Question 1

The economic field of industrial organization examines how firms' decisions about prices and quantities depend on the market conditions they face.

Accepted Answer

A) True 
 B)False

Question 2

A certain firm manufactures and sells computer chips.Last year it sold 2 million chips at a price of $10 per chip.For last year,the firm's

Accepted Answer

A)  accounting profit amounted to $20 million. 
B)  economic profit amounted to $20 million. 
C)  total revenue amounted to $20 million. 
D)  explicit costs amounted to $20 million. 
A)  accounting profit amounted to $20 million. 
B)  economic profit amounted to $20 million. 
C)  total revenue amounted to $20 million. 
D)  explicit costs amounted to $20 million.

Question 3

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.What is the total opportunity cost of the day that Farmer Tony incurred for his spring day in the field planting wheat?

Accepted Answer

A)  $130 
B)  $250 
C)  $300 
D)  $380 
A)  $130 
B)  $250 
C)  $300 
D)  $380

Question 4

If the marginal cost curve is rising,then so is the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 5

Economists normally assume that the goal of a firm is to

Accepted Answer

A)  (i)and (ii)are true. 
B)  (ii)and (iii)are true. 
C)  (iii)is true. 
D)  (i)and (iii)are true. 
A)  (i)and (ii)are true. 
B)  (ii)and (iii)are true. 
C)  (iii)is true. 
D)  (i)and (iii)are true.

Question 6

According to the mathematical laws that govern the relationship between average total cost and marginal cost,where must these two curves intersect?

Accepted Answer

The two curves will

Question 7

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.Which of the following statements is (are)true?

Accepted Answer

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

Question 8

Fixed costs can be defined as costs that

Accepted Answer

A)  vary inversely with production. 
B)  vary in proportion with production. 
C)  are incurred only when production is large enough. 
D)  are incurred even if nothing is produced. 
A)  vary inversely with production. 
B)  vary in proportion with production. 
C)  are incurred only when production is large enough. 
D)  are incurred even if nothing is produced.

Question 9

Tom's Tent Company has total fixed costs of $300,000 per year.The firm's average variable cost is $80 for 10,000 tents.At that level of output,the firm's average total costs equal

Accepted Answer

A)  $80 
B)  $90 
C)  $100 
D)  $110 
A)  $80 
B)  $90 
C)  $100 
D)  $110

Question 10

An example of an opportunity cost that is also an implicit cost is

Accepted Answer

A)  a lease payment. 
B)  the cost of raw materials. 
C)  the value of the business owner's time. 
D)  All of the above are correct. 
A)  a lease payment. 
B)  the cost of raw materials. 
C)  the value of the business owner's time. 
D)  All of the above are correct.

Question 11

Larry's Lunchcart is a small street vendor business.If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50,his average total cost per pretzel is

Accepted Answer

A)  $1.10. 
B)  $6.50. 
C)  $15.00. 
D)  $16.50. 
A)  $1.10. 
B)  $6.50. 
C)  $15.00. 
D)  $16.50.

Question 12

Which of the following expressions is correct?

Accepted Answer

A)  accounting profit = total revenue - explicit costs 
B)  economic profit = total revenue - implicit costs 
C)  economic profit = total revenue - explicit costs 
D)  Both a and b are correct. 
A)  accounting profit = total revenue - explicit costs 
B)  economic profit = total revenue - implicit costs 
C)  economic profit = total revenue - explicit costs 
D)  Both a and b are correct.

Question 13

Some costs do not vary with the quantity of output produced.Those costs are called

Accepted Answer

A)  marginal costs. 
B)  average costs. 
C)  fixed costs. 
D)  incurred costs. 
A)  marginal costs. 
B)  average costs. 
C)  fixed costs. 
D)  incurred costs.

Question 14

Which of these assumptions is often realistic for a firm in the short run?

Accepted Answer

A)  The firm can vary both the size of its factory and the number of workers it employs. 
B)  The firm can vary the size of its factory but not the number of workers it employs. 
C)  The firm can vary the number of workers it employs but not the size of its factory. 
D)  The firm can vary neither the size of its factory nor the number of workers it employs. 
A)  The firm can vary both the size of its factory and the number of workers it employs. 
B)  The firm can vary the size of its factory but not the number of workers it employs. 
C)  The firm can vary the number of workers it employs but not the size of its factory. 
D)  The firm can vary neither the size of its factory nor the number of workers it employs.

Question 15

What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Accepted Answer

The opportunity cost of an ite

Question 16

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.  
-Refer to Figure 13-9.At levels of output between M and N,the firm experiences

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  both the benefits of specialization and diminishing marginal productivity. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  both the benefits of specialization and diminishing marginal productivity.

Question 17

The marginal product of labor can be defined as

Accepted Answer

A)  change in profit/change in labor. 
B)  change in output/change in labor. 
C)  change in labor/change in output. 
D)  change in labor/change in total cost. 
A)  change in profit/change in labor. 
B)  change in output/change in labor. 
C)  change in labor/change in output. 
D)  change in labor/change in total cost.

Question 18

Kirsten sells 300 glasses of lemonade at $0.50 each.Her total costs are $125.Her profits are

Accepted Answer

A)  $25. 
B)  $124.50. 
C)  $125. 
D)  $150. 
A)  $25. 
B)  $124.50. 
C)  $125. 
D)  $150.

Question 19

David's firm experiences diminishing marginal product for all ranges of inputs.The total cost curve associated with David's firm

Accepted Answer

A)  gets flatter as output increases. 
B)  gets steeper as output increases. 
C)  is constant for all ranges of output. 
D)  is unrelated to the production function. 
A)  gets flatter as output increases. 
B)  gets steeper as output increases. 
C)  is constant for all ranges of output. 
D)  is unrelated to the production function.

Question 20

Profit equals marginal revenue minus marginal cost.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production

The economic field of industrial organization examines how firms' decisions about prices and quantities depend on the market conditions they face.

A certain firm manufactures and sells computer chips.Last year it sold 2 million chips at a price of $10 per chip.For last year,the firm's

If the marginal cost curve is rising,then so is the average total cost curve.

Economists normally assume that the goal of a firm is to

According to the mathematical laws that govern the relationship between average total cost and marginal cost,where must these two curves intersect?

Fixed costs can be defined as costs that

Tom's Tent Company has total fixed costs of $300,000 per year.The firm's average variable cost is $80 for 10,000 tents.At that level of output,the firm's average total costs equal

An example of an opportunity cost that is also an implicit cost is

Larry's Lunchcart is a small street vendor business.If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50,his average total cost per pretzel is

Which of the following expressions is correct?

Some costs do not vary with the quantity of output produced.Those costs are called

Which of these assumptions is often realistic for a firm in the short run?

What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.At levels of output between M and N,the firm experiences

The marginal product of labor can be defined as

Kirsten sells 300 glasses of lemonade at $0.50 each.Her total costs are $125.Her profits are

David's firm experiences diminishing marginal product for all ranges of inputs.The total cost curve associated with David's firm

Profit equals marginal revenue minus marginal 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

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