Question 1

What relationship does a production function measure

Accepted Answer

A) inputs and quantity of output 
B) inputs and revenue 
C) inputs and costs 
D) inputs and profit 
A) inputs and quantity of output 
B) inputs and revenue 
C) inputs and costs 
D) inputs and profit

Question 2

What happens when a business is operating a factory in the short run?

Accepted Answer

A) The business cannot alter variable costs. 
B) Total cost and variable cost are usually the same. 
C) Average fixed cost rises as output increases. 
D) The business cannot adjust the quantity of fixed inputs. 
A) The business cannot alter variable costs. 
B) Total cost and variable cost are usually the same. 
C) Average fixed cost rises as output increases. 
D) The business cannot adjust the quantity of fixed inputs.

Question 3

What can the marginal product of labour be defined as

Accepted Answer

A) change in profit divided by change in quantity of labour 
B) change in quantity of output divided by change in quantity of labour 
C) change in quantity of labour divided by change in quantity of output 
D) change in quantity of labour divided by change in profit 
A) change in profit divided by change in quantity of labour 
B) change in quantity of output divided by change in quantity of labour 
C) change in quantity of labour divided by change in quantity of output 
D) change in quantity of labour divided by change in profit

Question 4

When would one expect to observe diminishing marginal product of labour

Accepted Answer

A) when crowded factory space reduces the productivity of new workers 
B) when workers are discouraged about the lack of help from other workers 
C) when only new workers are trained in using the most productive capital 
D) when union workers are told to reduce their work effort in preparation for a new round of collective bargaining talks 
A) when crowded factory space reduces the productivity of new workers 
B) when workers are discouraged about the lack of help from other workers 
C) when only new workers are trained in using the most productive capital 
D) when union workers are told to reduce their work effort in preparation for a new round of collective bargaining talks

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Figure 13-4
The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm.
  
-Refer to Figure 13-4.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 7

Scenario 13-3
Zach took $500,000 out of the bank and used it to start his new cookie business.The bank account pays 4 percent interest per year.During the first year of his business, Zach sold 15,000 boxes of cookies for $3 per box.Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $14,000.
-Refer to Scenario 13-3.What was Zach's accounting profit for the year

Accepted Answer

A) -$455,000 
B) -$56,000 
C) $1000 
D) $31,000 
A) -$455,000 
B) -$56,000 
C) $1000 
D) $31,000

Question 8

Figure 13-3
  
-Refer to Figure 13-3.Which of the marginal-cost curves reflects the existence of diminishing marginal product

Accepted Answer

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

Question 9

Suppose that three different technologies can be used to produce a special product.The following table shows the total cost related to each technology for the amount of output produced per day.A firm is considering adopting a proper technology to produce this special product.Derive the long-run average- total-cost curve to help the firm making its decision.Quantity 1 2 3 4 5 6 7
Firm 1 $30 $40 $50 $60 $75 $90 $110
Firm 2 15 25 39 56 75 96 119
Firm 3 21 29 37 50 68 106 132

Accepted Answer

First,we need to calculate average total

Question 10

XYZ Corporation produced 300 units of output but sold only 250 of the units it produced.The average cost of production for each unit of output produced was $100.Each of the 250 units sold was sold for a price of $95.What would total revenue for XYZ Corporation be

Accepted Answer

A) -$3875 
B) $3875 
C) $23,750 
D) $25,500 
A) -$3875 
B) $3875 
C) $23,750 
D) $25,500

Question 11

What does marginal cost equal

Accepted Answer

A) total cost divided by quantity of output produced 
B) total output divided by the change in total cost 
C) the change of total cost divided by the change of output 
D) average cost divided by output 
A) total cost divided by quantity of output produced 
B) total output divided by the change in total cost 
C) the change of total cost divided by the change of output 
D) average cost divided by output

Question 12

How does the average-fixed-cost curve behave

Accepted Answer

A) It always declines with increased levels of output. 
B) It always rises with increased levels of output. 
C) It declines as long as it is above marginal cost. 
D) It declines as long as it is below marginal cost. 
A) It always declines with increased levels of output. 
B) It always rises with increased levels of output. 
C) It declines as long as it is above marginal cost. 
D) It declines as long as it is below marginal cost.

Question 13

What must be happening when marginal cost is greater than average total cost

Accepted Answer

A) Marginal cost is rising. 
B) Marginal cost is falling. 
C) Average total cost is rising. 
D) Average total cost is falling. 
A) Marginal cost is rising. 
B) Marginal cost is falling. 
C) Average total cost is rising. 
D) Average total cost is falling.

Question 14

What effect, if any, does diminishing marginal product have on the shape of the marginal-cost curve?

Accepted Answer

Diminishing marginal

Question 15

Because of the greater flexibility that firms have in the long run,all short-run-cost curves lie on or above the long-run curve.

