Question 1

A 10-cent-per-box tax on producers of cigars will

Accepted Answer

A) shift the firm's ATC and MC curves upward by the full amount of the tax. 
B) induce the firm to produce less but will not shift the firm's MC curve. 
C) shift the firm's ATC and MC curves downward by the full amount of the tax. 
D) shift the MC curve upward but will not cause any shift in the ATC curve. 
A) shift the firm's ATC and MC curves upward by the full amount of the tax. 
B) induce the firm to produce less but will not shift the firm's MC curve. 
C) shift the firm's ATC and MC curves downward by the full amount of the tax. 
D) shift the MC curve upward but will not cause any shift in the ATC curve.

Question 2

If a firm enlarges its factory size and realizes higher average costs of production then

Accepted Answer

A) it has experienced economies of scale. 
B) it has experienced diseconomies of scale. 
C) it has experienced constant returns to scale. 
D) the long-run average cost curve slopes downward. 
E) the long-run average cost curve shifts upward. 
A) it has experienced economies of scale. 
B) it has experienced diseconomies of scale. 
C) it has experienced constant returns to scale. 
D) the long-run average cost curve slopes downward. 
E) the long-run average cost curve shifts upward.

Question 3

As a firm expands output,in the short run marginal costs will

Accepted Answer

A) always decline as output expands. 
B) increase at first but eventually level off and decline. 
C) eventually increase as the firm experiences diminishing returns to the fixed factors of production. 
D) initially increase at a decreasing rate but eventually increase at an increasing rate. 
A) always decline as output expands. 
B) increase at first but eventually level off and decline. 
C) eventually increase as the firm experiences diminishing returns to the fixed factors of production. 
D) initially increase at a decreasing rate but eventually increase at an increasing rate.

Question 4

Figure 8-8
  
-In Figure 8-8,which output level would be most closely associated with the point where diminishing marginal returns have begun?

Accepted Answer

A) 4 
B) 5 
C) 6 
D) 8 
A) 4 
B) 5 
C) 6 
D) 8

Question 5

A profit-maximizing firm would

Accepted Answer

A) consider opportunity costs rather than accounting costs when making decisions about output. 
B) expand current output if the revenues expected from doing so were less than the expected costs. 
C) enlarge its current plant size if present depreciation costs were less than average variable costs. 
D) increase output in the next period if accounting profits during the previous period were positive. 
A) consider opportunity costs rather than accounting costs when making decisions about output. 
B) expand current output if the revenues expected from doing so were less than the expected costs. 
C) enlarge its current plant size if present depreciation costs were less than average variable costs. 
D) increase output in the next period if accounting profits during the previous period were positive.

Question 6

Which of the following is true?

Accepted Answer

A) The difference between the ATC and AVC curves will decline as output expands. 
B) The AFC will remain constant as output increases. 
C) If ATC is increasing,then AVC must be greater than ATC. 
D) Implicit costs and fixed costs are always the same. 
A) The difference between the ATC and AVC curves will decline as output expands. 
B) The AFC will remain constant as output increases. 
C) If ATC is increasing,then AVC must be greater than ATC. 
D) Implicit costs and fixed costs are always the same.

Question 7

Figure 8-3
  
-According to Figure 8-3,at what output would a properly constructed marginal cost curve cross the ATC curve?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 6 
A) 3 
B) 4 
C) 5 
D) 6

Question 8

The implicit rate of return that must be paid to induce investors to continue to supply the funds necessary to maintain a firm's capital assets is called

Accepted Answer

A) the investors' rate of return. 
B) the opportunity cost of labor. 
C) the opportunity cost of capital. 
D) equity capital. 
A) the investors' rate of return. 
B) the opportunity cost of labor. 
C) the opportunity cost of capital. 
D) equity capital.

Question 9

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's

Accepted Answer

A) economic profit. 
B) accounting profit. 
C) opportunity cost of capital. 
D) long-run average total cost. 
A) economic profit. 
B) accounting profit. 
C) opportunity cost of capital. 
D) long-run average total cost.

Question 10

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.If the firm produces 10 units of output,its average total cost is

Accepted Answer

A) 6. 
B) 7. 
C) 12. 
D) 13. 
A) 6. 
B) 7. 
C) 12. 
D) 13.

Question 11

Figure 8-9
  
-In Figure 8-9,which output would minimize the firm's average total cost of production?

Accepted Answer

A) 30 
B) 40 
C) 50 
D) 60 
A) 30 
B) 40 
C) 50 
D) 60

Question 12

Figure 8-9
  
-Using Figure 8-9,calculate the firm's approximate average total cost when it produces 50 units.

