Question 1

The sum of the explicit and implicit costs incurred in the production process is called

Accepted Answer

A)  fixed cost. 
B)  sunk cost. 
C)  marginal cost. 
D)  total cost. 
A)  fixed cost. 
B)  sunk cost. 
C)  marginal cost. 
D)  total cost.

Question 2

The law of diminishing marginal returns implies that,in the short run:

Accepted Answer

A)  output must fall beyond a certain point. 
B)  price must fall beyond a certain point. 
C)  the marginal product of the variable input must eventually decrease. 
D)  wages of workers must eventually increase. 
E)  total cost must fall beyond a certain point. 
A)  output must fall beyond a certain point. 
B)  price must fall beyond a certain point. 
C)  the marginal product of the variable input must eventually decrease. 
D)  wages of workers must eventually increase. 
E)  total cost must fall beyond a certain point.

Question 3

Exhibit 6-13 Cost curves
  
-In Exhibit 6-13,AFC is shown by the graph labeled:

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
E)  V. 
A)  I. 
B)  II. 
C)  III. 
D)  IV. 
E)  V.

Question 4

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's:

Accepted Answer

A)  economic profit. 
B)  accounting profit. 
C)  opportunity cost of capital. 
D)  long-run average total cost. 
A)  economic profit. 
B)  accounting profit. 
C)  opportunity cost of capital. 
D)  long-run average total cost.

Question 5

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Accepted Answer

A) True 
 B)False

Question 6

If two workers can produce 22 units of output,and the addition of a third worker increases output to 30 units,the marginal product of the third worker is

Accepted Answer

A)  8 units. 
B)  10 units. 
C)  22 units. 
D)  30 units. 
A)  8 units. 
B)  10 units. 
C)  22 units. 
D)  30 units.

Question 7

All of a firm's inputs are considered to be variable in the long run.

Accepted Answer

A) True 
 B)False

Question 8

Cash payments to a steel mill for steel used in production would be an example of:

Accepted Answer

A)  sunk costs. 
B)  fixed costs. 
C)  explicit costs. 
D)  implicit costs. 
E)  entrepreneurial costs. 
A)  sunk costs. 
B)  fixed costs. 
C)  explicit costs. 
D)  implicit costs. 
E)  entrepreneurial costs.

Question 9

The ____ is the situation in which the marginal product of labor is greater than zero and declining as more labor is hired.

Accepted Answer

A)  law of demand 
B)  law of diminishing supply 
C)  law of diminishing returns 
D)  law of returns to scale 
A)  law of demand 
B)  law of diminishing supply 
C)  law of diminishing returns 
D)  law of returns to scale

Question 10

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

Accepted Answer

A)  $100. 
B)  $150. 
C)  $200. 
D)  $185. 
E)  $85. 
A)  $100. 
B)  $150. 
C)  $200. 
D)  $185. 
E)  $85.

Question 11

Exhibit 6-14 Cost curves
  
-In Exhibit 6-14,a firm finds that it is experiencing numerous managerial and information problems.The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Accepted Answer

A)  between 0 and 1,000. 
B)  between 1,000 and 2,000. 
C)  between 2,000 and 3,000. 
D)  between 3,000 and 4,000. 
E)  where it should shut down immediately. 
A)  between 0 and 1,000. 
B)  between 1,000 and 2,000. 
C)  between 2,000 and 3,000. 
D)  between 3,000 and 4,000. 
E)  where it should shut down immediately.

Question 12

Exhibit 6-2 Cost schedule for pizza production
  
-Exhibit 6-2 shows the labor,energy,and materials cost of making various quantities of pizzas.The table shows that the energy cost of making pizzas will:

Accepted Answer

A)  increase at a decreasing rate. 
B)  decrease at a decreasing rate. 
C)  decrease at an increasing rate. 
D)  increase at an increasing rate. 
E)  increase at a constant rate. 
A)  increase at a decreasing rate. 
B)  decrease at a decreasing rate. 
C)  decrease at an increasing rate. 
D)  increase at an increasing rate. 
E)  increase at a constant rate.

