Question 1

Constant returns to scale exist over the range of output for which the long-run average cost is:

Accepted Answer

A)  neither rising or falling. 
B)  falling. 
C)  rising. 
D)  none of the above. 
A)  neither rising or falling. 
B)  falling. 
C)  rising. 
D)  none of the above.

Question 2

Diseconomies of scale exist for all of the following reasons except:

Accepted Answer

A)  bureaucratic inefficiencies. 
B)  management problems. 
C)  failures in information flows. 
D)  firm size is too small. 
E)  organizational problems. 
A)  bureaucratic inefficiencies. 
B)  management problems. 
C)  failures in information flows. 
D)  firm size is too small. 
E)  organizational problems.

Question 3

If the units of variable input in a production process are 1,2,3,4,and 5,and the corresponding total outputs are 30,34,37,39,and 40,respectively.The marginal product of the fourth unit is:

Accepted Answer

A)  2. 
B)  1. 
C)  37. 
D)  39. 
A)  2. 
B)  1. 
C)  37. 
D)  39.

Question 4

In the short run,a firm will eventually experience rising per-unit costs because of:

Accepted Answer

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

Question 5

Each short-run average total cost curve is tangent at its lowest point to the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 6-12 Cost schedule for producing pizza
  
-By filling in the blanks in Exhibit 6-12,the ATC of 3 pizzas is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40. 
A)  $10. 
B)  $13.33. 
C)  $9. 
D)  $22.33. 
E)  $40.

Question 7

Which of the following is not an explicit cost?

Accepted Answer

A)  Salaries. 
B)  Sales taxes. 
C)  Utilities, such as gas and electricity. 
D)  Insurance. 
E)  The firm owner's time. 
A)  Salaries. 
B)  Sales taxes. 
C)  Utilities, such as gas and electricity. 
D)  Insurance. 
E)  The firm owner's time.

Question 8

Variable inputs are defined as any resource that:

Accepted Answer

A)  varies with the size of the firm's plant. 
B)  cannot be changed as output changes. 
C)  can be changed as output changes. 
D)  can be increased or decreased hourly. 
A)  varies with the size of the firm's plant. 
B)  cannot be changed as output changes. 
C)  can be changed as output changes. 
D)  can be increased or decreased hourly.

Question 9

Which of the following is an explicit cost?

Accepted Answer

A)  The opportunity cost of an owner/entrepreneur's time invested in the firm. 
B)  The opportunity cost of the money the business owner/entrepreneur has invested in the firm. 
C)  The wages paid to workers. 
D)  None of the above. 
A)  The opportunity cost of an owner/entrepreneur's time invested in the firm. 
B)  The opportunity cost of the money the business owner/entrepreneur has invested in the firm. 
C)  The wages paid to workers. 
D)  None of the above.

Question 10

In the short run,if average variable cost equals $50,average total cost equals $75,and output equals 100,the total fixed cost must be:

Accepted Answer

A)  $25. 
B)  $2,500. 
C)  $5,000. 
D)  $7,500. 
A)  $25. 
B)  $2,500. 
C)  $5,000. 
D)  $7,500.

Question 11

What is the shape of the average total cost curve for a firm in the short run?

Accepted Answer

A)  U-shaped. 
B)  A horizontal line. 
C)  A vertical line. 
D)  A curve that slopes upward to the right. 
A)  U-shaped. 
B)  A horizontal line. 
C)  A vertical line. 
D)  A curve that slopes upward to the right.

Question 12

Exhibit 6-8 Costs schedules for producing pizza
  
-Which of the following is true about average fixed cost?

Accepted Answer

A)  Average fixed cost has a U-shape, and marginal cost crosses average fixed cost at its minimum point. 
B)  Average fixed cost does not vary as output increases. 
C)  Average fixed cost is the difference between marginal cost and average total cost. 
D)  Average fixed cost is total fixed cost divided by the quantity of output produced, and it declines steadily as output increases. 
A)  Average fixed cost has a U-shape, and marginal cost crosses average fixed cost at its minimum point. 
B)  Average fixed cost does not vary as output increases. 
C)  Average fixed cost is the difference between marginal cost and average total cost. 
D)  Average fixed cost is total fixed cost divided by the quantity of output produced, and it declines steadily as output increases.

Question 13

Suppose when a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day.When it adds a third station,but no more workers,it is able to wash 150 cars per day.The marginal product of the third washing station appears is:

Accepted Answer

A)  100 cars per day. 
B)  150 cars per day. 
C)  5 cars per day. 
D)  50 cars per day. 
A)  100 cars per day. 
B)  150 cars per day. 
C)  5 cars per day. 
D)  50 cars per day.

