Question 1

Which of the following factors would not shift the cost curves of an automobile company upward?

Accepted Answer

A) a regulation requiring all automobiles be equipped with improved safety equipment 
B) an increase in the price of steel used to make automobiles 
C) an increase in the property tax on buildings and equipment used by the automobile company 
D) An employee develops a new method of installing doors on the cars that requires half as many workers as before. 
A) a regulation requiring all automobiles be equipped with improved safety equipment 
B) an increase in the price of steel used to make automobiles 
C) an increase in the property tax on buildings and equipment used by the automobile company 
D) An employee develops a new method of installing doors on the cars that requires half as many workers as before.

Question 2

Figure 8-14
The following question(s)refer(s)to the below cost curves for one very small firm in a large market.
  
-Refer to Figure 8-14.The marginal cost of producing the tenth unit is

Accepted Answer

A) 7. 
B) 13. 
C) 70. 
D) 130. 
A) 7. 
B) 13. 
C) 70. 
D) 130.

Question 3

Which of the following is most likely to reduce the incidence of employee shirking?

Accepted Answer

A) use of the corporate business structure,rather than an individual proprietorship 
B) closely relating the pay of workers to their productive contribution 
C) payment of identical wage rates to all workers 
D) providing workers with a year-end bonus if the business firm loses money during the year 
A) use of the corporate business structure,rather than an individual proprietorship 
B) closely relating the pay of workers to their productive contribution 
C) payment of identical wage rates to all workers 
D) providing workers with a year-end bonus if the business firm loses money during the year

Question 4

Where marginal cost is less than average cost,

Accepted Answer

A) opportunity cost must have been excluded from the calculation of marginal cost. 
B) marginal cost must be falling. 
C) marginal cost must be rising. 
D) marginal cost may be rising,falling,or constant. 
A) opportunity cost must have been excluded from the calculation of marginal cost. 
B) marginal cost must be falling. 
C) marginal cost must be rising. 
D) marginal cost may be rising,falling,or constant.

Question 5

Andy wants to maximize his grade-point average.Having spent six hours studying for his final exam in economics,Andy calculates his grade and discovers that even with a perfect score on the final,he will not pass the course.He decides to study two more hours so he will not have wasted the first six hours.Is this a good decision? Why or why not?

Accepted Answer

The six hours spent studying for the exa

Question 6

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 7

Figure 8-9
  
-Using Figure 8-9,calculate the firm's approximate total cost when average total cost is at a minimum.

Accepted Answer

A) $100 
B) $160 
C) $480 
D) $600 
A) $100 
B) $160 
C) $480 
D) $600

Question 8

The owners of a business

Accepted Answer

A) are paid the market rate of return for resources they supply to the firm. 
B) are residual income claimants. 
C) have little incentive to monitor shirking on the part of employees. 
D) have little incentive to provide their employees with an incentive system that encourages operational efficiency. 
A) are paid the market rate of return for resources they supply to the firm. 
B) are residual income claimants. 
C) have little incentive to monitor shirking on the part of employees. 
D) have little incentive to provide their employees with an incentive system that encourages operational efficiency.

Question 9

When total revenue minus total economic cost is equal to zero,the firm is

Accepted Answer

A) earning above-average economic profit. 
B) earning the normal profit rate. 
C) losing too much money to stay in business. 
D) earning abnormally low profits. 
A) earning above-average economic profit. 
B) earning the normal profit rate. 
C) losing too much money to stay in business. 
D) earning abnormally low profits.

Question 10

Costs that a firm remaining in business will still incur even if it halts current production are called

Accepted Answer

A) fixed costs. 
B) variable costs. 
C) implicit costs. 
D) explicit costs. 
A) fixed costs. 
B) variable costs. 
C) implicit costs. 
D) explicit costs.

Question 11

Since it is costly for stockholders to monitor corporate managers,managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization.This is an example of

Accepted Answer

A) an external benefit. 
B) economies of scale. 
C) the principal-agent problem. 
D) sunk costs. 
A) an external benefit. 
B) economies of scale. 
C) the principal-agent problem. 
D) sunk costs.

Question 12

Accounting costs are often unsatisfactory from the economist's point of view because

Accepted Answer

A) they fail to allow for depreciation,the wearing out of capital assets during a period. 
B) they often exclude the opportunity costs of the firm's equity capital. 
C) accountants attempt to minimize costs in order to make profits look good. 
D) accounting procedures are designed to overstate costs in order to minimize business tax liability. 
A) they fail to allow for depreciation,the wearing out of capital assets during a period. 
B) they often exclude the opportunity costs of the firm's equity capital. 
C) accountants attempt to minimize costs in order to make profits look good. 
D) accounting procedures are designed to overstate costs in order to minimize business tax liability.

