Question 1

In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a

Accepted Answer

A) short-run cost. 
B) variable cost. 
C) productivity cost. 
D) fixed cost. 
E) marginal cost. 
A) short-run cost. 
B) variable cost. 
C) productivity cost. 
D) fixed cost. 
E) marginal cost. D

Question 2

Total cost includes

Accepted Answer

A) the cost of variable resources only. 
B) the cost of fixed resources only. 
C) the cost of both variable and fixed resources. 
D) the cost of neither variable nor fixed resources. 
E) all explicit costs and all the implicit costs that actually must be paid using money. 
A) the cost of variable resources only. 
B) the cost of fixed resources only. 
C) the cost of both variable and fixed resources. 
D) the cost of neither variable nor fixed resources. 
E) all explicit costs and all the implicit costs that actually must be paid using money. C

Question 3

If total fixed cost increases, which of the following will NOT change?

Accepted Answer

A) total cost 
B) average fixed cost 
C) marginal cost 
D) average total cost 
E) ALL costs increase when total fixed cost increases. 
A) total cost 
B) average fixed cost 
C) marginal cost 
D) average total cost 
E) ALL costs increase when total fixed cost increases. C

Question 4

Jeremiah runs a bullfrog farm in Frogville, Oklahoma. Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker. Jeremiah must be

Accepted Answer

A) experiencing increasing marginal returns to labor. 
B) producing at a point where the average product of labor decreases as more workers are employed. 
C) producing at a point below his total product curve. 
D) mistaken because the law of decreasing returns points out that it cannot be the case that the marginal product increases as more workers are employed. 
E) producing at a point where the average product of labor exceeds the marginal product of labor. 
A) experiencing increasing marginal returns to labor. 
B) producing at a point where the average product of labor decreases as more workers are employed. 
C) producing at a point below his total product curve. 
D) mistaken because the law of decreasing returns points out that it cannot be the case that the marginal product increases as more workers are employed. 
E) producing at a point where the average product of labor exceeds the marginal product of labor.

Question 5

Darryl runs a ranch in Jackson, Wyoming. The interest on the debt he incurred to buy his ranch totals $3,000 per year. For Darryl, the interest is

Accepted Answer

A) an implicit cost. 
B) an explicit cost. 
C) his normal cost. 
D) his normal profit. 
E) part of his economic profit. 
A) an implicit cost. 
B) an explicit cost. 
C) his normal cost. 
D) his normal profit. 
E) part of his economic profit.

Question 6

Bill is an economics professor who earns $40,000 teaching but decides to leave and fulfill his dream of catering barbecues. During his first year of barbecuing he earned total revenue of $60,000. He spent $30,000 on food and supplies. He also paid his wife $10,000 to help serve food. The normal profit for an entrepreneur running a barbecue business is $3,000. He also rented an industrial grill/fry truck for $12,000. An accountant would conclude that Bill's profit was

Accepted Answer

A) $30,000. 
B) $20,000. 
C) $8,000. 
D) -$2,000. 
E) $40,000. 
A) $30,000. 
B) $20,000. 
C) $8,000. 
D) -$2,000. 
E) $40,000.

Question 7

From a firm's viewpoint, opportunity cost is the

Accepted Answer

A) best alternative use customers can find for the firm's output. 
B) cost the firm must pay for the factors of production it employs to attract them from their best alternative use. 
C) accounting cost of resources. 
D) price a firm can charge for its output. 
E) cost of acquiring the opportunity to sell to its customers. 
A) best alternative use customers can find for the firm's output. 
B) cost the firm must pay for the factors of production it employs to attract them from their best alternative use. 
C) accounting cost of resources. 
D) price a firm can charge for its output. 
E) cost of acquiring the opportunity to sell to its customers.

Question 8

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (hair stylings per day) }
\end{array} \
\hline 0 & 0 \
1 & 10 \
2 & 25 \
3 & 45 \
4 & 60 \
5 & 70 \
\hline
\end{array}$$
-When the average product is at its maximum,

Accepted Answer

A) the marginal product is increasing as output increases. 
B) the marginal product is negative. 
C) it is equal to the marginal product. 
D) total product is also at its maximum. 
E) total product is at its minimum. 
A) the marginal product is increasing as output increases. 
B) the marginal product is negative. 
C) it is equal to the marginal product. 
D) total product is also at its maximum. 
E) total product is at its minimum.

Question 9

The short run is

Accepted Answer

A) less than one year. 
B) the time frame in which all resources are fixed. 
C) the time frame in which some resources are fixed. 
D) the time frame in which output is fixed. 
E) a time frame short enough so that some costs are explicit costs. 
A) less than one year. 
B) the time frame in which all resources are fixed. 
C) the time frame in which some resources are fixed. 
D) the time frame in which output is fixed. 
E) a time frame short enough so that some costs are explicit costs.