Question 13

If the total variable cost curve for a firm is S-shaped,what is the shape of the total cost curve for that firm?

Accepted Answer

A)  U-shaped 
B)  Flat. 
C)  Hill-shaped. 
D)  S-shaped. 
E)  There is not enough information. 
A)  U-shaped 
B)  Flat. 
C)  Hill-shaped. 
D)  S-shaped. 
E)  There is not enough information.

Question 14

A firm's opportunity cost of using resources provided by the firm's owners is called:

Accepted Answer

A)  sunk costs. 
B)  fixed costs. 
C)  explicit costs. 
D)  implicit costs. 
E)  entrepreneurial costs. 
A)  sunk costs. 
B)  fixed costs. 
C)  explicit costs. 
D)  implicit costs. 
E)  entrepreneurial costs.

Question 15

When marginal cost is below average total cost:

Accepted Answer

A)  total cost is falling. 
B)  total cost is rising. 
C)  average total cost is falling. 
D)  average fixed cost is rising. 
E)  total variable cost is falling. 
A)  total cost is falling. 
B)  total cost is rising. 
C)  average total cost is falling. 
D)  average fixed cost is rising. 
E)  total variable cost is falling.

Question 16

The total fixed cost remains constant as which of the following varies?

Accepted Answer

A)  Cost of resources. 
B)  Time. 
C)  Output in a given period of time. 
D)  Profit. 
A)  Cost of resources. 
B)  Time. 
C)  Output in a given period of time. 
D)  Profit.

Question 17

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 labor input begins to fall with the employment of the ____ worker.

Accepted Answer

A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth 
A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth

Question 18

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 the marginal product of the labor input is decreasing with the hiring of the third worker.A possible reason for this diminishing marginal product is:

Accepted Answer

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

Question 19

Which of the following is an example of a fixed cost for a fishing company?

Accepted Answer

A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
E)  Bait. 
A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
E)  Bait.

Question 20

A farm is able to produce 5,000 bushels of peaches per season on 100 acres.Assume it adds one more acre and is able to produce 6,000 bushels per season.The marginal product of the additional acre of land for this farm is:

Accepted Answer

A)  6,000 bushels per acre per year. 
B)  5,000 bushels per acre per year. 
C)  1,000 bushels per acre per year. 
D)  11,000 bushels per acre per year. 
A)  6,000 bushels per acre per year. 
B)  5,000 bushels per acre per year. 
C)  1,000 bushels per acre per year. 
D)  11,000 bushels per acre per year.

Exam 6: Production Costs

The sum of the explicit and implicit costs incurred in the production process is called

The law of diminishing marginal returns implies that,in the short run:

Exhibit 6-13 Cost curves -In Exhibit 6-13,AFC is shown by the graph labeled:

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's:

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

If two workers can produce 22 units of output,and the addition of a third worker increases output to 30 units,the marginal product of the third worker is

All of a firm's inputs are considered to be variable in the long run.

Cash payments to a steel mill for steel used in production would be an example of:

The ____ is the situation in which the marginal product of labor is greater than zero and declining as more labor is hired.

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

Exhibit 6-14 Cost curves -In Exhibit 6-14,a firm finds that it is experiencing numerous managerial and information problems.The position of its short- and long-run average total cost curves suggest that it is operating at a production level:

Exhibit 6-2 Cost schedule for pizza production -Exhibit 6-2 shows the labor,energy,and materials cost of making various quantities of pizzas.The table shows that the energy cost of making pizzas will:

If the total variable cost curve for a firm is S-shaped,what is the shape of the total cost curve for that firm?

A firm's opportunity cost of using resources provided by the firm's owners is called:

When marginal cost is below average total cost:

The total fixed cost remains constant as which of the following varies?

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 labor input begins to fall with the employment of the ____ worker.

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 the marginal product of the labor input is decreasing with the hiring of the third worker.A possible reason for this diminishing marginal product is:

Which of the following is an example of a fixed cost for a fishing company?

A farm is able to produce 5,000 bushels of peaches per season on 100 acres.Assume it adds one more acre and is able to produce 6,000 bushels per season.The marginal product of the additional acre of land for this farm 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

Filters