regulation requiring farmers to treat their crops with three new pesticides.

Question 11

The law of diminishing returns states that

Accepted Answer

A) as we continually add variable factors to a fixed amount of other resources,output eventually increases at a decreasing rate. 
B) as we increase plant size,costs must diminish. 
C) the additional output generated by the employment of additional units of a variable input eventually decline. 
D) both a and c are correct. 
A) as we continually add variable factors to a fixed amount of other resources,output eventually increases at a decreasing rate. 
B) as we increase plant size,costs must diminish. 
C) the additional output generated by the employment of additional units of a variable input eventually decline. 
D) both a and c are correct.

Question 12

Figure 8-10
  
-In Figure 8-10,which output would minimize the firm's average total cost of production?

Accepted Answer

A) 4 
B) 6 
C) 8 
D) 10 
A) 4 
B) 6 
C) 8 
D) 10

Question 13

If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output,when 10,000 units are produced,the average total cost will be

Accepted Answer

A) $20. 
B) $30. 
C) $50. 
D) $70. 
A) $20. 
B) $30. 
C) $50. 
D) $70.

Question 14

When an economist says a firm is earning zero economic profit,this implies that the firm

Accepted Answer

A) will be forced out of business in the near future unless market conditions change. 
B) is earning a zero rate of return on its assets. 
C) is earning as high a rate of return now as could be earned in other industries. 
D) has an accounting profit of zero. 
A) will be forced out of business in the near future unless market conditions change. 
B) is earning a zero rate of return on its assets. 
C) is earning as high a rate of return now as could be earned in other industries. 
D) has an accounting profit of zero.

Question 15

Figure 8-4
  
-Using Figure 8-4,calculate the firm's total cost of producing four units of output.

Accepted Answer

A) $4 
B) $8 
C) $12 
D) $16 
A) $4 
B) $8 
C) $12 
D) $16

Question 16

Mr.Hudson notes that if he produces 10 pairs of shoes per day,his average fixed cost (AFC)is $14 and his marginal cost is $8;if he produces 20 pairs of shoes per day,his MC is $15.What is his AFC when output is 20 pairs of shoes per day?

Accepted Answer

A) $5 
B) $7 
C) $8 
D) $15 
A) $5 
B) $7 
C) $8 
D) $15

Question 17

Which of the following is most likely to be an implicit cost of production?

Accepted Answer

A) property taxes on a building owned by the firm 
B) transportation costs paid to a trucking supplier 
C) rental payments for a building utilized by the company and rented from another party 
D) interest income foregone on funds invested in the firm by the owners 
A) property taxes on a building owned by the firm 
B) transportation costs paid to a trucking supplier 
C) rental payments for a building utilized by the company and rented from another party 
D) interest income foregone on funds invested in the firm by the owners

Question 18

Figure 8-4
  
-The average variable cost (AVC)and average total cost (ATC)for a firm are indicated in Figure 8-4.If the marginal cost curve were constructed,at what output would it cross the AVC curve?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 19

A homeowner will be away from her house for six months.The monthly mortgage payment on the house is $1,000.The owner's cost of utilities is $100 if the house is unoccupied but $300 if the owner rents it out.If the owner wishes to minimize her losses from the house while away,she should rent the house for as much as the market will bear,as long as monthly rent is greater than which of the following? (Assume wear and tear to be zero regardless of whether the house is occupied. )

Accepted Answer

A) $200 
B) $300 
C) $1,100 
D) $1,300 
A) $200 
B) $300 
C) $1,100 
D) $1,300

Question 20

In the short run,if average variable cost equals $50,average total cost equals $75,and output equals 100,the total fixed cost must be

Accepted Answer

A) $25. 
B) $2,500. 
C) $5,000. 
D) $7,500. 
A) $25. 
B) $2,500. 
C) $5,000. 
D) $7,500.

Exam 21: Acosts and the Supply of Goods

A business owned by a single individual who is fully liable for its debts is called

Takeover bids (and the potential for such bids)

In the long run,a firm might experience rising per-unit costs due to

Figure 8-3 -Using Figure 8-3,calculate the total variable cost of producing three units.

Figure 8-10 -Using Figure 8-10,calculate the firm's approximate total cost when average total cost is at a minimum.

The average fixed costs of a firm equal

The increase in total output that results from a unit increase in the employment of a variable input is equal to the input's

Which of the following explains why business owners have a strong incentive to strive for operational efficiency?

A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500.Insurance,license,and operating costs for the year were $1,500.What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?

Which of the following factors is most likely to shift the cost curves of an Iowa corn farmer downward?

The law of diminishing returns states that

Figure 8-10 -In Figure 8-10,which output would minimize the firm's average total cost of production?

If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output,when 10,000 units are produced,the average total cost will be

When an economist says a firm is earning zero economic profit,this implies that the firm

Figure 8-4 -Using Figure 8-4,calculate the firm's total cost of producing four units of output.

Mr.Hudson notes that if he produces 10 pairs of shoes per day,his average fixed cost (AFC)is $14 and his marginal cost is $8;if he produces 20 pairs of shoes per day,his MC is $15.What is his AFC when output is 20 pairs of shoes per day?

Which of the following is most likely to be an implicit cost of production?

Figure 8-4 -The average variable cost (AVC)and average total cost (ATC)for a firm are indicated in Figure 8-4.If the marginal cost curve were constructed,at what output would it cross the AVC curve?

In the short run,if average variable cost equals $50,average total cost equals $75,and output equals 100,the total fixed cost must be

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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