Question 1

The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 2

The marginal product of labor is equal to the

Accepted Answer

A)  incremental cost associated with a one unit increase in labor. 
B)  incremental profit associated with a one unit increase in labor. 
C)  increase in labor necessary to generate a one unit increase in output. 
D)  increase in output obtained from a one unit increase in labor. 
A)  incremental cost associated with a one unit increase in labor. 
B)  incremental profit associated with a one unit increase in labor. 
C)  increase in labor necessary to generate a one unit increase in output. 
D)  increase in output obtained from a one unit increase in labor.

Question 3

Diseconomies 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 4

For a construction company that builds houses,which of the following costs would be a fixed cost?

Accepted Answer

A)  the $20 per hour wage paid to a construction foreman 
B)  the $30,000 per year salary paid to the company's bookkeeper 
C)  the $2 per worker-hour paid to the state government for workers' compensation insurance 
D)  All of the above are correct. 
A)  the $20 per hour wage paid to a construction foreman 
B)  the $30,000 per year salary paid to the company's bookkeeper 
C)  the $2 per worker-hour paid to the state government for workers' compensation insurance 
D)  All of the above are correct.

Question 5

Economic profit is equal to

Accepted Answer

A)  total revenue minus the explicit cost of producing goods and services. 
B)  total revenue minus the opportunity cost of producing goods and services. 
C)  total revenue minus the accounting cost of producing goods and services. 
D)  average revenue minus the average cost of producing the last unit of a good or service. 
A)  total revenue minus the explicit cost of producing goods and services. 
B)  total revenue minus the opportunity cost of producing goods and services. 
C)  total revenue minus the accounting cost of producing goods and services. 
D)  average revenue minus the average cost of producing the last unit of a good or service.

Question 6

Those things that must be forgone to acquire a good are called

Accepted Answer

A)  implicit costs. 
B)  opportunity costs. 
C)  explicit costs. 
D)  accounting costs. 
A)  implicit costs. 
B)  opportunity costs. 
C)  explicit costs. 
D)  accounting costs.

Question 7

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 the average total cost when 5 units of output are produced is $30,and the marginal cost of the sixth unit of output is $60.What is the average total cost when six units are produced?

Accepted Answer

A)  $10 
B)  $25 
C)  $30 
D)  $35 
A)  $10 
B)  $25 
C)  $30 
D)  $35

Question 8

If a firm produces nothing,it still incurs its fixed costs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following costs do not vary with the amount of output a firm produces?

Accepted Answer

A)  average fixed costs 
B)  fixed costs and average fixed costs 
C)  marginal costs and average fixed costs 
D)  fixed costs 
A)  average fixed costs 
B)  fixed costs and average fixed costs 
C)  marginal costs and average fixed costs 
D)  fixed costs

Question 10

Variable costs equal fixed costs when nothing is produced.

Accepted Answer

A) True 
 B)False

Question 11

In the long run Firm A incurs total costs of $1,050 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)  diseconomies of scale because average total cost is rising as output rises. 
C)  economies of scale because 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)  diseconomies of scale because average total cost is rising as output rises. 
C)  economies of scale because total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises.

Question 12

If marginal cost is greater than average total cost,then

Accepted Answer

A)  profits are increasing. 
B)  economies of scale are becoming greater. 
C)  average total cost remains constant. 
D)  average total cost is increasing. 
A)  profits are increasing. 
B)  economies of scale are becoming greater. 
C)  average total cost remains constant. 
D)  average total cost is increasing.

Question 13

Economies of scale arise when

Accepted Answer

A)  an economy is self-sufficient in production. 
B)  individuals in a society are self-sufficient. 
C)  fixed costs are large relative to variable costs. 
D)  workers are able to specialize in a particular task. 
A)  an economy is self-sufficient in production. 
B)  individuals in a society are self-sufficient. 
C)  fixed costs are large relative to variable costs. 
D)  workers are able to specialize in a particular task.

