Question 1

Economic profit equals accounting profit minus:

Accepted Answer

A)  explicit costs. 
B)  implicit costs. 
C)  fixed costs. 
D)  variable costs. 
A)  explicit costs. 
B)  implicit costs. 
C)  fixed costs. 
D)  variable costs.

Question 2

The primary source of scale diseconomies appears to be:

Accepted Answer

A)  a firm's inability to acquire quality resources. 
B)  too little demand for the firm's product. 
C)  consumers who resist dealing with large firms. 
D)  division of labor. 
E)  the organizational difficulties of managing an ever larger enterprise. 
A)  a firm's inability to acquire quality resources. 
B)  too little demand for the firm's product. 
C)  consumers who resist dealing with large firms. 
D)  division of labor. 
E)  the organizational difficulties of managing an ever larger enterprise.

Question 3

Distinguish the short run form the long run.Generally,what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?

Accepted Answer

The short run is any amount of time in w

Question 4

A young chef is considering opening his own sushi bar.To do so,he would have to quit his current job,which pays $20,000 a year,and take over a store building that he owns and currently rents to his brother for $6,000 a year.His expenses at the sushi bar would be $50,000,for food and $2,000 for gas and electricity.What are his implicit costs?

Accepted Answer

A)  $26,000. 
B)  $66,000. 
C)  $78,000. 
D)  $52,000. 
E)  $72,000. 
A)  $26,000. 
B)  $66,000. 
C)  $78,000. 
D)  $52,000. 
E)  $72,000.

Question 5

A farm is able to produce 10,000 bushels of peanuts per season on 10 acres.Assume it adds one more acre and is able to produce 12,000 bushels per season.The marginal product of the additional acre of land for this farm is:

Accepted Answer

A)  10,000 bushels per acre per year. 
B)  1,200 bushels per acre per year. 
C)  2,000 bushels per acre per year. 
D)  12,000 bushels per acre per year. 
A)  10,000 bushels per acre per year. 
B)  1,200 bushels per acre per year. 
C)  2,000 bushels per acre per year. 
D)  12,000 bushels per acre per year.

Question 6

If a firm's average variable cost curve is rising,its marginal cost must exceed its average variable cost.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following factors of production is not variable in the long run?

Accepted Answer

A)  the size of the firm's plant. 
B)  property taxes on the assets of the firm. 
C)  highly trained labor. 
D)  All factors of production are variable in the long run. 
A)  the size of the firm's plant. 
B)  property taxes on the assets of the firm. 
C)  highly trained labor. 
D)  All factors of production are variable in the long run.

Question 8

The long run is a period of:

Accepted Answer

A)  at least one year. 
B)  sufficient length to allow a firm to expand output by hiring additional workers. 
C)  sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D)  sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers. 
A)  at least one year. 
B)  sufficient length to allow a firm to expand output by hiring additional workers. 
C)  sufficient length to allow a firm to alter its plant size and capacity and all other factors of production. 
D)  sufficient length to allow a firm to transform economic losses into economic profits by hiring better workers.

Question 9

Unlike implicit costs,explicit costs:

Accepted Answer

A)  reflect opportunity costs. 
B)  include the value of the owner's time. 
C)  are not included in the accounting statement of the firm. 
D)  are actual cash payments. 
E)  do not change with the output rate of the firm. 
A)  reflect opportunity costs. 
B)  include the value of the owner's time. 
C)  are not included in the accounting statement of the firm. 
D)  are actual cash payments. 
E)  do not change with the output rate of the firm.

Question 10

During the short run,a firm has enough time to adjust:

Accepted Answer

A)  its technology. 
B)  its fixed inputs. 
C)  its variable inputs. 
D)  all of its inputs-both fixed and variable. 
A)  its technology. 
B)  its fixed inputs. 
C)  its variable inputs. 
D)  all of its inputs-both fixed and variable.

Question 11

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

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
E)  $85. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
E)  $85.