Accepted Answer

A) True 
 B)False

Question 16

Dolores used to work as a high school teacher for $55,000 per year but quit in order to start her own catering business.To buy the necessary equipment,she withdrew $30,000 from her savings (which paid 2 percent interest per year) and borrowed $30,000 from her uncle,to whom she pays 3 percent interest per year.Last year she paid $25,000 for ingredients and had revenue of $75,000.She asked Louis,an accountant,and Greg,an economist,to calculate her profit for her.What did they say

Accepted Answer

A) Louis said her profit was $49,100, and Greg said she lost $6500. 
B) Louis said her profit was $49,100, and Greg said her profit was $6500. 
C) Louis said her profit was $50,000, and Greg said she lost $5000. 
D) Louis said her profit was $4500, and Greg said her profit was $33,500. 
A) Louis said her profit was $49,100, and Greg said she lost $6500. 
B) Louis said her profit was $49,100, and Greg said her profit was $6500. 
C) Louis said her profit was $50,000, and Greg said she lost $5000. 
D) Louis said her profit was $4500, and Greg said her profit was $33,500.

Question 17

How would a production function that exhibits decreasing marginal product affect the shape of the total-cost curve? Explain and draw a graph.

Accepted Answer

The total-cost curve will incr

Question 18

What is the relationship between accounting profit and economic profit

Accepted Answer

A) Accounting profit = Economic profit + Implicit costs 
B) Accounting profit = Economic profit - Implicit costs 
C) Economic profit = Accounting profit + Explicit costs 
D) Economic profit = Accounting profit - Explicit costs 
A) Accounting profit = Economic profit + Implicit costs 
B) Accounting profit = Economic profit - Implicit costs 
C) Economic profit = Accounting profit + Explicit costs 
D) Economic profit = Accounting profit - Explicit costs

Question 19

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

Accepted Answer

A) True 
 B)False

Question 20

Figure 13-4
The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm.
  
-Refer to Figure 13-4.When is this particular firm necessarily experiencing increasing marginal product

Accepted Answer

A) when curve A is falling 
B) when curve B is falling 
C) when curve C is falling 
D) when curve D is falling 
A) when curve A is falling 
B) when curve B is falling 
C) when curve C is falling 
D) when curve D is falling

What relationship does a production function measure

What happens when a business is operating a factory in the short run?

What can the marginal product of labour be defined as

When would one expect to observe diminishing marginal product of labour

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

Figure 13-4 The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm. -Refer to Figure 13-4.Which of the curves is most likely to represent average fixed cost

Figure 13-3 -Refer to Figure 13-3.Which of the marginal-cost curves reflects the existence of diminishing marginal product

XYZ Corporation produced 300 units of output but sold only 250 of the units it produced.The average cost of production for each unit of output produced was $100.Each of the 250 units sold was sold for a price of $95.What would total revenue for XYZ Corporation be

What does marginal cost equal

How does the average-fixed-cost curve behave

What must be happening when marginal cost is greater than average total cost

What effect, if any, does diminishing marginal product have on the shape of the marginal-cost curve?

Because of the greater flexibility that firms have in the long run,all short-run-cost curves lie on or above the long-run curve.

How would a production function that exhibits decreasing marginal product affect the shape of the total-cost curve? Explain and draw a graph.

What is the relationship between accounting profit and economic profit

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

Figure 13-4 The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm. -Refer to Figure 13-4.When is this particular firm necessarily experiencing increasing marginal product

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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Exam 13: The Costs of Production

What relationship does a production function measure

What happens when a business is operating a factory in the short run?

What can the marginal product of labour be defined as

When would one expect to observe diminishing marginal product of labour

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

Figure 13-4 The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm. -Refer to Figure 13-4.Which of the curves is most likely to represent average fixed cost

Figure 13-3 -Refer to Figure 13-3.Which of the marginal-cost curves reflects the existence of diminishing marginal product

XYZ Corporation produced 300 units of output but sold only 250 of the units it produced.The average cost of production for each unit of output produced was $100.Each of the 250 units sold was sold for a price of $95.What would total revenue for XYZ Corporation be

What does marginal cost equal

How does the average-fixed-cost curve behave

What must be happening when marginal cost is greater than average total cost

What effect, if any, does diminishing marginal product have on the shape of the marginal-cost curve?

Because of the greater flexibility that firms have in the long run,all short-run-cost curves lie on or above the long-run curve.

How would a production function that exhibits decreasing marginal product affect the shape of the total-cost curve? Explain and draw a graph.

What is the relationship between accounting profit and economic profit

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

Figure 13-4 The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm. -Refer to Figure 13-4.When is this particular firm necessarily experiencing increasing marginal product

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters