Question 1

When Ford hires Ernst and Young Consulting to help Ford redesign its marketing, Ford's payment to Ernst and Young is classified as

Accepted Answer

A) an explicit cost. 
B) depreciation. 
C) an implicit cost. 
D) normal profit. 
E) economic profit. 
A) an explicit cost. 
B) depreciation. 
C) an implicit cost. 
D) normal profit. 
E) economic profit.

Question 2

The long-run average cost curve is U-shaped because of which of the following?

Accepted Answer

A) decreasing marginal returns as more labor is hired 
B) constant fixed costs as output is increased 
C) economies and diseconomies of scale 
D) increasing marginal returns as more labor is hired 
E) decreasing average fixed costs as output is increased 
A) decreasing marginal returns as more labor is hired 
B) constant fixed costs as output is increased 
C) economies and diseconomies of scale 
D) increasing marginal returns as more labor is hired 
E) decreasing average fixed costs as output is increased

Question 3

The law of decreasing returns applies to

Accepted Answer

A) the long-run average cost curve. 
B) average total cost. 
C) diseconomies of scale. 
D) changes in a variable input with a given quantity of fixed inputs. 
E) changes in a fixed input with a given quantity of variable inputs. 
A) the long-run average cost curve. 
B) average total cost. 
C) diseconomies of scale. 
D) changes in a variable input with a given quantity of fixed inputs. 
E) changes in a fixed input with a given quantity of variable inputs.

Question 4

Suppose a firm's total revenue is $1,000,000. The firm has incurred explicit costs of $750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of normal profit. What is the firm's economic profit?

Accepted Answer

A) $250,000 
B) $200,000 
C) $190,000 
D) $167,000 
E) $180,000 
A) $250,000 
B) $200,000 
C) $190,000 
D) $167,000 
E) $180,000

Question 5

Based on the figure above, curve B is the firm's

Accepted Answer

A) marginal cost curve. 
B) total cost curve. 
C) average total cost curve. 
D) average variable cost curve. 
E) average fixed cost curve. 
A) marginal cost curve. 
B) total cost curve. 
C) average total cost curve. 
D) average variable cost curve. 
E) average fixed cost curve.

Question 6

In the long run, the firm ________ change the number of workers it employs and ________ change the size of its plant.

Accepted Answer

A) can; can 
B) can; cannot 
C) cannot; can 
D) cannot; cannot 
E) In order to answer the question more information is needed about how long is the long run. 
A) can; can 
B) can; cannot 
C) cannot; can 
D) cannot; cannot 
E) In order to answer the question more information is needed about how long is the long run.

Question 7

Jake opens a pig farm in Idaho. To start his farm, he uses his entire $50,000 of savings from his savings account. The bank was paying him $2,500 interest on his saving. Explain why the $2,500 is one of Jake's costs.

Accepted Answer

When Jake provides the $50,000 to financ

Question 8

Which of the following statements is true?

Accepted Answer

A) In the long run, the average cost curve is always downward sloping. 
B) In the long run, the quantities of all inputs are fixed. 
C) In the long run, the firms' fixed costs are greater than its variable costs. 
D) In the long run, all costs are variable costs. 
E) In the long run, the total variable cost equals the total fixed cost. 
A) In the long run, the average cost curve is always downward sloping. 
B) In the long run, the quantities of all inputs are fixed. 
C) In the long run, the firms' fixed costs are greater than its variable costs. 
D) In the long run, all costs are variable costs. 
E) In the long run, the total variable cost equals the total fixed cost.

Question 9

Curve B is the firm's

Accepted Answer

A) marginal cost curve. 
B) total cost curve. 
C) average total cost curve. 
D) total variable cost curve. 
E) total fixed cost curve. 
A) marginal cost curve. 
B) total cost curve. 
C) average total cost curve. 
D) total variable cost curve. 
E) total fixed cost curve.

