Question 1

As the quantity produced increases:

Accepted Answer

A)  average fixed cost decreases 
B)  fixed cost increases 
C)  variable cost always decreases 
D)  none of the above are true 
A)  average fixed cost decreases 
B)  fixed cost increases 
C)  variable cost always decreases 
D)  none of the above are true

Question 2

Dave is majoring in computer information development at University of Environmental Sustainability. While he has been attending university, Dave has started a computer consulting business to help local residents set up a local skill-sharing network. Dave charges $25 per hour for his consulting services. Dave also works five hours a week for the Arts Faculty to maintain its departmental web page. The Arts Faculty pays Dave $20 per hour. From this information we can conclude that:

Accepted Answer

A)  Dave should increase the number of hours he works for the Arts Faculty to make his income from it comparable to his consulting business income 
B)  Dave is obviously not maximising his wellbeing if he continues to work for the Arts Faculty 
C)  if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $20 is considered a cost of the choice to go to the beach 
D)  if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach 
A)  Dave should increase the number of hours he works for the Arts Faculty to make his income from it comparable to his consulting business income 
B)  Dave is obviously not maximising his wellbeing if he continues to work for the Arts Faculty 
C)  if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $20 is considered a cost of the choice to go to the beach 
D)  if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach

Question 3

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False

Question 4

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Accepted Answer

A) True 
 B)False

Question 5

Diminishing marginal product suggests that the marginal:

Accepted Answer

A)  product of an extra worker is less than the previous worker's marginal product 
B)  cost of an extra worker is less than the previous worker's marginal cost 
C)  product of an extra worker is greater than the previous worker's marginal product 
D)  cost of an extra worker is unchanged 
A)  product of an extra worker is less than the previous worker's marginal product 
B)  cost of an extra worker is less than the previous worker's marginal cost 
C)  product of an extra worker is greater than the previous worker's marginal product 
D)  cost of an extra worker is unchanged

Question 6

At low output levels a firm's average total cost tends to be high because:

Accepted Answer

A)  marginal costs are increasing 
B)  variable costs are spread over only a few units of output 
C)  average fixed cost is large 
D)  there is a shortage of experienced workers 
A)  marginal costs are increasing 
B)  variable costs are spread over only a few units of output 
C)  average fixed cost is large 
D)  there is a shortage of experienced workers

Question 7

Amy owns a photo developing shop. She also does contract photography. If she takes on a contract, she cannot develop photos in that time and her customers use another firm. Suppose Amy rejects a contract to photograph a wedding. This would have been a five hour job and Amy charges $500 per hour. She spent those five hours developing photos. Her chemicals and paper cost $1250. She earned $3500 in sales.
-According to the information provided, Amy's accountant would most likely figure the total cost of her photograph developing to be:

Accepted Answer

A)  $1250 
B)  $2500 
C)  $3500 
D)  $3750 
A)  $1250 
B)  $2500 
C)  $3500 
D)  $3750

Question 8

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

Accepted Answer

A) True 
 B)False

Question 9

An important implicit cost of almost every business is the:

Accepted Answer

A)  cost of accounting services 
B)  cost of compliance with government regulation 
C)  opportunity cost of financial capital that has been invested in the business 
D)  cost of debt 
A)  cost of accounting services 
B)  cost of compliance with government regulation 
C)  opportunity cost of financial capital that has been invested in the business 
D)  cost of debt

Question 10

Diseconomies of scale occur when:

Accepted Answer

A)  long-run average total costs rise as output increases 
B)  long-run average total costs fall as output increases 
C)  average fixed costs are falling 
D)  average fixed costs are constant 
A)  long-run average total costs rise as output increases 
B)  long-run average total costs fall as output increases 
C)  average fixed costs are falling 
D)  average fixed costs are constant

Question 11

Table 13-2
Adrienne's Premium Boxing Service subcontracts with a chocolate manufacturer to box premium chocolates for their mail order catalogue business. Adrienne rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. Costs are in dollars per week.
  
-Refer to Table 13-2. One week, Adrian exactly breaks even. If her revenue for the week is $1525, how many boxes of chocolate did she produce?

