Question 1

Economies of scale arise when:

Accepted Answer

A)  workers are able to specialise in a particular task 
B)  an economy is self-sufficient in production 
C)  individuals in a society are self-sufficient 
D)  fixed costs are large relative to variable costs 
A)  workers are able to specialise in a particular task 
B)  an economy is self-sufficient in production 
C)  individuals in a society are self-sufficient 
D)  fixed costs are large relative to variable costs

Question 2

The time it takes for a firm to reach the long run depends on the firm and the products it makes.

Accepted Answer

A) True 
 B)False

Question 3

The fact that many decisions are fixed in the short run but variable in the long run has an impact on the firm's cost curves.

Accepted Answer

A) True 
 B)False

Question 4

Fixed costs can be defined as costs that:

Accepted Answer

A)  are incurred only when production is large enough 
B)  are unaffected by production 
C)  vary inversely with production 
D)  vary at a fixed rate with production 
A)  are incurred only when production is large enough 
B)  are unaffected by production 
C)  vary inversely with production 
D)  vary at a fixed rate with production

Question 5

A second or third worker may have a higher marginal product than the first worker in certain circumstances.

Accepted Answer

A) True 
 B)False

Question 6

Constant returns to scale occur when:

Accepted Answer

A)  long-run average total costs are constant as output increases 
B)  marginal product of labour is falling 
C)  the firm's long-run average cost curve is falling as output increases 
D)  the firm's long-run average cost curve is rising as output increases 
A)  long-run average total costs are constant as output increases 
B)  marginal product of labour is falling 
C)  the firm's long-run average cost curve is falling as output increases 
D)  the firm's long-run average cost curve is rising as output increases

Question 7

Graph 13-1
   This graph depicts a production function for a firm that produces cookies. Use the
graph to answer the following question(s).
-Refer to Graph 13-1. The slope of the total product curve reveals information about the:

Accepted Answer

A)  average product of workers 
B)  fixed product of workers 
C)  total product of workers 
D)  marginal product of workers 
A)  average product of workers 
B)  fixed product of workers 
C)  total product of workers 
D)  marginal product of workers

Question 8

Accountants are primarily interested in the:

Accepted Answer

A)  stock of assets of firms 
B)  marginal costs of production of firms 
C)  taxes due on capital assets of firms 
D)  flow of cash into and out of firms 
A)  stock of assets of firms 
B)  marginal costs of production of firms 
C)  taxes due on capital assets of firms 
D)  flow of cash into and out of firms

Question 9

To an economist, it is conceivable that the objective that motivates an individual entrepreneur to start a business arises from:

Accepted Answer

A)  an altruistic desire to provide the world with their product 
B)  an innate love for the type of business they start 
C)  a desire to make money 
D)  all of the above 
A)  an altruistic desire to provide the world with their product 
B)  an innate love for the type of business they start 
C)  a desire to make money 
D)  all of the above

Question 10

Implicit costs are costs that do not require an outlay of cash by the firm.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an implicit cost? (i) a business owner forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm
(ii) interest on debt
(iii) uncollected revenue

Accepted Answer

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

Question 12

The law of supply states that:

Accepted Answer

A)  the supply curve slopes downward 
B)  the demand curve slopes upwards 
C)  firms are willing to produce a greater quantity of a good when the price of the good is higher 
D)  supply creates its own demand 
A)  the supply curve slopes downward 
B)  the demand curve slopes upwards 
C)  firms are willing to produce a greater quantity of a good when the price of the good is higher 
D)  supply creates its own demand

Question 13

Define the Law of Diminishing returns:

Accepted Answer

As increasing quantities of a

Question 14

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. One month the firm worked overtime to produce 16 bicycles. What was the average fixed cost for that month?

Accepted Answer

A)  340 
B)  75 
C)  120 
D)  it can't be determined from the information given. 
A)  340 
B)  75 
C)  120 
D)  it can't be determined from the information given.

Question 15

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, Jack's production function will:

Accepted Answer

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

Question 16

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Accepted Answer

When the average total cost cu

Question 17

Graph 13-1
   This graph depicts a production function for a firm that produces cookies. Use the
graph to answer the following question(s).
-Refer to Graph 13-1. With regard to cookie production, the figure implies:

Accepted Answer

A)  decreasing cost of cookie production 
B)  diminishing marginal product of workers 
C)  increasing marginal product of workers 
D)  diminishing marginal cost of cookie production 
A)  decreasing cost of cookie production 
B)  diminishing marginal product of workers 
C)  increasing marginal product of workers 
D)  diminishing marginal cost of cookie production

Question 18

To an economist, the field of industrial organisation answers which of the following questions?

Accepted Answer

A)  How does the difference in the number of firms affect prices and efficiency of market outcomes? 
B)  Why are consumers subject to the law of demand? 
C)  Why do firms experience falling marginal product of labour? 
D)  Why do firms consider production costs when determining product supply? 
A)  How does the difference in the number of firms affect prices and efficiency of market outcomes? 
B)  Why are consumers subject to the law of demand? 
C)  Why do firms experience falling marginal product of labour? 
D)  Why do firms consider production costs when determining product supply?

Question 19

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximising firm is that, in the short run:

Accepted Answer

A)  output is not variable 
B)  the size of the factory is fixed 
C)  the number of workers used to produce the firm's product is fixed 
D)  there are no fixed costs 
A)  output is not variable 
B)  the size of the factory is fixed 
C)  the number of workers used to produce the firm's product is fixed 
D)  there are no fixed costs

Question 20

When a firm is making a profit-maximising production decision, which one of the Ten Lessons of Economics is likely to be most important to their decision?

Accepted Answer

A)  governments can sometimes improve market outcomes 
B)  the cost of something is what you give up to get it 
C)  a country's standard of living depends on its ability to produce goods and services 
D)  prices rise when the government prints too much money 
A)  governments can sometimes improve market outcomes 
B)  the cost of something is what you give up to get it 
C)  a country's standard of living depends on its ability to produce goods and services 
D)  prices rise when the government prints too much money

Exam 13: The Costs of Production

Economies of scale arise when:

The time it takes for a firm to reach the long run depends on the firm and the products it makes.

The fact that many decisions are fixed in the short run but variable in the long run has an impact on the firm's cost curves.

Fixed costs can be defined as costs that:

A second or third worker may have a higher marginal product than the first worker in certain circumstances.

Constant returns to scale occur when:

Graph 13-1 This graph depicts a production function for a firm that produces cookies. Use the graph to answer the following question(s). -Refer to Graph 13-1. The slope of the total product curve reveals information about the:

Accountants are primarily interested in the:

To an economist, it is conceivable that the objective that motivates an individual entrepreneur to start a business arises from:

Implicit costs are costs that do not require an outlay of cash by the firm.

Which of the following is an implicit cost? (i) a business owner forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm (ii) interest on debt (iii) uncollected revenue

The law of supply states that:

Define the Law of Diminishing returns:

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Graph 13-1 This graph depicts a production function for a firm that produces cookies. Use the graph to answer the following question(s). -Refer to Graph 13-1. With regard to cookie production, the figure implies:

To an economist, the field of industrial organisation answers which of the following questions?

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximising firm is that, in the short run:

When a firm is making a profit-maximising production decision, which one of the Ten Lessons of Economics is likely to be most important to their decision?

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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