Question 1

Figure 13-3  
-Refer to Figure 13-3.The changing slope of the total cost curve reflects

Accepted Answer

A)  decreasing average variable cost. 
B)  decreasing average total cost. 
C)  decreasing marginal product. 
D)  increasing fixed cost. 
A)  decreasing average variable cost. 
B)  decreasing average total cost. 
C)  decreasing marginal product. 
D)  increasing fixed cost.

Question 2

Which of the following explains why long-run average cost at first decreases as output increases?

Accepted Answer

A)  diseconomies of scale 
B)  less-efficient use of inputs 
C)  fixed costs becoming spread out over more units of output 
D)  gains from specialization of inputs 
A)  diseconomies of scale 
B)  less-efficient use of inputs 
C)  fixed costs becoming spread out over more units of output 
D)  gains from specialization of inputs

Question 3

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that when the firm hires 2 workers,the total cost of production is $100.When the firm hires 3 workers,the total cost of production is $120.In addition,assume that the variable cost per unit of labor is the same regardless of the number of units of labor that are hired.What is the firm's fixed cost?

Accepted Answer

A)  $40 
B)  $60 
C)  $80 
D)  $100 
A)  $40 
B)  $60 
C)  $80 
D)  $100

Question 4

Which of the following statements is not correct?

Accepted Answer

A)  The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units. 
B)  The total variable cost of seven units equals the average variable cost of seven units times seven. 
C)  If marginal cost is rising,then average variable cost must be rising. 
D)  The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable cost of four units. 
A)  The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units. 
B)  The total variable cost of seven units equals the average variable cost of seven units times seven. 
C)  If marginal cost is rising,then average variable cost must be rising. 
D)  The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable cost of four units.

Question 5

Assume Jack received all A's in his classes last semester.If Jack gets all B's in his classes this semester,his GPA may or may not fall.

Accepted Answer

A) True 
 B)False

Question 6

Profit equals total revenue minus total cost.

Accepted Answer

A) True 
 B)False

Question 7

Figure 13-4  
-Refer to Figure 13-4.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 8

Scenario 13-4
Wanda owns a lemonade stand.She produces lemonade using five inputs: water,sugar,lemons,paper cups,and labor.Her costs per glass are as follows: $0.01 for water,$0.02 for sugar,$0.03 for lemons,$0.02 for cups,and $0.10 for the opportunity cost of her labor.She can sell 300 glasses for $0.50 each.
-Refer to Scenario 13-4.What are Wanda's total costs per glass?

Accepted Answer

A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02 
A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02

Question 9

Scenario 13-6
A certain firm produces and sells staplers.Last year,it produced 7,000 staplers and sold each stapler for $6.In producing the 7,000 staplers,it incurred variable costs of $28,000 and a total cost of $45,000.
-Refer to Scenario 13-6.In producing the 7,000 staplers,the firm's average fixed cost was

Accepted Answer

A)  $1.00. 
B)  $1.32. 
C)  $2.21. 
D)  $2.43. 
A)  $1.00. 
B)  $1.32. 
C)  $2.21. 
D)  $2.43.

Question 10

Table 13-9
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts.The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.
  
-Refer to Table 13-9.What is the marginal cost of creating the tenth instructional module in a given month?

Accepted Answer

A)  $900 
B)  $1,250 
C)  $2,500 
D)  $3,060 
A)  $900 
B)  $1,250 
C)  $2,500 
D)  $3,060

Question 11

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Accepted Answer

The total cost curve will incr

Question 12

How long does it take a firm to go from the short run to the long run?

Accepted Answer

A)  six months 
B)  one year 
C)  two years 
D)  It depends on the nature of the firm. 
A)  six months 
B)  one year 
C)  two years 
D)  It depends on the nature of the firm.

Question 13

Economies of scale often arise because higher production levels allow specialization among workers.

Accepted Answer

A) True 
 B)False

Question 14

Gavin has decided to start his own snow removal business.To purchase the necessary equipment,Gavin withdrew $2,000 from his savings account,which was earning 3% interest,and borrowed an additional $4,000 from the bank at an interest rate of 7%.What is Gavin's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A)  $60 
B)  $280 
C)  $340 
D)  $660 
A)  $60 
B)  $280 
C)  $340 
D)  $660

Question 15

Table 13-7
  
-Refer to Table 13-7.What is the variable cost of producing five widgets?

Accepted Answer

A)  $13.00 
B)  $14.00 
C)  $15.00 
D)  It can't be determined from the information given. 
A)  $13.00 
B)  $14.00 
C)  $15.00 
D)  It can't be determined from the information given.

Question 16

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accepted Answer

A) True 
 B)False

Question 17

Diseconomies of scale often arise because higher production levels allow specialization among workers.

Accepted Answer

A) True 
 B)False

Question 18

Marginal cost equals

Accepted Answer

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

Question 19

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that when four units of output are produced,the total cost is $175,and the average variable cost is $33.75.What would the average fixed cost be if ten units were produced?

Accepted Answer

A)  $4 
B)  $10 
C)  $40 
D)  $135 
A)  $4 
B)  $10 
C)  $40 
D)  $135

Exam 13: The Costs of Production

Figure 13-3 -Refer to Figure 13-3.The changing slope of the total cost curve reflects

Which of the following explains why long-run average cost at first decreases as output increases?

Which of the following statements is not correct?

Assume Jack received all A's in his classes last semester.If Jack gets all B's in his classes this semester,his GPA may or may not fall.

Profit equals total revenue minus total cost.

Figure 13-4 -Refer to Figure 13-4.Which of the curves is most likely to represent average fixed cost?

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

How long does it take a firm to go from the short run to the long run?

Economies of scale often arise because higher production levels allow specialization among workers.

Table 13-7 -Refer to Table 13-7.What is the variable cost of producing five widgets?

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Diseconomies of scale often arise because higher production levels allow specialization among workers.

Marginal cost equals

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

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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