Question 14

Accounting profit is greater than or equal to economic profit.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements about costs is correct?

Accepted Answer

A)  When marginal cost is less than average total cost,average total cost is rising. 
B)  The total cost curve is U-shaped. 
C)  As the quantity of output increases,marginal cost eventually rises. 
D)  All of the above are correct. 
A)  When marginal cost is less than average total cost,average total cost is rising. 
B)  The total cost curve is U-shaped. 
C)  As the quantity of output increases,marginal cost eventually rises. 
D)  All of the above are correct.

Question 16

Table 13-1
Alyson's Pet Sitting Service
  
-Refer to Table 13-1.Suppose that Alyson's pet sitting service has a fixed cost of $50 per month for her cell phone.Each worker costs Alyson $60 per day.What is the shape of Alyson's total cost curve as output increases from 45 to 70?

Accepted Answer

A)  Total cost increases but gets flatter. 
B)  Total cost increases and gets steeper. 
C)  Total cost decreases and gets flatter. 
D)  Total cost decreases but gets steeper. 
A)  Total cost increases but gets flatter. 
B)  Total cost increases and gets steeper. 
C)  Total cost decreases and gets flatter. 
D)  Total cost decreases but gets steeper.

Question 17

If marginal cost is rising,

Accepted Answer

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

Question 18

Scenario 13-2
Zach withdrew $400,000 out of his personal savings account and used it to start his new cookie business.The bank account pays 3 percent interest per year.During the first year of his business,Zach sold 6,000 boxes of cookies for $2.50 per box.Also during the first year,the cookie business made monetary outlays of $9,000.You may assume that there is no opportunity cost to Zach's time.
-Refer to Scenario 13-2.Zach's accounting profit for the year was

Accepted Answer

A)  $-494,000. 
B)  $-6,000. 
C)  $6,000. 
D)  $12,000. 
A)  $-494,000. 
B)  $-6,000. 
C)  $6,000. 
D)  $12,000.

Question 19

If a firm wants to capitalize on economies of scale,it may be able to do so by

Accepted Answer

A)  assigning limited tasks to its employees,so they can master those tasks. 
B)  employing a smaller number of workers. 
C)  producing a smaller quantity of output. 
D)  producing an output level higher than the efficient scale. 
A)  assigning limited tasks to its employees,so they can master those tasks. 
B)  employing a smaller number of workers. 
C)  producing a smaller quantity of output. 
D)  producing an output level higher than the efficient scale.

Question 20

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.Suppose the owner of the business had an offer to work for another firm that raises his opportunity cost by $25,000.The firm's economic profit for the year was

Accepted Answer

A)  $-28,000. 
B)  $-25,000 
C)  $-3,000. 
D)  $17,000. 
A)  $-28,000. 
B)  $-25,000 
C)  $-3,000. 
D)  $17,000.

Exam 13: The Costs of Production

The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve.

The marginal product of labor is equal to the

Diseconomies of scale occur when a firm's

For a construction company that builds houses,which of the following costs would be a fixed cost?

Economic profit is equal to

Those things that must be forgone to acquire a good are called

If a firm produces nothing,it still incurs its fixed costs.

Which of the following costs do not vary with the amount of output a firm produces?

Variable costs equal fixed costs when nothing is produced.

In the long run Firm A incurs total costs of $1,050 when output is 30 units and $1,200 when output is 40 units.Firm A exhibits

If marginal cost is greater than average total cost,then

Economies of scale arise when

Accounting profit is greater than or equal to economic profit.

Which of the following statements about costs is correct?

Table 13-1 Alyson's Pet Sitting Service -Refer to Table 13-1.Suppose that Alyson's pet sitting service has a fixed cost of $50 per month for her cell phone.Each worker costs Alyson $60 per day.What is the shape of Alyson's total cost curve as output increases from 45 to 70?

If marginal cost is rising,

If a firm wants to capitalize on economies of scale,it may be able to do so by

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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