Question 12

Economies of scale imply that within some range one can increase the size of operation and:

Accepted Answer

A)  total cost will decrease. 
B)  fixed cost will decrease. 
C)  average total cost will decrease. 
D)  average total cost will increase. 
E)  average variable cost will decrease. 
A)  total cost will decrease. 
B)  fixed cost will decrease. 
C)  average total cost will decrease. 
D)  average total cost will increase. 
E)  average variable cost will decrease.

Question 13

Exhibit 6-3 A marginal product curve
  
-As shown in Exhibit 6-3,the law of diminishing returns applies where there are:

Accepted Answer

A)  more than 5 workers per day. 
B)  more than 4 workers per day. 
C)  more than 3 workers per day. 
D)  between 0 and 5 workers per day. 
A)  more than 5 workers per day. 
B)  more than 4 workers per day. 
C)  more than 3 workers per day. 
D)  between 0 and 5 workers per day.

Question 14

Marginal cost is best defined as:

Accepted Answer

A)  a cost that does not vary with the rate of output. 
B)  the difference between fixed and variable cost at any level of output. 
C)  the amount added to total cost when one more unit of output is produced. 
D)  the difference between price and average total cost at the profit-maximizing level of output. 
A)  a cost that does not vary with the rate of output. 
B)  the difference between fixed and variable cost at any level of output. 
C)  the amount added to total cost when one more unit of output is produced. 
D)  the difference between price and average total cost at the profit-maximizing level of output.

Question 15

Exhibit 6-17 Long-run average cost curve
  
-Given the short-run average total cost curves in Exhibit 6-17,what level of output per week minimizes average total cost?

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 16

In the short-run,total fixed costs always exceed total variable costs.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 6-17 Long-run average cost curve
  
-If the firm represented in Exhibit 6-17 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)  Q₁ units per week. 
B)  Q₂ units per week. 
C)  Q₃ units per week. 
D)  Q₄ units per week. 
A)  Q₁ units per week. 
B)  Q₂ units per week. 
C)  Q₃ units per week. 
D)  Q₄ units per week.

Question 18

Exhibit 6-12 Cost schedule for producing pizza
  
-By filling in the blanks in Exhibit 6-12,the AFC 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 19

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15,the marginal cost of producing a sixth unit is $5.

Accepted Answer

A) True 
 B)False

Question 20

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases,then:

Accepted Answer

A)  the firm should try to produce less output. 
B)  total fixed costs are constant along the LRAC curve. 
C)  there are economies of scale. 
D)  the firm is probably having significant management problems. 
E)  when output is doubled, total costs are doubled. 
A)  the firm should try to produce less output. 
B)  total fixed costs are constant along the LRAC curve. 
C)  there are economies of scale. 
D)  the firm is probably having significant management problems. 
E)  when output is doubled, total costs are doubled.

Exam 6: Production Costs

Economic profit equals accounting profit minus:

The primary source of scale diseconomies appears to be:

Distinguish the short run form the long run.Generally,what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?

A farm is able to produce 10,000 bushels of peanuts per season on 10 acres.Assume it adds one more acre and is able to produce 12,000 bushels per season.The marginal product of the additional acre of land for this farm is:

If a firm's average variable cost curve is rising,its marginal cost must exceed its average variable cost.

Which of the following factors of production is not variable in the long run?

The long run is a period of:

Unlike implicit costs,explicit costs:

During the short run,a firm has enough time to adjust:

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

Economies of scale imply that within some range one can increase the size of operation and:

Exhibit 6-3 A marginal product curve -As shown in Exhibit 6-3,the law of diminishing returns applies where there are:

Marginal cost is best defined as:

Exhibit 6-17 Long-run average cost curve -Given the short-run average total cost curves in Exhibit 6-17,what level of output per week minimizes average total cost?

In the short-run,total fixed costs always exceed total variable costs.

Exhibit 6-17 Long-run average cost curve -If the firm represented in Exhibit 6-17 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 6-12 Cost schedule for producing pizza -By filling in the blanks in Exhibit 6-12,the AFC of 3 pizzas is shown to be equal to:

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15,the marginal cost of producing a sixth unit is $5.

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases,then:

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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