Question 1

Which of the following statements is not correct?

Accepted Answer

A)  In the long run,there are no fixed costs. 
B)  Marginal cost is independent of fixed costs. 
C)  Economies of scale is a short-run concept. 
D)  Diminishing marginal product explains increasing marginal cost. 
A)  In the long run,there are no fixed costs. 
B)  Marginal cost is independent of fixed costs. 
C)  Economies of scale is a short-run concept. 
D)  Diminishing marginal product explains increasing marginal cost.

Question 2

Table 13-7
  
-Refer to Table 13-7.What is the marginal cost of producing the first widget?

Accepted Answer

A)  $1.00 
B)  $10.00 
C)  $11.00 
D)  It can't be determined from the information given. 
A)  $1.00 
B)  $10.00 
C)  $11.00 
D)  It can't be determined from the information given.

Question 3

Table 13-13
Consider the following table of long-run total cost for four different firms:
  
-Refer to Table 13-13.Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?

Accepted Answer

A)  Firm 1 
B)  Firm 2 
C)  Firm 3 
D)  Firm 4 
A)  Firm 1 
B)  Firm 2 
C)  Firm 3 
D)  Firm 4

Question 4

Diminishing marginal productivity implies decreasing total product.

Accepted Answer

A) True 
 B)False

Question 5

Economic profit

Accepted Answer

A)  will never exceed accounting profit. 
B)  is most often equal to accounting profit. 
C)  is always at least as large as accounting profit. 
D)  is a less complete measure of profitability than accounting profit. 
A)  will never exceed accounting profit. 
B)  is most often equal to accounting profit. 
C)  is always at least as large as accounting profit. 
D)  is a less complete measure of profitability than accounting profit.

Question 6

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.What is the marginal product of the second worker?

Accepted Answer

A)  110 
B)  200 
C)  260 
D)  300 
A)  110 
B)  200 
C)  260 
D)  300

Question 7

If Amanda sells 200 glasses of lemonade at $0.50 each,her total revenues are

Accepted Answer

A)  $100. 
B)  $199.50. 
C)  $200. 
D)  $400. 
A)  $100. 
B)  $199.50. 
C)  $200. 
D)  $400.

Question 8

Which of the following is the best example of a variable cost?

Accepted Answer

A)  monthly wage payments for hired labor 
B)  annual property tax payments for a building 
C)  monthly rent payments for a warehouse 
D)  annual insurance payments for a warehouse 
A)  monthly wage payments for hired labor 
B)  annual property tax payments for a building 
C)  monthly rent payments for a warehouse 
D)  annual insurance payments for a warehouse

Question 9

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,600 when output is 40 units.Firm A exhibits

Accepted Answer

A)  diseconomies of scale because total cost is rising as output rises. 
B)  constant returns to scale because average total cost is constant as output rises. 
C)  diseconomies of scale because average total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises. 
A)  diseconomies of scale because total cost is rising as output rises. 
B)  constant returns to scale because average total cost is constant as output rises. 
C)  diseconomies of scale because average total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises.

Question 10

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

Accepted Answer

A)  230 units. 
B)  100 units. 
C)  77 units. 
D)  60 units. 
A)  230 units. 
B)  100 units. 
C)  77 units. 
D)  60 units.

Question 11

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 accounting profits?

Accepted Answer

A)  $150 
B)  $126 
C)  $96 
D)  $24 
A)  $150 
B)  $126 
C)  $96 
D)  $24

Question 12

Economies of scale occur when

Accepted Answer

A)  long-run average total costs rise as output increases. 
B)  long-run average total costs fall as output increases. 
C)  average fixed costs are falling. 
D)  average fixed costs are constant. 
A)  long-run average total costs rise as output increases. 
B)  long-run average total costs fall as output increases. 
C)  average fixed costs are falling. 
D)  average fixed costs are constant.