Question 13

A family has decided to go away for the summer.The monthly mortgage payment on the family's house is $1,000.Water,electricity,natural gas,and maintenance bills,to be paid by the family,will be $700 per month if the house is occupied and zero otherwise.If the family wishes to minimize losses from being away,it should rent the house for as much as the market will bear,as long as the monthly rent is above which of the following? (Assume wear and tear to be the same whether or not the house is occupied. )

Accepted Answer

A) $300 
B) $700 
C) $1,000 
D) $1,700 
A) $300 
B) $700 
C) $1,000 
D) $1,700

Question 14

Which of the following is always true?

Accepted Answer

A) When marginal costs are less than average total costs,average total costs will be decreasing. 
B) When average fixed costs are falling,marginal costs must be less than average fixed costs. 
C) When average fixed costs are rising,marginal costs must be greater than average total costs. 
D) When marginal costs are greater than average total costs,average total costs will be decreasing. 
A) When marginal costs are less than average total costs,average total costs will be decreasing. 
B) When average fixed costs are falling,marginal costs must be less than average fixed costs. 
C) When average fixed costs are rising,marginal costs must be greater than average total costs. 
D) When marginal costs are greater than average total costs,average total costs will be decreasing.

Question 15

If a firm's per-unit costs fall as it produces a larger output,

Accepted Answer

A) average variable cost must also decline as output expands. 
B) marginal cost must also decline as output expands. 
C) average fixed cost must be less than average variable costs. 
D) marginal cost must be less than average total cost. 
A) average variable cost must also decline as output expands. 
B) marginal cost must also decline as output expands. 
C) average fixed cost must be less than average variable costs. 
D) marginal cost must be less than average total cost.

Question 16

Figure 8-5
  
-Refer to Figure 8-5.Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC₁ to ATC₂?

Accepted Answer

A) an increase in demand for steel bolts 
B) an increase in the market price of steel bolts 
C) diminishing returns for the variable factors used to produce steel bolts 
D) an increase in the price of steel 
A) an increase in demand for steel bolts 
B) an increase in the market price of steel bolts 
C) diminishing returns for the variable factors used to produce steel bolts 
D) an increase in the price of steel

Question 17

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

Accepted Answer

A) the average is increasing. 
B) the average is decreasing. 
C) the marginal is increasing. 
D) the marginal is decreasing. 
E) the total is decreasing. 
A) the average is increasing. 
B) the average is decreasing. 
C) the marginal is increasing. 
D) the marginal is decreasing. 
E) the total is decreasing.

Question 18

The long run is a period of

Accepted Answer

A) at least one year. 
B) sufficient length to allow a firm to expand output by hiring additional workers. 
C) sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D) sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers. 
A) at least one year. 
B) sufficient length to allow a firm to expand output by hiring additional workers. 
C) sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D) sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers.

Question 19

Figure 8-11
  
-Which of the following is true for a firm with the costs illustrated in Figure 8-11?

Accepted Answer

A) Marginal costs exceed average total cost when output is 15. 
B) Marginal costs exceed average total cost when output is 20. 
C) Marginal costs exceed average total cost when output is 25. 
D) The firm's total fixed cost exceeds 40. 
A) Marginal costs exceed average total cost when output is 15. 
B) Marginal costs exceed average total cost when output is 20. 
C) Marginal costs exceed average total cost when output is 25. 
D) The firm's total fixed cost exceeds 40.

Question 20

Which of the following is not an advantage of the corporate structure over proprietorship and partnership forms of business organization?

Accepted Answer

A) Stockholders in the corporation have limited liability,whereas proprietors or partners have unlimited liability. 
B) Ownership rights of a corporation may be transferred more easily. 
C) Large investment funds are more easily attracted by the corporation. 
D) Corporations are less likely to suffer from the principal-agent problem. 
A) Stockholders in the corporation have limited liability,whereas proprietors or partners have unlimited liability. 
B) Ownership rights of a corporation may be transferred more easily. 
C) Large investment funds are more easily attracted by the corporation. 
D) Corporations are less likely to suffer from the principal-agent problem.

Exam 21: Acosts and the Supply of Goods

Which of the following factors would not shift the cost curves of an automobile company upward?

Figure 8-14 The following question(s)refer(s)to the below cost curves for one very small firm in a large market. -Refer to Figure 8-14.The marginal cost of producing the tenth unit is

Which of the following is most likely to reduce the incidence of employee shirking?

Where marginal cost is less than average cost,

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

Figure 8-9 -Using Figure 8-9,calculate the firm's approximate total cost when average total cost is at a minimum.

The owners of a business

When total revenue minus total economic cost is equal to zero,the firm is

Costs that a firm remaining in business will still incur even if it halts current production are called

Since it is costly for stockholders to monitor corporate managers,managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization.This is an example of

Accounting costs are often unsatisfactory from the economist's point of view because

Which of the following is always true?

If a firm's per-unit costs fall as it produces a larger output,

Figure 8-5 -Refer to Figure 8-5.Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC₁ to ATC₂?

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

The long run is a period of

Figure 8-11 -Which of the following is true for a firm with the costs illustrated in Figure 8-11?

Which of the following is not an advantage of the corporate structure over proprietorship and partnership forms of business organization?

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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