Question 1

Implicit costs are:

Accepted Answer

A)  the opportunity costs of using resources owned by the entrepreneur in his/her own business. 
B)  payments the business owner must make on borrowed funds. 
C)  costs which vary as the level of output varies. 
D)  those payments the business owner makes in cash. 
E)  the payments the business owner makes for public relations, such as donations to charity. 
A)  the opportunity costs of using resources owned by the entrepreneur in his/her own business. 
B)  payments the business owner must make on borrowed funds. 
C)  costs which vary as the level of output varies. 
D)  those payments the business owner makes in cash. 
E)  the payments the business owner makes for public relations, such as donations to charity.

Question 2

Exhibit 6-1 Production of pizza data
  
-Exhibit 6-1 shows the change in the production of pizzas as more workers are hired.The marginal product of the second employee equals:

Accepted Answer

A)  4. 
B)  10. 
C)  14. 
D)  6. 
E)  15. 
A)  4. 
B)  10. 
C)  14. 
D)  6. 
E)  15.

Question 3

Exhibit 6-1 Production of pizza data
  
-Exhibit 6-1 shows the change in the production of pizzas as more workers are hired.The total output of pizzas after hiring 4 workers is:

Accepted Answer

A)  4. 
B)  15. 
C)  18. 
D)  3. 
E)  1. 
A)  4. 
B)  15. 
C)  18. 
D)  3. 
E)  1.

Question 4

Exhibit 6-9 Cost schedule for firm X
  
-As shown in Exhibit 6-9,the total cost of producing 5 units is:

Accepted Answer

A)  zero. 
B)  $227. 
C)  $250. 
D)  $100. 
A)  zero. 
B)  $227. 
C)  $250. 
D)  $100.

Question 5

Which of the following is most likely to be true of economic and accounting profits?

Accepted Answer

A)  Economic profits are less than accounting profits. 
B)  Accounting profits are less than economic profits. 
C)  Economic profits plus accounting profits equal zero. 
D)  Accounting profits minus economic profits equal zero. 
A)  Economic profits are less than accounting profits. 
B)  Accounting profits are less than economic profits. 
C)  Economic profits plus accounting profits equal zero. 
D)  Accounting profits minus economic profits equal zero.

Question 6

Which of the following is considered to be a fixed cost of operating an automobile?

Accepted Answer

A)  Gasoline. 
B)  Tires. 
C)  Oil change. 
D)  Maintenance. 
E)  Registration fees. 
A)  Gasoline. 
B)  Tires. 
C)  Oil change. 
D)  Maintenance. 
E)  Registration fees.

Question 7

Exhibit 6-9 Cost schedule for firm X
  
-As shown in Exhibit 6-9,the total cost of producing 4 units is:

Accepted Answer

A)  zero. 
B)  $227. 
C)  $250. 
D)  $100. 
A)  zero. 
B)  $227. 
C)  $250. 
D)  $100.

Question 8

In the long run,total fixed cost will:

Accepted Answer

A)  remain constant. 
B)  increase. 
C)  decrease. 
D)  not exist by definition. 
A)  remain constant. 
B)  increase. 
C)  decrease. 
D)  not exist by definition.

Question 9

The marginal cost is the:

Accepted Answer

A) b and c. 
B) change in total cost as the quantity changes by one unit. 
C) change in total variable cost as the quantity changes by one unit. 
D) change in total fixed cost as the quantity changes by one unit. 
E) same as the fixed cost when average fixed cost is at a minimum. 
A) b and c. 
B) change in total cost as the quantity changes by one unit. 
C) change in total variable cost as the quantity changes by one unit. 
D) change in total fixed cost as the quantity changes by one unit. 
E) same as the fixed cost when average fixed cost is at a minimum.

Question 10

When total revenue minus total cost is equal to zero,the firm is:

Accepted Answer

A)  earning above-average economic profit. 
B)  earning a normal profit. 
C)  losing too much money to stay in business. 
D)  earning abnormally low profits. 
A)  earning above-average economic profit. 
B)  earning a normal profit. 
C)  losing too much money to stay in business. 
D)  earning abnormally low profits.

