Question 1

Table 13-1
Measures of Cost for Splashy Cardboard Kayak Factory.
  
-Refer to Table 13-1. What is the marginal cost of producing the first kayak?

Accepted Answer

A)  it can't be determined from the information given. 
B)  $0 
C)  $2 
D)  $20 
A)  it can't be determined from the information given. 
B)  $0 
C)  $2 
D)  $20

Question 2

Graph 13-5
   The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s).
-Refer to Graph 13-5. Which of the curves is most likely to represent average fixed cost?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 3

Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants one bag of seeds, he gets 30 watermelons. If he plants two bags of seeds, he gets 50 watermelons. If he plants three bags of seeds he gets 60 watermelons. A bag of seeds costs $100 and seeds are his only costs.
-According to the information provided, which of the following statements is(are) true? (i) farmer Jack experiences decreasing marginal product
(ii) farmer Jack's total cost curve is linear
(iii) farmer Jack's production function is nonlinear

Accepted Answer

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

Question 4

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. Which of the statements below best captures information about the underlying production function?

Accepted Answer

A)  output increases at a decreasing rate with additional units of input 
B)  output increases at an increasing rate with additional units of input 
C)  output decreases at a decreasing rate with additional units of input 
D)  output decreases at an increasing rate with additional units of input 
A)  output increases at a decreasing rate with additional units of input 
B)  output increases at an increasing rate with additional units of input 
C)  output decreases at a decreasing rate with additional units of input 
D)  output decreases at an increasing rate with additional units of input

Question 5

The efficient scale of the firm is the quantity of output that:

Accepted Answer

A)  maximises marginal product 
B)  maximises average fixed cost 
C)  minimises average total cost 
D)  minimises average variable cost 
A)  maximises marginal product 
B)  maximises average fixed cost 
C)  minimises average total cost 
D)  minimises average variable cost

Question 6

The cost of capital includes both any interest payments in loans as well as any forgone interest on savings used to finance the business.

Accepted Answer

A) True 
 B)False

Question 7

The production function depicts a relationship between which two variables? Draw a production function that exhibits diminishing marginal product.

Accepted Answer

The production function depict

Question 8

Marginal cost equals:

Accepted Answer

A)  total cost divided by total quantity 
B)  the slope of the total cost curve 
C)  total output divided by the change in total cost 
D)  none of the above 
A)  total cost divided by total quantity 
B)  the slope of the total cost curve 
C)  total output divided by the change in total cost 
D)  none of the above

Question 9

Average variable cost is equal to the quantity of output divided by the total variable cost.

Accepted Answer

A) True 
 B)False

Question 10

Table 13-1
Measures of Cost for Splashy Cardboard Kayak Factory.
  
-Refer to Table 13-1. What is the variable cost of producing 5 kayaks?

Accepted Answer

A)  $28 
B)  $20 
C)  $12 
D)  it can't be determined from the information given 
A)  $28 
B)  $20 
C)  $12 
D)  it can't be determined from the information given

Question 11

Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants one bag of seeds, he gets 30 watermelons. If he plants two bags of seeds, he gets 50 watermelons. If he plants three bags of seeds he gets 60 watermelons. A bag of seeds costs $100 and seeds are his only costs.
-Harry Hoarder runs a small street vendor service which contracts to produce and sell moulded plastic souvenirs (key chains, commemorative plastic coins, plastic animals, etc.) at small theatre shows. As owner of the firm, Harry must decide how much of each product to produce. The key element of this decision is:

Accepted Answer

A)  the fixed cost of production 
B)  the cost of his selling booth 
C)  how costs will vary as he changes the level of production 
D)  the cost of book keeping services 
A)  the fixed cost of production 
B)  the cost of his selling booth 
C)  how costs will vary as he changes the level of production 
D)  the cost of book keeping services

Question 12

Opportunity costs are comprised of:

Accepted Answer

A)  explicit costs 
B)  implicit costs 
C)  forgone income 
D)  all of the above 
A)  explicit costs 
B)  implicit costs 
C)  forgone income 
D)  all of the above

Question 13

A production function is a relationship between inputs and:

Accepted Answer

A)  revenue 
B)  costs 
C)  profit 
D)  quantity of output 
A)  revenue 
B)  costs 
C)  profit 
D)  quantity of output

Question 14

Average total cost equals:

Accepted Answer

A)  change in total costs / change in quantity produced 
B)  (fixed costs + variable costs) / change in quantity produced 
C)  change in total costs / quantity produced 
D)  (fixed costs + variable costs) / quantity produced 
A)  change in total costs / change in quantity produced 
B)  (fixed costs + variable costs) / change in quantity produced 
C)  change in total costs / quantity produced 
D)  (fixed costs + variable costs) / quantity produced

Question 15

Which of the following would be categorised as an opportunity cost? (i) wages of workers
(ii) raw material costs
(iii) forgone investment opportunities

Accepted Answer

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

Question 16

If total costs are divided by the change in quantity produced we calculate the:

Accepted Answer

A)  average total cost 
B)  average fixed cost 
C)  average variable cost 
D)  none of the above 
A)  average total cost 
B)  average fixed cost 
C)  average variable cost 
D)  none of the above

Question 17

Profit plus total costs equals:

Accepted Answer

A)  total revenue 
B)  net profit 
C)  capital profit 
D)  operational profit 
A)  total revenue 
B)  net profit 
C)  capital profit 
D)  operational profit

Question 18

The cost to produce an additional unit of output is the firm's:

Accepted Answer

A)  variable cost 
B)  average variable cost 
C)  marginal cost 
D)  productivity offset 
A)  variable cost 
B)  average variable cost 
C)  marginal cost 
D)  productivity offset

Question 19

Table 13-3
Consider the following firm which makes high-performance racing bicycles. All costs are given in dollars. Output is shown on a monthly basis. The firm's fixed costs include a rent of $800 and a lease cost of $400 per month.
  
-Refer to Table 13-3. What is the marginal cost of producing the tenth bicycle in a given month?

Accepted Answer

A)  $300 
B)  $304 
C)  $321 
D)  $340 
A)  $300 
B)  $304 
C)  $321 
D)  $340

Question 20

Graph 13-3
  
-Refer to Graph 13-3. Which of the marginal cost curves shown reflects the existence of diminishing marginal product?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Exam 13: The Costs of Production

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1. What is the marginal cost of producing the first kayak?

Graph 13-5 The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s). -Refer to Graph 13-5. Which of the curves is most likely to represent average fixed cost?

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. Which of the statements below best captures information about the underlying production function?

The efficient scale of the firm is the quantity of output that:

The cost of capital includes both any interest payments in loans as well as any forgone interest on savings used to finance the business.

The production function depicts a relationship between which two variables? Draw a production function that exhibits diminishing marginal product.

Marginal cost equals:

Average variable cost is equal to the quantity of output divided by the total variable cost.

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1. What is the variable cost of producing 5 kayaks?

Opportunity costs are comprised of:

A production function is a relationship between inputs and:

Average total cost equals:

Which of the following would be categorised as an opportunity cost? (i) wages of workers (ii) raw material costs (iii) forgone investment opportunities

If total costs are divided by the change in quantity produced we calculate the:

Profit plus total costs equals:

The cost to produce an additional unit of output is the firm's:

Graph 13-3 -Refer to Graph 13-3. Which of the marginal cost curves shown reflects the existence of diminishing marginal product?

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

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