Question 1

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 fifth employee equals:

Accepted Answer

A)  4. 
B)  18. 
C)  19. 
D)  3. 
E)  1. 
A)  4. 
B)  18. 
C)  19. 
D)  3. 
E)  1.

Question 2

The short run is a period of time:

Accepted Answer

A)  in which a firm uses at least one fixed input. 
B)  that is long enough to permit changes in the firm's plant size. 
C)  in which production occurs within one year. 
D)  in which production occurs within six months. 
A)  in which a firm uses at least one fixed input. 
B)  that is long enough to permit changes in the firm's plant size. 
C)  in which production occurs within one year. 
D)  in which production occurs within six months.

Question 3

Suppose a firm has an output of 10,000 cans and a total fixed cost of $2,000.At an output of 5,000 the difference between the total cost and the total variable cost is:

Accepted Answer

A) b and c. 
B) $0.40. 
C) the average fixed cost. 
D) $2,000. 
E) $0.20. 
A) b and c. 
B) $0.40. 
C) the average fixed cost. 
D) $2,000. 
E) $0.20.

Question 4

Implicit costs are best thought of as:

Accepted Answer

A)  variable costs. 
B)  marginal costs. 
C)  accounting costs. 
D)  opportunity costs. 
E)  sunk costs. 
A)  variable costs. 
B)  marginal costs. 
C)  accounting costs. 
D)  opportunity costs. 
E)  sunk costs.

Question 5

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

Accepted Answer

A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs. 
A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs.

Question 6

For most firms,the costs of energy and raw materials will be total fixed costs.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 6-14 Cost curves
  
-In Exhibit 6-14,economies of scale only exist for output levels up to:

Accepted Answer

A)  1,000. 
B)  2,000. 
C)  3,000. 
D)  4,000. 
E)  greater than 4,000. 
A)  1,000. 
B)  2,000. 
C)  3,000. 
D)  4,000. 
E)  greater than 4,000.

Question 8

A farm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 bushels with 6 workers.The marginal product of the sixth worker for this farm is:

Accepted Answer

A)  10,000 bushels. 
B)  3,000 bushels. 
C)  500 bushels. 
D)  23,000 bushels. 
A)  10,000 bushels. 
B)  3,000 bushels. 
C)  500 bushels. 
D)  23,000 bushels.

Question 9

The short run is a time period such that:

Accepted Answer

A)  the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B)  the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C)  the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D)  new firms may build plants and enter the industry. 
A)  the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B)  the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C)  the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D)  new firms may build plants and enter the industry.

Question 10

Exhibit 6-15 Long-run average cost
  
-If the firm represented in Exhibit 6-15 is operating with a plant whose size corresponds to short-run average total cost curve A,the level of output that would minimize its short-run average total cost is:

Accepted Answer

A)  500 units per week. 
B)  1,000 units per week. 
C)  1,500 units per week. 
D)  2,000 units per week. 
A)  500 units per week. 
B)  1,000 units per week. 
C)  1,500 units per week. 
D)  2,000 units per week.

Question 11

Exhibit 6-15 Long-run average cost
  
-In Exhibit 6-15,economies of scale exist up to:

Accepted Answer

A)  500 units of output per week. 
B)  1,000 units of output per week. 
C)  1,500 units of output. 
D)  2,000 units of output. 
A)  500 units of output per week. 
B)  1,000 units of output per week. 
C)  1,500 units of output. 
D)  2,000 units of output.

Question 12

Economies of scale can be caused by all of the following except:

Accepted Answer

A)  price discounts for large scale purchases. 
B)  labor specialization. 
C)  use of more productive equipment. 
D)  increases in the firm's average total cost. 
E)  more cost-efficient methods of marketing. 
A)  price discounts for large scale purchases. 
B)  labor specialization. 
C)  use of more productive equipment. 
D)  increases in the firm's average total cost. 
E)  more cost-efficient methods of marketing.

Question 13

If a firm has total revenue of $200 million,explicit costs of $190 million,and implicit costs of $30 million,its economic profit is:

Accepted Answer

A)  $200 million. 
B)  $70 million. 
C)  $10 million. 
D)  -$10 million. 
E)  -$20 million. 
A)  $200 million. 
B)  $70 million. 
C)  $10 million. 
D)  -$10 million. 
E)  -$20 million.

Question 14

Economic profit equals accounting profit minus implicit costs.