Question 10

The marginal product of labor equals the change in ________ from a one-unit increase in the quantity of labor.

Accepted Answer

A) total product 
B) average product 
C) total cost 
D) the slope of the average product curve 
E) the wage rate 
A) total product 
B) average product 
C) total cost 
D) the slope of the average product curve 
E) the wage rate

Question 11

An increase in the price of labor (a variable resource)shifts

Accepted Answer

A) all cost curves upward. 
B) the variable cost curves upward but leaves the fixed cost curves unchanged. 
C) the fixed cost curves upward but leaves the variable cost curves unchanged. 
D) the marginal cost curve rightward. 
E) none of the cost curves. 
A) all cost curves upward. 
B) the variable cost curves upward but leaves the fixed cost curves unchanged. 
C) the fixed cost curves upward but leaves the variable cost curves unchanged. 
D) the marginal cost curve rightward. 
E) none of the cost curves.

Question 12

Which of the following is an explicit cost in Jim's business venture?

Accepted Answer

A) the salary Jim could have earned at another job 
B) the interest Jim does not earn because he invested his savings in his business 
C) the wages Jim pays his workers 
D) Jim's normal profit 
E) Answers A, B, and D are correct. 
A) the salary Jim could have earned at another job 
B) the interest Jim does not earn because he invested his savings in his business 
C) the wages Jim pays his workers 
D) Jim's normal profit 
E) Answers A, B, and D are correct.

Question 13

Suppose that a firm earned $500,000 in total revenue. At the same time, it incurred labor costs of $200,000; economic depreciation of $50,000; normal profit of $75,000; interest paid to the bank of $25,000; and used other factors of production that cost $100,000. The economic profit earned by the firm equals

Accepted Answer

A) $275,000. 
B) $175,000. 
C) $50,000. 
D) $200,000. 
E) $500,000. 
A) $275,000. 
B) $175,000. 
C) $50,000. 
D) $200,000. 
E) $500,000.

Question 14

Economies of scale can occur as a result of which of the following?

Accepted Answer

A) increasing marginal returns as the firm increases its size 
B) lower fixed cost as the firm increases its size 
C) management difficulties as the firm increases its size 
D) greater specialization of labor and capital as the firm increases its size 
E) increased total cost when the firm increases its size 
A) increasing marginal returns as the firm increases its size 
B) lower fixed cost as the firm increases its size 
C) management difficulties as the firm increases its size 
D) greater specialization of labor and capital as the firm increases its size 
E) increased total cost when the firm increases its size

Question 15

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (dogs groomed per week) }
\end{array} \
\hline 0 & 0 \
1 & 40 \
2 & 100 \
3 & 150 \
4 & 190 \
5 & 220 \
6 & 240
\end{array}$$
-Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna's total product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon. These are her only costs. When Anna has a staff of 2 workers, her average total cost equals

Accepted Answer

A) $2,400. 
B) $300. 
C) $10.00. 
D) $12.00. 
E) $1,200. 
A) $2,400. 
B) $300. 
C) $10.00. 
D) $12.00. 
E) $1,200.

Question 16

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (lawns mowed per hour) }
\end{array} \
\hline 0 & 0 \
1 & 2 \
2 & 5 \
3 & 8 \
4 & 15 \
5 & 22 \
6 & 26 \
7 & 28
\end{array}$$
-The table above shows the total product schedule for Rick's Lawn Service, a yard care company. When the 4th worker is hired, the ________ product of labor equals ________ lawns mowed.

Accepted Answer

A) average; 60 
B) average; 3.75 
C) marginal; 3.75 
D) marginal; 0 
E) marginal; 15 
A) average; 60 
B) average; 3.75 
C) marginal; 3.75 
D) marginal; 0 
E) marginal; 15

Question 17

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (hair stylings per day) }
\end{array} \
\hline 0 & 0 \
1 & 10 \
2 & 25 \
3 & 45 \
4 & 60 \
5 & 70 \
\hline
\end{array}$$
-The above table shows the total product schedule for Hair Today, a hair styling salon. The average product when four workers are hired is

Accepted Answer

A) 10 hair stylings. 
B) 15 hair stylings. 
C) 20 hair stylings. 
D) 240 hair stylings. 
E) the same as when five workers are hired. 
A) 10 hair stylings. 
B) 15 hair stylings. 
C) 20 hair stylings. 
D) 240 hair stylings. 
E) the same as when five workers are hired.