Accepted Answer

A)  five 
B)  60 
C)  950 
D)  1375 
A)  five 
B)  60 
C)  950 
D)  1375

Question 12

The marginal product of labour can be defined as (where $\Delta$ denotes 'change'):

Accepted Answer

A)  $\Delta$output/$\Delta$labour 
B)  $\Delta$labour/$\Delta$output 
C)  $\Delta$profit/$\Delta$labour 
D)  $\Delta$labour/$\Delta$total cost 
A)  $\Delta$output/$\Delta$labour 
B)  $\Delta$labour/$\Delta$output 
C)  $\Delta$profit/$\Delta$labour 
D)  $\Delta$labour/$\Delta$total cost

Question 13

The average total cost curve is increasing when marginal cost is:

Accepted Answer

A)  increasing 
B)  decreasing 
C)  less than average total cost 
D)  greater than average total cost 
A)  increasing 
B)  decreasing 
C)  less than average total cost 
D)  greater than average total cost

Question 14

Complete the following formulae:
TVC = costs
TC = total
AVC = costs
AC = costs
TFC = costs
AFC = average
MC = costs
TC = TFC +
AC = + AVC
MC = ∆TC/ = /∆Q
AFC = TFC/
AVC = /Q
AC = TC/Q

Accepted Answer

TVC = total variable costs
TC = total co

Question 15

Graph 13-2
   This graph depicts a total cost function for a firm that produces cookies. Use the graph to answer the following question(s).
-Refer to Graph 13-2. Identify the true statements from the list below. (i) diminishing marginal product for all levels of input usage
(ii) total output increases but at a decreasing rate
(iii) the slope of the production function increases as quantity of inputs increase.

Accepted Answer

A)  (i) only 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii) 
A)  (i) only 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii)

Question 16

Bob Edwards owns Bob's Bagels. He hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced. The results indicate a U-shaped average total cost curve. Bob's economist explains that the ATC curve is U-shaped for two reasons, the first being the existence of diminishing marginal product, which causes it to rise. What would the second reason be? Assume that the marginal cost curve is linear. (Hint: The second reason relates to average fixed cost.)

Accepted Answer

Average fixed cost always decl

Question 17

Diminishing marginal product suggests that:

Accepted Answer

A)  marginal cost is downward-sloping 
B)  additional units of output are more expensive 
C)  the firm is at full capacity 
D)  all of the above are true 
A)  marginal cost is downward-sloping 
B)  additional units of output are more expensive 
C)  the firm is at full capacity 
D)  all of the above are true

Question 18

Total revenue equals:

Accepted Answer

A)  total output multiplied by the unit cost of output 
B)  total output multiplied by profit 
C)  total output multiplied by the unit price of output 
D)  total output divided by profit 
A)  total output multiplied by the unit cost of output 
B)  total output multiplied by profit 
C)  total output multiplied by the unit price of output 
D)  total output divided by profit

Question 19

Fill in the following table's missing values.

Accepted Answer

The answer of Fill in the following table's missing values.
...

Question 20

Economists normally assume that a firm would? (i) sell a higher output if this would increase revenue
(ii) sell a lower output and collect less revenue, if this would increase profit
(iii) sell a higher output and incur more costs, if this would increase profit

Accepted Answer

A)  (i) and (ii) 
B)  (i) and (iii) 
C)  (ii) and (iii) 
D)  none of the above 
A)  (i) and (ii) 
B)  (i) and (iii) 
C)  (ii) and (iii) 
D)  none of the above

Exam 13: The Costs of Production

As the quantity produced increases:

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Diminishing marginal product suggests that the marginal:

At low output levels a firm's average total cost tends to be high because:

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

An important implicit cost of almost every business is the:

Diseconomies of scale occur when:

The marginal product of labour can be defined as (where Δ\DeltaΔ denotes 'change'):

The average total cost curve is increasing when marginal cost is:

Complete the following formulae: TVC = costs TC = total AVC = costs AC = costs TFC = costs AFC = average MC = costs TC = TFC + AC = + AVC MC = ∆TC/ = /∆Q AFC = TFC/ AVC = /Q AC = TC/Q

Diminishing marginal product suggests that:

Total revenue equals:

Fill in the following table's missing values.

Economists normally assume that a firm would? (i) sell a higher output if this would increase revenue (ii) sell a lower output and collect less revenue, if this would increase profit (iii) sell a higher output and incur more costs, if this would increase profit

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

The marginal product of labour can be defined as (where $\Delta$ denotes 'change'):