Question 13

The amount by which total cost rises when the firm produces one additional unit of output is called

Accepted Answer

A)  average cost. 
B)  marginal cost. 
C)  fixed cost. 
D)  variable cost. 
A)  average cost. 
B)  marginal cost. 
C)  fixed cost. 
D)  variable cost.

Question 14

When marginal cost exceeds average total cost,

Accepted Answer

A)  average fixed cost must be rising. 
B)  average total cost must be rising. 
C)  average total cost must be falling. 
D)  marginal cost must be falling. 
A)  average fixed cost must be rising. 
B)  average total cost must be rising. 
C)  average total cost must be falling. 
D)  marginal cost must be falling.

Question 15

The Wacky Widget company has total fixed costs of $100,000 per year.The firm's average variable cost is $5 for 10,000 widgets.At that level of output,the firm's average total costs equal

Accepted Answer

A)  $10 
B)  $15 
C)  $100 
D)  $150 
A)  $10 
B)  $15 
C)  $100 
D)  $150

Question 16

Average total cost (ATC)is calculated as follows:

Accepted Answer

A)  ATC = (change in total cost)/(change in quantity of output). 
B)  ATC = (change in total cost)/(change in quantity of input). 
C)  ATC = (total cost)/(quantity of output). 
D)  ATC = (total cost)/(quantity of input). 
A)  ATC = (change in total cost)/(change in quantity of output). 
B)  ATC = (change in total cost)/(change in quantity of input). 
C)  ATC = (total cost)/(quantity of output). 
D)  ATC = (total cost)/(quantity of input).

Question 17

Scenario 13-1
Joe wants to start his own business,which will require that he purchase a factory that costs $400,000.Joe currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1.If Joe purchases the factory with his own money,what is the annual implicit opportunity cost of purchasing the factory?

Accepted Answer

A)  $0 
B)  $3,000 
C)  $12,000 
D)  $15,000 
A)  $0 
B)  $3,000 
C)  $12,000 
D)  $15,000

Question 18

Table 13-10
Jimmy's Gigaplots Factory
  
-Refer to Table 13-10.What is the average fixed cost of producing 3 gigaplots at Jimmy's Gigaplot factory?

Accepted Answer

A)  $1.67 
B)  $2.67 
C)  $5.33 
D)  $8.33 
A)  $1.67 
B)  $2.67 
C)  $5.33 
D)  $8.33

Question 19

If a firm experiences constant returns to scale at all output levels,then its long-run average total cost curve would

Accepted Answer

A)  slope downward. 
B)  be horizontal. 
C)  slope upward. 
D)  slope downward for low output levels and upward for high output levels. 
A)  slope downward. 
B)  be horizontal. 
C)  slope upward. 
D)  slope downward for low output levels and upward for high output levels.

Question 20

Variable costs usually change as the firm alters the quantity of output produced.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production

Which of the following statements is not correct?

Table 13-7 -Refer to Table 13-7.What is the marginal cost of producing the first widget?

Table 13-13 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-13.Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?

Diminishing marginal productivity implies decreasing total product.

Economic profit

If Amanda sells 200 glasses of lemonade at $0.50 each,her total revenues are

Which of the following is the best example of a variable cost?

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,600 when output is 40 units.Firm A exhibits

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

Economies of scale occur when

The amount by which total cost rises when the firm produces one additional unit of output is called

When marginal cost exceeds average total cost,

The Wacky Widget company has total fixed costs of $100,000 per year.The firm's average variable cost is $5 for 10,000 widgets.At that level of output,the firm's average total costs equal

Average total cost (ATC)is calculated as follows:

Table 13-10 Jimmy's Gigaplots Factory -Refer to Table 13-10.What is the average fixed cost of producing 3 gigaplots at Jimmy's Gigaplot factory?

If a firm experiences constant returns to scale at all output levels,then its long-run average total cost curve would

Variable costs usually change as the firm alters the quantity of output produced.

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