Question 11

Exhibit 6-12 Cost schedule for producing pizza
  
-By filling in the blanks in Exhibit 6-12,the AFC of 4 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
E)  $78. 
A)  $10. 
B)  $9.50. 
C)  $19.50. 
D)  $40. 
E)  $78.

Question 12

Fixed costs are best defined as:

Accepted Answer

A)  costs that do not vary with output. 
B)  costs that are at a minimum when output approaches the firm's capacity. 
C)  the amount that one more unit of output adds to total costs. 
D)  costs that decline as output increases. 
A)  costs that do not vary with output. 
B)  costs that are at a minimum when output approaches the firm's capacity. 
C)  the amount that one more unit of output adds to total costs. 
D)  costs that decline as output increases.

Question 13

A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers.The marginal product of the fifth worker expressed in gallons per worker per day,is:

Accepted Answer

A)  35. 
B)  50. 
C)  70. 
D)  350. 
A)  35. 
B)  50. 
C)  70. 
D)  350.

Question 14

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

Accepted Answer

A)  constant. 
B)  falling. 
C)  rising. 
D)  subject to diminishing returns. 
A)  constant. 
B)  falling. 
C)  rising. 
D)  subject to diminishing returns.

Question 15

Suppose a firm earns an accounting profit.This means the firm also earns a positive economic profit.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true at the point where diminishing returns set in?

Accepted Answer

A)  Both marginal product and marginal cost are at a maximum. 
B)  Both marginal product and marginal cost are at a minimum. 
C)  Marginal product is at a maximum and marginal cost is at a minimum. 
D)  Marginal product is at a minimum and marginal cost is at a maximum. 
A)  Both marginal product and marginal cost are at a maximum. 
B)  Both marginal product and marginal cost are at a minimum. 
C)  Marginal product is at a maximum and marginal cost is at a minimum. 
D)  Marginal product is at a minimum and marginal cost is at a maximum.

Question 17

In the long run,a firm might experience rising per-unit cost due to:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of supply. 
D)  the law of diminishing marginal returns. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of supply. 
D)  the law of diminishing marginal returns.

Question 18

The primary cause of diseconomies of scale is scarcity of machinery and capital.

Accepted Answer

A) True 
 B)False

Question 19

A firm's average fixed cost curve can never be U-shaped,even if its other average cost curves are U-shaped.

Accepted Answer

A) True 
 B)False

Question 20

The change in total cost that results from the production of one additional unit is called:

Accepted Answer

A)  marginal revenue. 
B)  average variable cost. 
C)  marginal cost. 
D)  average total cost. 
A)  marginal revenue. 
B)  average variable cost. 
C)  marginal cost. 
D)  average total cost.

Exam 6: Production Costs

Implicit costs are:

Exhibit 6-1 Production of pizza data -Exhibit 6-1 shows the change in the production of pizzas as more workers are hired.The marginal product of the second employee equals:

Exhibit 6-1 Production of pizza data -Exhibit 6-1 shows the change in the production of pizzas as more workers are hired.The total output of pizzas after hiring 4 workers is:

Exhibit 6-9 Cost schedule for firm X -As shown in Exhibit 6-9,the total cost of producing 5 units is:

Which of the following is most likely to be true of economic and accounting profits?

Which of the following is considered to be a fixed cost of operating an automobile?

Exhibit 6-9 Cost schedule for firm X -As shown in Exhibit 6-9,the total cost of producing 4 units is:

In the long run,total fixed cost will:

The marginal cost is the:

When total revenue minus total cost is equal to zero,the firm is:

Exhibit 6-12 Cost schedule for producing pizza -By filling in the blanks in Exhibit 6-12,the AFC of 4 pizzas is shown to be equal to:

Fixed costs are best defined as:

A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers.The marginal product of the fifth worker expressed in gallons per worker per day,is:

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

Suppose a firm earns an accounting profit.This means the firm also earns a positive economic profit.

Which of the following is true at the point where diminishing returns set in?

In the long run,a firm might experience rising per-unit cost due to:

The primary cause of diseconomies of scale is scarcity of machinery and capital.

A firm's average fixed cost curve can never be U-shaped,even if its other average cost curves are U-shaped.

The change in total cost that results from the production of one additional unit is called:

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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