Question 1

In order for the law of diminishing returns to be present,we must have:

Accepted Answer

A)  at least one factor of production to be fixed. 
B)  output decreasing as more laborers are hired. 
C)  the price of labor increasing as more workers are hired. 
D)  simultaneous changes in labor and capital. 
E)  double the output when labor input is doubled. 
A)  at least one factor of production to be fixed. 
B)  output decreasing as more laborers are hired. 
C)  the price of labor increasing as more workers are hired. 
D)  simultaneous changes in labor and capital. 
E)  double the output when labor input is doubled.

Question 2

Normal profit is a term for:

Accepted Answer

A)  explicit profit. 
B)  the minimum profit to keep a firm in operation. 
C)  the accounting profit forgone. 
D)  pure economic profit. 
A)  explicit profit. 
B)  the minimum profit to keep a firm in operation. 
C)  the accounting profit forgone. 
D)  pure economic profit.

Question 3

Exhibit 6-5 Workers and output data
  
-In Exhibit 6-5,the marginal product of the second worker is:

Accepted Answer

A)  0. 
B)  8. 
C)  10. 
D)  12. 
E)  20. 
A)  0. 
B)  8. 
C)  10. 
D)  12. 
E)  20.

Question 4

Exhibit 6-8 Costs schedules for producing pizza
  
-By filling in the blanks in Exhibit 6-8,the average variable cost of producing 4 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $40. 
E)  $85. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $40. 
E)  $85.

Question 5

Each potential short-run average total cost curve is tangent to the long-run average cost curve at:

Accepted Answer

A)  the level of output that minimizes short-run average total cost. 
B)  the minimum point of the average total cost curve. 
C)  the minimum point of the long-run average cost curve. 
D)  a single point on the short-run average total cost curve. 
A)  the level of output that minimizes short-run average total cost. 
B)  the minimum point of the average total cost curve. 
C)  the minimum point of the long-run average cost curve. 
D)  a single point on the short-run average total cost curve.

Question 6

During the course of a week,McDonald's has enough time to hire or layoff workers,but it does not have enough time to expand its kitchen or add an additional seating area.In this situation,McDonald's:

Accepted Answer

A)  has no fixed costs. 
B)  is in the short run. 
C)  suffers an economic loss. 
D)  earns a large profit. 
A)  has no fixed costs. 
B)  is in the short run. 
C)  suffers an economic loss. 
D)  earns a large profit.

Question 7

When the curve that envelops the series of possible short-run average total cost curves is horizontal,this means that there are:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  diminishing returns. 
E)  some fixed factors of production. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  diminishing returns. 
E)  some fixed factors of production.

Question 8

Exhibit 6-8 Costs schedules for producing pizza
  
-By filling in the blanks in Exhibit 6-8,the total cost of producing zero pizzas is shown to be equal to:

Accepted Answer

A)  zero. 
B)  $100. 
C)  $5. 
D)  $105. 
E)  $95. 
A)  zero. 
B)  $100. 
C)  $5. 
D)  $105. 
E)  $95.

Question 9

What is the difference between economic and accounting profit? Why is a distinction between them important?

Accepted Answer

An economic profit includes implicit cos

Question 10

A bus is mostly filled with passengers and ready to travel from Los Angeles to San Francisco.At the last minute,a person comes running up to the bus and takes a seat.The change in the bus company's total cost as a result of transporting one more passenger on this trip is called:

Accepted Answer

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

Question 11

If fixed cost is $200,000 and variable cost is $30 per unit over the relevant range of output,when 10,000 units are produced,the average total cost will be:

Accepted Answer

A)  $20. 
B)  $30. 
C)  $50. 
D)  $70. 
A)  $20. 
B)  $30. 
C)  $50. 
D)  $70.

Question 12

As a fishing firm hires its first,second,and third workers,it could find that marginal product actually rises.The reason for this is:

Accepted Answer

A)  diminishing returns have set in. 
B)  the division of labor creates greater productivity. 
C)  the firm has hired another boat. 
D)  all tasks are shared by all workers. 
E)  less qualified workers are becoming available. 
A)  diminishing returns have set in. 
B)  the division of labor creates greater productivity. 
C)  the firm has hired another boat. 
D)  all tasks are shared by all workers. 
E)  less qualified workers are becoming available.

Question 13

Exhibit 6-17 Long-run average cost curve
  
-In Exhibit 6-17,short-run average total cost,short-run marginal cost,and long-run average cost are all equal at which level of output per week?

Accepted Answer

A)  Q₁ units. 
B)  Q₂ units. 
C)  Q₃ units. 
D)  Q₄ units. 
A)  Q₁ units. 
B)  Q₂ units. 
C)  Q₃ units. 
D)  Q₄ units.