Accepted Answer

A) True 
 B)False

Question 15

Marginal product measures the change in:

Accepted Answer

A)  total cost brought about by changing production by one unit. 
B)  product price brought about by changing production by one unit. 
C)  a firm's revenue brought about by changing production by one unit. 
D)  the firm's output brought about by employing one additional unit of input. 
E)  the firm's profit brought about by employing one more input. 
A)  total cost brought about by changing production by one unit. 
B)  product price brought about by changing production by one unit. 
C)  a firm's revenue brought about by changing production by one unit. 
D)  the firm's output brought about by employing one additional unit of input. 
E)  the firm's profit brought about by employing one more input.

Question 16

Applying a price of labor to the law of diminishing returns generates:

Accepted Answer

A)  the law of increasing costs. 
B)  less output as more labor is hired. 
C)  differences in the quality of labor. 
D)  a negatively-sloped labor supply curve. 
E)  specialization and the division of labor. 
A)  the law of increasing costs. 
B)  less output as more labor is hired. 
C)  differences in the quality of labor. 
D)  a negatively-sloped labor supply curve. 
E)  specialization and the division of labor.

Question 17

At the point where marginal cost equals average variable cost,

Accepted Answer

A) b and c. 
B) marginal cost is rising. 
C) average total cost is at its minimum. 
D) average variable cost is falling. 
E) there is no total cost. 
A) b and c. 
B) marginal cost is rising. 
C) average total cost is at its minimum. 
D) average variable cost is falling. 
E) there is no total cost.

Question 18

Paul's Plumbing is a small business that employs 12 people.Which of the following is most likely to be a fixed cost for Paul's Plumbing?

Accepted Answer

A)  The tax and insurance payments on the property owned by the firm. 
B)  The wages paid to the 12 employees. 
C)  The payroll taxes on the wages of the 12 employees. 
D)  The salary paid to Paul, who is the manager of the firm. 
A)  The tax and insurance payments on the property owned by the firm. 
B)  The wages paid to the 12 employees. 
C)  The payroll taxes on the wages of the 12 employees. 
D)  The salary paid to Paul, who is the manager of the firm.

Question 19

A firm's marginal product curve slopes downward throughout its length.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 6-1 Production of pizza data
  
-Exhibit 6-1 shows the change in the short run production of pizzas as more workers are hired.The table shows marginal product increasing between the 0 to 2 hired workers.A possible reason for this increased marginal product is:

Accepted Answer

A)  increased wages. 
B)  increases in plant size. 
C)  decreases in fixed cost. 
D)  increased division of labor as additional workers are hired. 
E)  increased product price. 
A)  increased wages. 
B)  increases in plant size. 
C)  decreases in fixed cost. 
D)  increased division of labor as additional workers are hired. 
E)  increased product price.

Exam 6: Production Costs

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 fifth employee equals:

The short run is a period of time:

Suppose a firm has an output of 10,000 cans and a total fixed cost of $2,000.At an output of 5,000 the difference between the total cost and the total variable cost is:

Implicit costs are best thought of as:

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

For most firms,the costs of energy and raw materials will be total fixed costs.

Exhibit 6-14 Cost curves -In Exhibit 6-14,economies of scale only exist for output levels up to:

A farm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 bushels with 6 workers.The marginal product of the sixth worker for this farm is:

The short run is a time period such that:

Exhibit 6-15 Long-run average cost -If the firm represented in Exhibit 6-15 is operating with a plant whose size corresponds to short-run average total cost curve A,the level of output that would minimize its short-run average total cost is:

Exhibit 6-15 Long-run average cost -In Exhibit 6-15,economies of scale exist up to:

Economies of scale can be caused by all of the following except:

If a firm has total revenue of $200 million,explicit costs of $190 million,and implicit costs of $30 million,its economic profit is:

Economic profit equals accounting profit minus implicit costs.

Marginal product measures the change in:

Applying a price of labor to the law of diminishing returns generates:

At the point where marginal cost equals average variable cost,

Paul's Plumbing is a small business that employs 12 people.Which of the following is most likely to be a fixed cost for Paul's Plumbing?

A firm's marginal product curve slopes downward throughout its length.

Exhibit 6-1 Production of pizza data -Exhibit 6-1 shows the change in the short run production of pizzas as more workers are hired.The table shows marginal product increasing between the 0 to 2 hired workers.A possible reason for this increased marginal product 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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