Accepted Answer

A) $10 
B) $13 
C) $15 
D) $17 
A) $10 
B) $13 
C) $15 
D) $17

Question 13

When costs that vary with the level of output are divided by the output,you have calculated

Accepted Answer

A) total changing cost. 
B) total fixed cost. 
C) average fixed cost. 
D) average variable cost. 
A) total changing cost. 
B) total fixed cost. 
C) average fixed cost. 
D) average variable cost.

Question 14

Advantages of the corporate form of business organization include

Accepted Answer

A) the ease of transferring ownership in a corporation. 
B) the limited liability concept that protects the stockholder from potential debts incurred by the corporation. 
C) the lack of employee shirking that occurs in corporations. 
D) both a and b. 
A) the ease of transferring ownership in a corporation. 
B) the limited liability concept that protects the stockholder from potential debts incurred by the corporation. 
C) the lack of employee shirking that occurs in corporations. 
D) both a and b.

Question 15

Figure 8-2
  
-Using Figure 8-2,calculate the firm's total cost of producing 30 units of output.

Accepted Answer

A) $8 
B) $120 
C) $180 
D) $240 
A) $8 
B) $120 
C) $180 
D) $240

Question 16

If fixed cost at quantity (Q)= 100 is $130,then

Accepted Answer

A) fixed cost at Q = 0 is $0. 
B) fixed cost at Q = 0 is less than $130. 
C) fixed cost at Q = 200 is $260. 
D) fixed cost at Q = 200 is $130. 
E) it is impossible to calculate fixed costs at any other quantity. 
A) fixed cost at Q = 0 is $0. 
B) fixed cost at Q = 0 is less than $130. 
C) fixed cost at Q = 200 is $260. 
D) fixed cost at Q = 200 is $130. 
E) it is impossible to calculate fixed costs at any other quantity.

Question 17

Ben quit his job as an economics professor to become a golf professional.He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest)in this venture.After all expenses,his net winnings were $35,000.Ben's economic profits were

Accepted Answer

A) $35,000. 
B) $5,000. 
C) $2,000. 
D) zero. 
A) $35,000. 
B) $5,000. 
C) $2,000. 
D) zero.

Question 18

If a firm produces nothing,which of the following costs will be zero?

Accepted Answer

A) total cost 
B) fixed cost 
C) opportunity cost 
D) variable cost 
A) total cost 
B) fixed cost 
C) opportunity cost 
D) variable cost

Question 19

The three basic legal forms of business enterprise are

Accepted Answer

A) monopolists,competitors,and enterprises. 
B) vertical,horizontal,and conglomerate corporations. 
C) conglomerates,multinationals,and partnerships. 
D) proprietorships,partnerships,and corporations. 
A) monopolists,competitors,and enterprises. 
B) vertical,horizontal,and conglomerate corporations. 
C) conglomerates,multinationals,and partnerships. 
D) proprietorships,partnerships,and corporations.

Question 20

The normal rate of return on equity capital is also known as

Accepted Answer

A) the explicit cost of capital. 
B) the marginal cost of capital. 
C) economic profit. 
D) the opportunity cost of capital. 
A) the explicit cost of capital. 
B) the marginal cost of capital. 
C) economic profit. 
D) the opportunity cost of capital.

Exam 21: Acosts and the Supply of Goods

A 10-cent-per-box tax on producers of cigars will

If a firm enlarges its factory size and realizes higher average costs of production then

As a firm expands output,in the short run marginal costs will

Figure 8-8 -In Figure 8-8,which output level would be most closely associated with the point where diminishing marginal returns have begun?

A profit-maximizing firm would

Which of the following is true?

Figure 8-3 -According to Figure 8-3,at what output would a properly constructed marginal cost curve cross the ATC curve?

The implicit rate of return that must be paid to induce investors to continue to supply the funds necessary to maintain a firm's capital assets is called

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's

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.If the firm produces 10 units of output,its average total cost is

Figure 8-9 -In Figure 8-9,which output would minimize the firm's average total cost of production?

Figure 8-9 -Using Figure 8-9,calculate the firm's approximate average total cost when it produces 50 units.

When costs that vary with the level of output are divided by the output,you have calculated

Advantages of the corporate form of business organization include

Figure 8-2 -Using Figure 8-2,calculate the firm's total cost of producing 30 units of output.

If fixed cost at quantity (Q)= 100 is $130,then

Ben quit his job as an economics professor to become a golf professional.He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest)in this venture.After all expenses,his net winnings were $35,000.Ben's economic profits were

If a firm produces nothing,which of the following costs will be zero?

The three basic legal forms of business enterprise are

The normal rate of return on equity capital is also known as

The Economic Approach

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Asupply,demand,and the Market Process

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Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

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Great Debates in Economics: Keynes Versus Hayek

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Lessons From the Great Depression

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