Question 14

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production
  
-In Exhibit 6-10,the publisher's fixed cost is equal to:

Accepted Answer

A)  $50. 
B)  $100. 
C)  $200. 
D)  $300. 
A)  $50. 
B)  $100. 
C)  $200. 
D)  $300.

Question 15

Explicit costs would include

Accepted Answer

A)  rent. 
B)  the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business. 
C)  the loss of rent on a building the business owner owns and uses in his/her business. 
D)  the opportunity costs of the business owner's time. 
E)  the use of tools owned by the business owner and dedicated to the business. 
A)  rent. 
B)  the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business. 
C)  the loss of rent on a building the business owner owns and uses in his/her business. 
D)  the opportunity costs of the business owner's time. 
E)  the use of tools owned by the business owner and dedicated to the business.

Question 16

The decreasing portion of a firm's long run average cost curve is attributable to:

Accepted Answer

A)  diminishing returns to scale. 
B)  increasing marginal cost. 
C)  economies of scale. 
D)  diseconomies of scale. 
E)  constant returns to scale. 
A)  diminishing returns to scale. 
B)  increasing marginal cost. 
C)  economies of scale. 
D)  diseconomies of scale. 
E)  constant returns to scale.

Question 17

If a firm enlarges its factory size and realizes higher average (per unit)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 18

Exhibit 6-8 Costs schedules for producing pizza
  
-By filling in the blanks in Exhibit 6-8,the variable cost of producing 4 pizzas is shown to be equal to:

Accepted Answer

A)  $100. 
B)  $40. 
C)  $60. 
D)  $85. 
E)  $185. 
A)  $100. 
B)  $40. 
C)  $60. 
D)  $85. 
E)  $185.

Question 19

Exhibit 6-11 Short-run cost curves schedule for pizzeria's hourly production
  
-In Exhibit 6-11,what is the marginal cost of increasing production from 10 to 20 pizzas per hour?

Accepted Answer

A)  $2 per pizza. 
B)  $3 per pizza. 
C)  $4 per pizza. 
D)  $5 per pizza. 
A)  $2 per pizza. 
B)  $3 per pizza. 
C)  $4 per pizza. 
D)  $5 per pizza.

Question 20

A firm estimates that when output is 10,its total costs are $900.It also finds that when output is 11,its total costs are $920.The marginal cost of the eleventh unit of output is:

Accepted Answer

A)  $1. 
B)  $20. 
C)  $90. 
D)  $900. 
E)  $920. 
A)  $1. 
B)  $20. 
C)  $90. 
D)  $900. 
E)  $920.

Exam 6: Production Costs

In order for the law of diminishing returns to be present,we must have:

Normal profit is a term for:

Exhibit 6-5 Workers and output data -In Exhibit 6-5,the marginal product of the second worker is:

Exhibit 6-8 Costs schedules for producing pizza -By filling in the blanks in Exhibit 6-8,the average variable cost of producing 4 pizzas is shown to be equal to:

Each potential short-run average total cost curve is tangent to the long-run average cost curve at:

During the course of a week,McDonald's has enough time to hire or layoff workers,but it does not have enough time to expand its kitchen or add an additional seating area.In this situation,McDonald's:

When the curve that envelops the series of possible short-run average total cost curves is horizontal,this means that there are:

Exhibit 6-8 Costs schedules for producing pizza -By filling in the blanks in Exhibit 6-8,the total cost of producing zero pizzas is shown to be equal to:

What is the difference between economic and accounting profit? Why is a distinction between them important?

A bus is mostly filled with passengers and ready to travel from Los Angeles to San Francisco.At the last minute,a person comes running up to the bus and takes a seat.The change in the bus company's total cost as a result of transporting one more passenger on this trip is called:

If fixed cost is $200,000 and variable cost is $30 per unit over the relevant range of output,when 10,000 units are produced,the average total cost will be:

As a fishing firm hires its first,second,and third workers,it could find that marginal product actually rises.The reason for this is:

Exhibit 6-17 Long-run average cost curve -In Exhibit 6-17,short-run average total cost,short-run marginal cost,and long-run average cost are all equal at which level of output per week?

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production -In Exhibit 6-10,the publisher's fixed cost is equal to:

Explicit costs would include

The decreasing portion of a firm's long run average cost curve is attributable to:

If a firm enlarges its factory size and realizes higher average (per unit)costs of production then:

Exhibit 6-8 Costs schedules for producing pizza -By filling in the blanks in Exhibit 6-8,the variable cost of producing 4 pizzas is shown to be equal to:

Exhibit 6-11 Short-run cost curves schedule for pizzeria's hourly production -In Exhibit 6-11,what is the marginal cost of increasing production from 10 to 20 pizzas per hour?

A firm estimates that when output is 10,its total costs are $900.It also finds that when output is 11,its total costs are $920.The marginal cost of the eleventh unit of output is:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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