Question 1

At what level of output will average variable cost equal average total cost?

Accepted Answer

A)  when marginal cost equals average total cost 
B)  for all levels of output in which average variable cost is falling 
C)  when marginal cost equals average variable cost 
D)  There is no level of output where this occurs,as long as fixed costs are positive. 
A)  when marginal cost equals average total cost 
B)  for all levels of output in which average variable cost is falling 
C)  when marginal cost equals average variable cost 
D)  There is no level of output where this occurs,as long as fixed costs are positive. D

Question 2

Harry's Hotdogs is a small street vendor business owned by Harry Huggins.Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable.Which of the following costs are most likely to be considered fixed costs?

Accepted Answer

A)  the cost of mustard 
B)  the cost of hotdog buns 
C)  wages paid to workers who sell hot dogs 
D)  the cost of bookkeeping services 
A)  the cost of mustard 
B)  the cost of hotdog buns 
C)  wages paid to workers who sell hot dogs 
D)  the cost of bookkeeping services D

Question 3

In the long run,when marginal cost is above average total cost,the average total cost curve exhibits

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  efficient scale. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  efficient scale. B

Question 4

John has decided to start his own lawn-mowing business.To purchase the mowers and the trailer to transport the mowers,John withdrew $1,000 from his savings account,which was earning 3% interest,and borrowed an additional $2,000 from the bank at an interest rate of 7%.What is John's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A)  $30 
B)  $140 
C)  $170 
D)  $300 
A)  $30 
B)  $140 
C)  $170 
D)  $300

Question 5

The cost of producing an additional unit of output is the firm's

Accepted Answer

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

Question 6

Figure 13-1
Suppose the production function shifts from TP1 to TP2.  
-Refer to Figure 13-1.Which of the following could explain why the total product curve shifted in this diagram?

Accepted Answer

A)  A reduction in capital equipment available to the firm. 
B)  Labor skills have become rusty and outdated in the firm. 
C)  The firm has developed new technology in its production facility. 
D)  The firm is now receiving a higher price for its product. 
A)  A reduction in capital equipment available to the firm. 
B)  Labor skills have become rusty and outdated in the firm. 
C)  The firm has developed new technology in its production facility. 
D)  The firm is now receiving a higher price for its product.

Question 7

The marginal cost curve intersects the average total cost curve at the minimum point of the marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 8

Suppose Jan started up a small lemonade stand business last month.Variable costs for Jan's lemonade stand now include the cost of

Accepted Answer

A)  lemons and sugar. 
B)  paper cups. 
C)  the wages paid to her hourly workers. 
D)  All of the above are correct. 
A)  lemons and sugar. 
B)  paper cups. 
C)  the wages paid to her hourly workers. 
D)  All of the above are correct.

Question 9

When a firm's long-run average total costs do not vary as output increases,the firm exhibits

Accepted Answer

A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  the only output level associated with an efficient use of resources. 
A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  the only output level associated with an efficient use of resources.

Question 10

Charles's Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units of output (car washes).The firm's total variable cost is

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $500.

Question 11

A production function describes

Accepted Answer

A)  how a firm maximizes profits. 
B)  how a firm turns inputs into output. 
C)  the minimal cost of producing a given level of output. 
D)  the relationship between cost and output. 
A)  how a firm maximizes profits. 
B)  how a firm turns inputs into output. 
C)  the minimal cost of producing a given level of output. 
D)  the relationship between cost and output.

Question 12

Whenever marginal cost is greater than average total cost,

Accepted Answer

A)  average total cost is rising. 
B)  marginal cost is falling. 
C)  average total cost is falling. 
D)  Both b and c are correct. 
A)  average total cost is rising. 
B)  marginal cost is falling. 
C)  average total cost is falling. 
D)  Both b and c are correct.

Question 13

Scenario 13-3
Tony is a wheat farmer,but he also spends part of his day teaching guitar lessons.Due to the popularity of his local country western band,Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business.Farmer Tony charges $25 an hour for his guitar lessons.One spring day,he spends 10 hours in his fields planting $130 worth of seeds on his farm.He expects that the seeds he planted will yield $300 worth of wheat.
-Refer to Scenario 13-3.Tony's accountant would most likely figure the total cost of his wheat planting to equal

Accepted Answer

A)  $25. 
B)  $130. 
C)  $300. 
D)  $380. 
A)  $25. 
B)  $130. 
C)  $300. 
D)  $380.

Question 14

Table 13-13
Consider the following table of long-run total cost for four different firms:
  
-Refer to Table 13-13.Firm 1's efficient scale occurs at what quantity?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 15

Table 13-7
  
-Refer to Table 13-7.The average variable cost of producing four widgets is

Accepted Answer

A)  $2.00. 
B)  $2.50. 
C)  $3.33. 
D)  $5.00. 
A)  $2.00. 
B)  $2.50. 
C)  $3.33. 
D)  $5.00.

Question 16

Which of the following is an example of an implicit cost?

Accepted Answer

A)  salaries paid to owners who work for the firm 
B)  interest on money borrowed to finance equipment purchases 
C)  cash payments for raw materials 
D)  foregone rent on office space owned and used by the firm 
A)  salaries paid to owners who work for the firm 
B)  interest on money borrowed to finance equipment purchases 
C)  cash payments for raw materials 
D)  foregone rent on office space owned and used by the firm

Question 17

Table 13-5
The Flying Elvis Copter Rides
  
-Refer to Table 13-5.What is the value of O?

Accepted Answer

A)  $40 
B)  $140 
C)  $360 
D)  $410 
A)  $40 
B)  $140 
C)  $360 
D)  $410

Question 18

Because of the greater flexibility that firms have in the long run,all short-run cost curves lie on or above the long-run curve.

Accepted Answer

A) True 
 B)False

Question 19

When marginal cost is greater than average cost,average cost is

Accepted Answer

A)  rising. 
B)  falling. 
C)  constant. 
D)  either rising or falling depending on the economies of scale. 
A)  rising. 
B)  falling. 
C)  constant. 
D)  either rising or falling depending on the economies of scale.

Question 20

Average total cost and marginal cost express information that is already contained in a firm's total cost.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production

At what level of output will average variable cost equal average total cost?

Harry's Hotdogs is a small street vendor business owned by Harry Huggins.Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable.Which of the following costs are most likely to be considered fixed costs?

In the long run,when marginal cost is above average total cost,the average total cost curve exhibits

The cost of producing an additional unit of output is the firm's

Figure 13-1 Suppose the production function shifts from TP1 to TP2. -Refer to Figure 13-1.Which of the following could explain why the total product curve shifted in this diagram?

The marginal cost curve intersects the average total cost curve at the minimum point of the marginal cost curve.

Suppose Jan started up a small lemonade stand business last month.Variable costs for Jan's lemonade stand now include the cost of

When a firm's long-run average total costs do not vary as output increases,the firm exhibits

Charles's Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units of output (car washes).The firm's total variable cost is

A production function describes

Whenever marginal cost is greater than average total cost,

Table 13-13 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-13.Firm 1's efficient scale occurs at what quantity?

Table 13-7 -Refer to Table 13-7.The average variable cost of producing four widgets is

Which of the following is an example of an implicit cost?

Table 13-5 The Flying Elvis Copter Rides -Refer to Table 13-5.What is the value of O?

Because of the greater flexibility that firms have in the long run,all short-run cost curves lie on or above the long-run curve.

When marginal cost is greater than average cost,average cost is

Average total cost and marginal cost express information that is already contained in a firm's total cost.

Ten Principles of 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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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