Question 10

A firm pays $50,000 for a machine that is used in production for one year, after which it is sold for $40,000 to another firm. The $10,000 difference is

Accepted Answer

A) an explicit cost of production. 
B) economic depreciation, an implicit cost of production. 
C) normal profit. 
D) not counted as an economic cost of production. 
E) not an opportunity cost because it is not actually paid. 
A) an explicit cost of production. 
B) economic depreciation, an implicit cost of production. 
C) normal profit. 
D) not counted as an economic cost of production. 
E) not an opportunity cost because it is not actually paid.

Question 11

If a firm does not produce any output, its

Accepted Answer

A) total fixed cost must be zero. 
B) economic profit must be positive. 
C) total variable cost must be zero. 
D) total costs must be zero. 
E) marginal cost must be zero. 
A) total fixed cost must be zero. 
B) economic profit must be positive. 
C) total variable cost must be zero. 
D) total costs must be zero. 
E) marginal cost must be zero.

Question 12

A firm's fundamental goal is

Accepted Answer

A) different for each firm. 
B) to make a quality product. 
C) to maximize profit. 
D) to gain market share. 
E) to decrease its employment of workers in order to cut its costs. 
A) different for each firm. 
B) to make a quality product. 
C) to maximize profit. 
D) to gain market share. 
E) to decrease its employment of workers in order to cut its costs.

Question 13

One of the major reasons for the U-shaped average total cost curve is the fact that

Accepted Answer

A) there are increasing returns from labor regardless of the number of workers employed. 
B) there eventually are decreasing returns from labor as more workers are employed. 
C) prices fall as output increases. 
D) the average fixed cost increases as more output is produced. 
E) the variable cost decreases as more output is produced. 
A) there are increasing returns from labor regardless of the number of workers employed. 
B) there eventually are decreasing returns from labor as more workers are employed. 
C) prices fall as output increases. 
D) the average fixed cost increases as more output is produced. 
E) the variable cost decreases as more output is produced.

Question 14

If average variable costs increase as output increases, then

Accepted Answer

A) total fixed cost must be increasing also. 
B) marginal cost must be greater than average variable cost. 
C) total cost must be constant. 
D) output must be zero. 
E) average total cost must be increasing also. 
A) total fixed cost must be increasing also. 
B) marginal cost must be greater than average variable cost. 
C) total cost must be constant. 
D) output must be zero. 
E) average total cost must be increasing also.

Question 15

The average product curve

Accepted Answer

A) initially falls then rises. 
B) rises as average variable cost increases. 
C) initially rises and then falls. 
D) shows how productivity changes as output changes. 
E) intersects the marginal cost curve when the average product curve is at its maximum. 
A) initially falls then rises. 
B) rises as average variable cost increases. 
C) initially rises and then falls. 
D) shows how productivity changes as output changes. 
E) intersects the marginal cost curve when the average product curve is at its maximum.

Question 16

Based on the figure above, curve D is the firm's

Accepted Answer

A) marginal cost curve. 
B) total cost curve. 
C) average total cost curve. 
D) average variable cost curve. 
E) average fixed cost curve. 
A) marginal cost curve. 
B) total cost curve. 
C) average total cost curve. 
D) average variable cost curve. 
E) average fixed cost curve.

Question 17

What are economies of scale?
 What is the main source of economies of scale?

Accepted Answer

Economies of scale are features of the f

Question 18

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity of labor } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Total product } \
\text { (lawns mowed per week) }
\end{array} \
\hline 0 & 0 \
1 & 30 \
2 & 55 \
3 & 75 \
4 & 80 \
5 & 82
\end{array}$$
-Kenya owns a lawn mowing company. His total product schedule is in the above table. The marginal product of the fourth worker is ________ lawns mowed per week.

Accepted Answer

A) 80 
B) 25 
C) 20 
D) 5 
E) 320 
A) 80 
B) 25 
C) 20 
D) 5 
E) 320

Question 19

The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of i. constant total fixed cost.
Ii. increasing and then decreasing marginal returns as more labor is hired.
Iii. economies and diseconomies of scale as the plant size increases.

