Question 1

If a firm produces nothing,which of the following costs will be zero?

Accepted Answer

A)  total cost 
B)  fixed cost 
C)  opportunity cost 
D)  variable cost 
A)  total cost 
B)  fixed cost 
C)  opportunity cost 
D)  variable cost

Question 2

Which of the following statements is correct?

Accepted Answer

A)  Assuming that explicit costs are positive,economic profit is greater than accounting profit. 
B)  Assuming that implicit costs are positive,accounting profit is greater than economic profit. 
C)  Assuming that explicit costs are positive,accounting profit is equal to economic profit. 
D)  Assuming that implicit costs are positive,economic profit is positive. 
A)  Assuming that explicit costs are positive,economic profit is greater than accounting profit. 
B)  Assuming that implicit costs are positive,accounting profit is greater than economic profit. 
C)  Assuming that explicit costs are positive,accounting profit is equal to economic profit. 
D)  Assuming that implicit costs are positive,economic profit is positive.

Question 3

Table 13-2
  
-Refer to Table 13-2.The marginal product of the fourth worker is

Accepted Answer

A)  10 units. 
B)  60 units. 
C)  230 units. 
D)  240 units. 
A)  10 units. 
B)  60 units. 
C)  230 units. 
D)  240 units.

Question 4

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Accepted Answer

A) True 
 B)False

Question 5

Economies of scale occur when a firm's

Accepted Answer

A)  marginal costs are constant as output increases. 
B)  long-run average total costs are decreasing as output increases. 
C)  long-run average total costs are increasing as output increases. 
D)  marginal costs are equal to average total costs for all levels of output. 
A)  marginal costs are constant as output increases. 
B)  long-run average total costs are decreasing as output increases. 
C)  long-run average total costs are increasing as output increases. 
D)  marginal costs are equal to average total costs for all levels of output.

Question 6

A firm has a fixed cost of $700 in its first year of operation.When the firm produces 99 units of output,its total costs are $4,000.The marginal cost of producing the 100th unit of output is $200.What is the total cost of producing 100 units?

Accepted Answer

A)  $42 
B)  $900 
C)  $4,200 
D)  $4,900 
A)  $42 
B)  $900 
C)  $4,200 
D)  $4,900

Question 7

Table 13-8
Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business.Each pair is shipped in a separate box.She 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.There are no implicit costs.
  
-Refer to Table 13-8.Eileen has received an order for 3,000 boxes of earrings for next week.If she expects that the trend in the marginal product of labor will continue in the same direction,it is most likely that her best decision will be to

Accepted Answer

A)  not commit to meeting the order until she can move to a larger room and hire more workers to produce the earrings. 
B)  close her business until she is able to hire more productive workers. 
C)  hire about 12 new workers and hope she can satisfy the order. 
D)  commit to meeting the order and then take three weeks to complete the job. 
A)  not commit to meeting the order until she can move to a larger room and hire more workers to produce the earrings. 
B)  close her business until she is able to hire more productive workers. 
C)  hire about 12 new workers and hope she can satisfy the order. 
D)  commit to meeting the order and then take three weeks to complete the job.

Question 8

Figure 13-8  
-Refer to Figure 13-8.Which of the above marginal cost curves reflects diminishing marginal product?

Accepted Answer

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

Question 9

Since the 1980s,Wal-Mart stores have appeared in almost every community in America.Wal-Mart buys its goods in large quantities and,therefore,at cheaper prices.Wal-Mart also locates its stores where land prices are low,usually outside of the community business district.Many customers shop at Wal-Mart because of low prices.Local retailers,like the neighborhood drug store,often go out of business because they lose customers.This story demonstrates that

Accepted Answer

A)  consumers do not react to changing prices. 
B)  there are diseconomies of scale in retail sales. 
C)  there are economies of scale in retail sales. 
D)  there are diminishing returns to producing and selling retail goods. 
A)  consumers do not react to changing prices. 
B)  there are diseconomies of scale in retail sales. 
C)  there are economies of scale in retail sales. 
D)  there are diminishing returns to producing and selling retail goods.

Question 10

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

Accepted Answer

A)  $60 
B)  $135 
C)  $240 
D)  $270 
A)  $60 
B)  $135 
C)  $240 
D)  $270

Question 11

Bev is opening her own court-reporting business.She financed the business by withdrawing money from her personal savings account.When she closed the account,the bank representative mentioned that she would have earned $300 in interest next year.If Bev hadn't opened her own business,she would have earned a salary of $25,000.In her first year,Bev's revenues were $30,000.Which of the following statements is correct?

Accepted Answer

A)  Bev's total explicit costs are $25,300. 
B)  Bev's total implicit costs are $300. 
C)  Bev's accounting profits exceed her economic profits by $300. 
D)  Bev's economic profit is $4,700. 
A)  Bev's total explicit costs are $25,300. 
B)  Bev's total implicit costs are $300. 
C)  Bev's accounting profits exceed her economic profits by $300. 
D)  Bev's economic profit is $4,700.