Question 18

The long run is a time period in which

Accepted Answer

A) some of the firm's resources are fixed. 
B) all of the firm's resources are fixed. 
C) all of the firm's resources are variable. 
D) the firm cannot increase its output. 
E) all costs become explicit costs. 
A) some of the firm's resources are fixed. 
B) all of the firm's resources are fixed. 
C) all of the firm's resources are variable. 
D) the firm cannot increase its output. 
E) all costs become explicit costs.

Question 19

Increasing marginal returns to labor

Accepted Answer

A) occur when a particularly efficient worker is employed. 
B) describe the portion of a total product curve where the marginal product is negative. 
C) mean that two workers produce less than twice the output of one worker. 
D) are the result of specialization and division of labor in the production process. 
E) occur only when there are increasing marginal returns to capital. 
A) occur when a particularly efficient worker is employed. 
B) describe the portion of a total product curve where the marginal product is negative. 
C) mean that two workers produce less than twice the output of one worker. 
D) are the result of specialization and division of labor in the production process. 
E) occur only when there are increasing marginal returns to capital.

Question 20

Which of the following is correct?

Accepted Answer

A) The short run for a firm can be longer than the long run for the same firm. 
B) The short run is the same for all firms. 
C) The long run is the time frame in which the quantities of all resources can be varied. 
D) The long run is the time frame in which all resources are fixed. 
E) The long run does not exist for some firms. 
A) The short run for a firm can be longer than the long run for the same firm. 
B) The short run is the same for all firms. 
C) The long run is the time frame in which the quantities of all resources can be varied. 
D) The long run is the time frame in which all resources are fixed. 
E) The long run does not exist for some firms.

In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a

Total cost includes

If total fixed cost increases, which of the following will NOT change?

Jeremiah runs a bullfrog farm in Frogville, Oklahoma. Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker. Jeremiah must be

Darryl runs a ranch in Jackson, Wyoming. The interest on the debt he incurred to buy his ranch totals $3,000 per year. For Darryl, the interest is

From a firm's viewpoint, opportunity cost is the

Quantity of labor (workers) Total product (hair stylings per day) 0 0 1 10 2 25 3 45 4 60 5 70 -When the average product is at its maximum,

The short run is

The marginal product of labor equals the change in ________ from a one-unit increase in the quantity of labor.

An increase in the price of labor (a variable resource)shifts

Which of the following is an explicit cost in Jim's business venture?

Economies of scale can occur as a result of which of the following?

Quantity of labor (workers) Total product (lawns mowed per hour) 0 0 1 2 2 5 3 8 4 15 5 22 6 26 7 28 -The table above shows the total product schedule for Rick's Lawn Service, a yard care company. When the 4th worker is hired, the product of labor equals lawns mowed.

Quantity of labor (workers) Total product (hair stylings per day) 0 0 1 10 2 25 3 45 4 60 5 70 -The above table shows the total product schedule for Hair Today, a hair styling salon. The average product when four workers are hired is

The long run is a time period in which

Increasing marginal returns to labor

Which of the following is correct?

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 10: Production and Cost

In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a

Total cost includes

If total fixed cost increases, which of the following will NOT change?

Jeremiah runs a bullfrog farm in Frogville, Oklahoma. Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker. Jeremiah must be

Darryl runs a ranch in Jackson, Wyoming. The interest on the debt he incurred to buy his ranch totals $3,000 per year. For Darryl, the interest is

From a firm's viewpoint, opportunity cost is the

Quantity of labor (workers) Total product (hair stylings per day) 0 0 1 10 2 25 3 45 4 60 5 70 -When the average product is at its maximum,

The short run is

The marginal product of labor equals the change in ________ from a one-unit increase in the quantity of labor.

An increase in the price of labor (a variable resource)shifts

Which of the following is an explicit cost in Jim's business venture?

Economies of scale can occur as a result of which of the following?

Quantity of labor (workers) Total product (lawns mowed per hour) 0 0 1 2 2 5 3 8 4 15 5 22 6 26 7 28 -The table above shows the total product schedule for Rick's Lawn Service, a yard care company. When the 4th worker is hired, the ________ product of labor equals ________ lawns mowed.

Quantity of labor (workers) Total product (hair stylings per day) 0 0 1 10 2 25 3 45 4 60 5 70 -The above table shows the total product schedule for Hair Today, a hair styling salon. The average product when four workers are hired is

The long run is a time period in which

Increasing marginal returns to labor

Which of the following is correct?

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Quantity of labor (workers) Total product (lawns mowed per hour) 0 0 1 2 2 5 3 8 4 15 5 22 6 26 7 28 -The table above shows the total product schedule for Rick's Lawn Service, a yard care company. When the 4th worker is hired, the product of labor equals lawns mowed.