Accepted Answer

A) only i 
B) only ii 
C) i and iii 
D) ii and iii 
E) i, ii, and iii 
A) only i 
B) only ii 
C) i and iii 
D) ii and iii 
E) i, ii, and iii

Question 20

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Labor } \
\text { (workers) }
\end{array} & \text { Output } \
\hline 0 & 0 \
1 & 20 \
2 & 50 \
3 & 70 \
4 & 80 \
5 & 85
\end{array}$$
-The table above shows a total product schedule. Suppose that labor costs $20 per worker and fixed costs are $60. The average total cost of producing 80 units equals ________ per unit.

Accepted Answer

A) $0.75 
B) $1.00 
C) $1.75 
D) $60 
E) $0.25 
A) $0.75 
B) $1.00 
C) $1.75 
D) $60 
E) $0.25

When Ford hires Ernst and Young Consulting to help Ford redesign its marketing, Ford's payment to Ernst and Young is classified as

The long-run average cost curve is U-shaped because of which of the following?

The law of decreasing returns applies to

Based on the figure above, curve B is the firm's

In the long run, the firm change the number of workers it employs and change the size of its plant.

Jake opens a pig farm in Idaho. To start his farm, he uses his entire $50,000 of savings from his savings account. The bank was paying him $2,500 interest on his saving. Explain why the $2,500 is one of Jake's costs.

Which of the following statements is true?

Curve B is the firm's

A firm pays $50,000 for a machine that is used in production for one year, after which it is sold for $40,000 to another firm. The $10,000 difference is

If a firm does not produce any output, its

A firm's fundamental goal is

One of the major reasons for the U-shaped average total cost curve is the fact that

If average variable costs increase as output increases, then

The average product curve

Based on the figure above, curve D is the firm's

What are economies of scale? What is the main source of economies of scale?

Quantity of labor (workers) Total product (lawns mowed per week) 0 0 1 30 2 55 3 75 4 80 5 82 -Kenya owns a lawn mowing company. His total product schedule is in the above table. The marginal product of the fourth worker is ________ lawns mowed per week.

The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of i. constant total fixed cost. Ii. increasing and then decreasing marginal returns as more labor is hired. Iii. economies and diseconomies of scale as the plant size increases.

Labor (workers) Output 0 0 1 20 2 50 3 70 4 80 5 85 -The table above shows a total product schedule. Suppose that labor costs $20 per worker and fixed costs are $60. The average total cost of producing 80 units equals ________ per unit.

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

When Ford hires Ernst and Young Consulting to help Ford redesign its marketing, Ford's payment to Ernst and Young is classified as

The long-run average cost curve is U-shaped because of which of the following?

The law of decreasing returns applies to

Based on the figure above, curve B is the firm's

In the long run, the firm ________ change the number of workers it employs and ________ change the size of its plant.

Jake opens a pig farm in Idaho. To start his farm, he uses his entire $50,000 of savings from his savings account. The bank was paying him $2,500 interest on his saving. Explain why the $2,500 is one of Jake's costs.

Which of the following statements is true?

Curve B is the firm's

A firm pays $50,000 for a machine that is used in production for one year, after which it is sold for $40,000 to another firm. The $10,000 difference is

If a firm does not produce any output, its

A firm's fundamental goal is

One of the major reasons for the U-shaped average total cost curve is the fact that

If average variable costs increase as output increases, then

The average product curve

Based on the figure above, curve D is the firm's

What are economies of scale? What is the main source of economies of scale?

Quantity of labor (workers) Total product (lawns mowed per week) 0 0 1 30 2 55 3 75 4 80 5 82 -Kenya owns a lawn mowing company. His total product schedule is in the above table. The marginal product of the fourth worker is ________ lawns mowed per week.

The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of i. constant total fixed cost. Ii. increasing and then decreasing marginal returns as more labor is hired. Iii. economies and diseconomies of scale as the plant size increases.

Labor (workers) Output 0 0 1 20 2 50 3 70 4 80 5 85 -The table above shows a total product schedule. Suppose that labor costs $20 per worker and fixed costs are $60. The average total cost of producing 80 units equals ________ per unit.

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

In the long run, the firm change the number of workers it employs and change the size of its plant.