Question 12

Figure 13-5  
-Refer to Figure 13-5.Why doesn't the total cost curve begin at the origin (the point 0,0)?

Accepted Answer

A)  because variable costs are positive when output is zero 
B)  because fixed costs are positive when output is zero 
C)  because the firm is producing at the efficient scale 
D)  because the firm is maximizing profits 
A)  because variable costs are positive when output is zero 
B)  because fixed costs are positive when output is zero 
C)  because the firm is producing at the efficient scale 
D)  because the firm is maximizing profits

Question 13

If the marginal cost of producing the tenth unit of output is $2.50,and if the average total cost of producing the tenth unit of output is $3,then at ten units of output,average total cost is rising.

Accepted Answer

A) True 
 B)False

Question 14

Profit is defined as

Accepted Answer

A)  net revenue minus depreciation. 
B)  total revenue minus total cost. 
C)  average revenue minus average total cost. 
D)  marginal revenue minus marginal cost. 
A)  net revenue minus depreciation. 
B)  total revenue minus total cost. 
C)  average revenue minus average total cost. 
D)  marginal revenue minus marginal cost.

Question 15

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor,the firm is experiencing

Accepted Answer

A)  diminishing labor. 
B)  diminishing output. 
C)  diminishing marginal product. 
D)  negative marginal product. 
A)  diminishing labor. 
B)  diminishing output. 
C)  diminishing marginal product. 
D)  negative marginal product.

Question 16

Total revenue equals

Accepted Answer

A)  price x quantity. 
B)  price/quantity. 
C)  (price x quantity)- total cost. 
D)  output - input. 
A)  price x quantity. 
B)  price/quantity. 
C)  (price x quantity)- total cost. 
D)  output - input.

Question 17

Economists and accountants both include forgone income as a cost to a small business owner.

Accepted Answer

A) True 
 B)False

Question 18

Figure 13-2  
-Refer to Figure 13-2.The graph illustrates a typical

Accepted Answer

A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  marginal product of labor curve. 
A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  marginal product of labor curve.

Question 19

Figure 13-2  
-Refer to Figure 13-2.The graph illustrates a typical production function.Based on its shape,what does the corresponding total cost curve look like?

Accepted Answer

A)  an upward-sloping curve that increases at an increasing rate 
B)  an upward-sloping curve that increases at a decreasing rate 
C)  a downward-sloping curve 
D)  a horizontal straight line 
A)  an upward-sloping curve that increases at an increasing rate 
B)  an upward-sloping curve that increases at a decreasing rate 
C)  a downward-sloping curve 
D)  a horizontal straight line

Question 20

Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own catering business.To invest in her factory,she withdrew $20,000 from her savings,which paid 3 percent interest,and borrowed $30,000 from her uncle,whom she pays 3 percent interest per year.Last year she paid $25,000 for ingredients and had revenue of $60,000.She asked Louis the accountant and Greg the economist to calculate her profit for her.

Accepted Answer

A)  Louis says her profit is $25,900,and Greg says her profit is $66,500. 
B)  Louis says her profit is $35,000,and Greg says she lost $5,900. 
C)  Louis says her profit is $34,100,and Greg says she lost $6,500. 
D)  Louis says her profit is $34,100,and Greg says her profit is $34,100. 
A)  Louis says her profit is $25,900,and Greg says her profit is $66,500. 
B)  Louis says her profit is $35,000,and Greg says she lost $5,900. 
C)  Louis says her profit is $34,100,and Greg says she lost $6,500. 
D)  Louis says her profit is $34,100,and Greg says her profit is $34,100.

Exam 13: The Costs of Production

If a firm produces nothing,which of the following costs will be zero?

Which of the following statements is correct?

Table 13-2 -Refer to Table 13-2.The marginal product of the fourth worker is

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Economies of scale occur when a firm's

A firm has a fixed cost of $700 in its first year of operation.When the firm produces 99 units of output,its total costs are $4,000.The marginal cost of producing the 100th unit of output is $200.What is the total cost of producing 100 units?

Figure 13-8 -Refer to Figure 13-8.Which of the above marginal cost curves reflects diminishing marginal product?

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

Figure 13-5 -Refer to Figure 13-5.Why doesn't the total cost curve begin at the origin (the point 0,0)?

If the marginal cost of producing the tenth unit of output is $2.50,and if the average total cost of producing the tenth unit of output is $3,then at ten units of output,average total cost is rising.

Profit is defined as

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor,the firm is experiencing

Total revenue equals

Economists and accountants both include forgone income as a cost to a small business owner.

Figure 13-2 -Refer to Figure 13-2.The graph illustrates a typical

Figure 13-2 -Refer to Figure 13-2.The graph illustrates a typical production function.Based on its shape,what does the corresponding total cost curve look like?

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

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