Question 14

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production
  
-In Exhibit 6-10,the marginal cost of increasing production from 2 to 3 cases of books is:

Accepted Answer

A)  $100. 
B)  $150. 
C)  $450. 
D)  $800. 
A)  $100. 
B)  $150. 
C)  $450. 
D)  $800.

Question 15

Exhibit 6-3 A marginal product curve
  
-As shown in Exhibit 6-3,the marginal product of labor for the last worker hired when 2 workers are employed per day is:

Accepted Answer

A)  50. 
B)  100. 
C)  150. 
D)  175. 
A)  50. 
B)  100. 
C)  150. 
D)  175.

Question 16

Suppose the fixed cost of building a nuclear power plant is $1 billion.Suppose also that the only variable cost is the labor of Homer Simpson,and he earns $10 per hour.If the plant generates 1,000 kilowatts each hour,and has already generated 1 billion kilowatts,what can you say about the marginal cost of the next kilowatt?

Accepted Answer

A) b and e. 
B) The marginal cost is equal to $.01. 
C) The marginal cost is equal to $1.01. 
D) The marginal cost is rising. 
E) The marginal cost is falling. 
A) b and e. 
B) The marginal cost is equal to $.01. 
C) The marginal cost is equal to $1.01. 
D) The marginal cost is rising. 
E) The marginal cost is falling.

Question 17

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production
  
-In Exhibit 6-10,the average variable cost of producing 2 cases of books is:

Accepted Answer

A)  $50 per case. 
B)  $75 per case. 
C)  $100 per case. 
D)  $150 per case. 
A)  $50 per case. 
B)  $75 per case. 
C)  $100 per case. 
D)  $150 per case.

Question 18

If average fixed costs equal $60 and average total costs equal $120 when output is 100,the total variable cost must be:

Accepted Answer

A)  $40. 
B)  $60. 
C)  $6,000. 
D)  $8,000. 
A)  $40. 
B)  $60. 
C)  $6,000. 
D)  $8,000.

Question 19

If a firm's use of labor obeys the law of diminishing returns,then:

Accepted Answer

A)  it does not have enough time to hire or fire workers. 
B)  doubling the number of workers causes the firm's output to also double. 
C)  its marginal costs must be falling. 
D)  hiring additional workers adds less and less additional output. 
A)  it does not have enough time to hire or fire workers. 
B)  doubling the number of workers causes the firm's output to also double. 
C)  its marginal costs must be falling. 
D)  hiring additional workers adds less and less additional output.

Question 20

Exhibit 6-17 Long-run average cost curve
  
-In Exhibit 6-17,economies of scale exist up to:

Accepted Answer

A)  Q₁ units of output per week. 
B)  Q₂ units of output per week. 
C)  Q₃ units of output. 
D)  Q₄ units of output. 
A)  Q₁ units of output per week. 
B)  Q₂ units of output per week. 
C)  Q₃ units of output. 
D)  Q₄ units of output.

Exam 6: Production Costs

Constant returns to scale exist over the range of output for which the long-run average cost is:

Diseconomies of scale exist for all of the following reasons except:

If the units of variable input in a production process are 1,2,3,4,and 5,and the corresponding total outputs are 30,34,37,39,and 40,respectively.The marginal product of the fourth unit is:

In the short run,a firm will eventually experience rising per-unit costs because of:

Each short-run average total cost curve is tangent at its lowest point to the long-run average cost curve.

Exhibit 6-12 Cost schedule for producing pizza -By filling in the blanks in Exhibit 6-12,the ATC of 3 pizzas is shown to be equal to:

Which of the following is not an explicit cost?

Variable inputs are defined as any resource that:

Which of the following is an explicit cost?

In the short run,if average variable cost equals $50,average total cost equals $75,and output equals 100,the total fixed cost must be:

What is the shape of the average total cost curve for a firm in the short run?

Exhibit 6-8 Costs schedules for producing pizza -Which of the following is true about average fixed cost?

Suppose when a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day.When it adds a third station,but no more workers,it is able to wash 150 cars per day.The marginal product of the third washing station appears is:

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production -In Exhibit 6-10,the marginal cost of increasing production from 2 to 3 cases of books is:

Exhibit 6-3 A marginal product curve -As shown in Exhibit 6-3,the marginal product of labor for the last worker hired when 2 workers are employed per day is:

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production -In Exhibit 6-10,the average variable cost of producing 2 cases of books is:

If average fixed costs equal $60 and average total costs equal $120 when output is 100,the total variable cost must be:

If a firm's use of labor obeys the law of diminishing returns,then:

Exhibit 6-17 Long-run average cost curve -In Exhibit 6-17,economies of scale exist up to:

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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