Question 1

Explicit costs

Accepted Answer

A)  do not require an outlay of money by the firm. 
B)  enter into the accountant's measurement of a firm's profit. 
C)  enter into the economist's measurement of a firm's profit. 
D)  Both b and c are correct. 
A)  do not require an outlay of money by the firm. 
B)  enter into the accountant's measurement of a firm's profit. 
C)  enter into the economist's measurement of a firm's profit. 
D)  Both b and c are correct.

Question 2

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.One month,Teacher's Helper produced 18 instructional modules.What was the average fixed cost for that month?

Accepted Answer

A)  $60 
B)  $108 
C)  $811 
D)  It can't be determined from the information given. 
A)  $60 
B)  $108 
C)  $811 
D)  It can't be determined from the information given.

Question 3

The firm's efficient scale is the quantity of output that minimizes

Accepted Answer

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

Question 4

The typical total-cost curve is U-shaped.

Accepted Answer

A) True 
 B)False

Question 5

In the long run Firm A incurs total costs of $900 when output is 30 units and $1,200 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 6

When a firm is operating at an efficient scale,

Accepted Answer

A)  average variable cost is minimized. 
B)  average fixed cost is minimized. 
C)  average total cost is minimized. 
D)  marginal cost is minimized. 
A)  average variable cost is minimized. 
B)  average fixed cost is minimized. 
C)  average total cost is minimized. 
D)  marginal cost is minimized.

Question 7

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

Accepted Answer

A) True 
 B)False

Question 8

Figure 13-4  
-Refer to Figure 13-4.Curve C represents which type of cost curve?

Accepted Answer

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

Question 9

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.One week,Eileen earns a profit of $125.If her revenue for the week is $1100,how many boxes of earrings did she produce?

Accepted Answer

A)  140 
B)  330 
C)  780 
D)  950 
A)  140 
B)  330 
C)  780 
D)  950

Question 10

Scenario 13-7
Farmer Jack is a watermelon farmer.If Jack plants no seeds on his farm,he gets no harvest.If he plants 1 bag of seeds,he gets 30 watermelons.If he plants 2 bags of seeds,he gets 50 watermelons.If he plants 3 bags of seeds he gets 60 watermelons.A bag of seeds costs $100,and the costs of seeds are his only costs.
-Refer to Scenario 13-7.Farmer Jack's production function will

Accepted Answer

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

Question 11

An example of an explicit cost of production would be the

Accepted Answer

A)  cost of forgone labor earnings for an entrepreneur. 
B)  lost opportunity to invest in capital markets when the money is invested in one's business. 
C)  lease payments for the land on which a firm's factory stands. 
D)  Both a and c are correct. 
A)  cost of forgone labor earnings for an entrepreneur. 
B)  lost opportunity to invest in capital markets when the money is invested in one's business. 
C)  lease payments for the land on which a firm's factory stands. 
D)  Both a and c are correct.

Question 12

At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve,average variable cost

Accepted Answer

A)  rises. 
B)  remains unaffected. 
C)  falls. 
D)  All of the above are possible depending on the shape of the marginal cost curve. 
A)  rises. 
B)  remains unaffected. 
C)  falls. 
D)  All of the above are possible depending on the shape of the marginal cost curve.

Question 13

Figure 13-10  
-Refer to Figure 13-10.The three average total cost curves on the diagram labeled ATC1,ATC2,and ATC3 most likely correspond to three different

Accepted Answer

A)  time horizons. 
B)  products. 
C)  firms. 
D)  factory sizes. 
A)  time horizons. 
B)  products. 
C)  firms. 
D)  factory sizes.

Question 14

Diminishing marginal product suggests that the marginal

Accepted Answer

A)  cost of an extra worker is unchanged. 
B)  cost of an extra worker is less than the previous worker's marginal cost. 
C)  product of an extra worker is less than the previous worker's marginal product. 
D)  product of an extra worker is greater than the previous worker's marginal product. 
A)  cost of an extra worker is unchanged. 
B)  cost of an extra worker is less than the previous worker's marginal cost. 
C)  product of an extra worker is less than the previous worker's marginal product. 
D)  product of an extra worker is greater than the previous worker's marginal product.

Question 15

If long-run average total cost decreases as the quantity of output increases,the firm is experiencing

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  coordination problems arising from the large size of the firm. 
D)  fixed costs greatly exceeding variable costs. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  coordination problems arising from the large size of the firm. 
D)  fixed costs greatly exceeding variable costs.

Question 16

Table 13-4
Gallo Cork Factory
  
-Refer to Table 13-4.Each worker at Gallo's cork factory costs $12 per hour.The cost of each machine is $20 per day regardless of the number of corks produced.If Gallo's produces at a rate of 70 corks per hour and operates 8 hours per day,what is Gallo's total labor cost per day?

Accepted Answer

A)  $72 
B)  $112 
C)  $576 
D)  $616 
A)  $72 
B)  $112 
C)  $576 
D)  $616

Question 17

Scenario 13-8
Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level.
-Refer to Scenario 13-8.Average fixed cost will be

Accepted Answer

A)  rising at all points. 
B)  falling at all points. 
C)  U-shaped. 
D)  constant. 
A)  rising at all points. 
B)  falling at all points. 
C)  U-shaped. 
D)  constant.

Question 18

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

Accepted Answer

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

Question 19

Lois is a self-employed pet sitter.She can make 20 "housecalls" per day.She is considering hiring her sister Dora to work for her.Both she and Dora can visit 35 houses per day.What is Dora's marginal product?

Accepted Answer

A)  55 
B)  35 
C)  22.5 
D)  15 
A)  55 
B)  35 
C)  22.5 
D)  15

Question 20

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

Accepted Answer

A)  $30 
B)  $120 
C)  $220 
D)  $270 
A)  $30 
B)  $120 
C)  $220 
D)  $270

Exam 13: The Costs of Production

Explicit costs

The firm's efficient scale is the quantity of output that minimizes

The typical total-cost curve is U-shaped.

In the long run Firm A incurs total costs of $900 when output is 30 units and $1,200 when output is 40 units.Firm A exhibits

When a firm is operating at an efficient scale,

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

Figure 13-4 -Refer to Figure 13-4.Curve C represents which type of cost curve?

An example of an explicit cost of production would be the

At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve,average variable cost

Figure 13-10 -Refer to Figure 13-10.The three average total cost curves on the diagram labeled ATC1,ATC2,and ATC3 most likely correspond to three different

Diminishing marginal product suggests that the marginal

If long-run average total cost decreases as the quantity of output increases,the firm is experiencing

Scenario 13-8 Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. -Refer to Scenario 13-8.Average fixed cost will be

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

Lois is a self-employed pet sitter.She can make 20 "housecalls" per day.She is considering hiring her sister Dora to work for her.Both she and Dora can visit 35 houses per day.What is Dora's marginal product?

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

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

Figure 13-10 -Refer to Figure 13-10.The three average total cost curves on the diagram labeled ATC₁,ATC₂,and ATC₃ most likely correspond to three different