Question 1

An economist's measurement of profit differs from an accountant's in that:

Accepted Answer

A)  accountants calculate total revenue differently than do economists. 
B)  economists do not always include all of the opportunity costs when calculating total production costs. 
C)  accountants do not always include all of the opportunity costs when calculating total production costs. 
D)  economic profit generally exceeds accounting profit. 
A)  accountants calculate total revenue differently than do economists. 
B)  economists do not always include all of the opportunity costs when calculating total production costs. 
C)  accountants do not always include all of the opportunity costs when calculating total production costs. 
D)  economic profit generally exceeds accounting profit.

Question 2

Exhibit 11-4   Refer to Exhibit 11-4.Marginal product begins to diminish:

Accepted Answer

A)  with the first worker hired. 
B)  with the second worker hired. 
C)  with the third worker hired. 
D)  with the fourth worker hired. 
A)  with the first worker hired. 
B)  with the second worker hired. 
C)  with the third worker hired. 
D)  with the fourth worker hired.

Question 3

Which of the following is a reason that marginal product will eventually begin to fall?

Accepted Answer

A)  effective use of fixed inputs 
B)  decrease in demand 
C)  increased specialization 
D)  limited amounts of fixed inputs 
A)  effective use of fixed inputs 
B)  decrease in demand 
C)  increased specialization 
D)  limited amounts of fixed inputs

Question 4

From the firm's perspective,is an accounting profit of zero a good result,a bad result,or merely a satisfactory result? Why? Is an economic profit of zero a good result,a bad result,or merely a satisfactory result? Why?

Accepted Answer

An accounting profit of zero is most lik

Question 5

The marginal cost of a good is:

Accepted Answer

A)  the difference between average total cost and average variable cost. 
B)  the addition to total cost from producing one more unit of output. 
C)  decreasing whenever average total cost is decreasing. 
D)  always equal to average variable cost when the firm is maximizing profit. 
A)  the difference between average total cost and average variable cost. 
B)  the addition to total cost from producing one more unit of output. 
C)  decreasing whenever average total cost is decreasing. 
D)  always equal to average variable cost when the firm is maximizing profit.

Question 6

Exhibit 11-7   Refer to Exhibit 11-7.At output level 0Q,total fixed cost equals:

Accepted Answer

A)  area ADQ0. 
B)  area ADEB. 
C)  area ADFC. 
D)  area BEQ0. 
A)  area ADQ0. 
B)  area ADEB. 
C)  area ADFC. 
D)  area BEQ0.

Question 7

Cassie produces and sells 400 jars of homemade jelly each month for $3 each.Each month,she pays $200 for jars,$150 for ingredients,and uses her own time,with an opportunity cost of $300.Her economic profits each month are:

Accepted Answer

A)  $550. 
B)  $700. 
C)  $850. 
D)  $900. 
A)  $550. 
B)  $700. 
C)  $850. 
D)  $900.

Question 8

Total variable costs:

Accepted Answer

A)  are costs associated with short-run fixed capital. 
B)  are so named because they vary from firm to firm within an industry. 
C)  increase as production increases. 
D)  decrease as production increases. 
A)  are costs associated with short-run fixed capital. 
B)  are so named because they vary from firm to firm within an industry. 
C)  increase as production increases. 
D)  decrease as production increases.

Question 9

Average fixed cost:

Accepted Answer

A)  declines continuously as output increases. 
B)  is always greater than average variable cost. 
C)  equals the difference between average total cost and average variable cost. 
D)  is characterized by both (a) and (c). 
A)  declines continuously as output increases. 
B)  is always greater than average variable cost. 
C)  equals the difference between average total cost and average variable cost. 
D)  is characterized by both (a) and (c).

Question 10

Exhibit 11-1   Refer to Exhibit 11-1.The total product of labor diminishes with the addition of the ____ picker.

Accepted Answer

A)  fifth 
B)  seventh 
C)  eighth 
D)  ninth 
A)  fifth 
B)  seventh 
C)  eighth 
D)  ninth

Question 11

When there are diseconomies of scale in production:

Accepted Answer

A)  long-run average total cost declines as output expands. 
B)  long-run average total cost increases as output expands. 
C)  marginal cost decreases as output expands. 
D)  none of the above 
A)  long-run average total cost declines as output expands. 
B)  long-run average total cost increases as output expands. 
C)  marginal cost decreases as output expands. 
D)  none of the above

Question 12

The short run is that period in which firms:

Accepted Answer

A)  are free to vary all inputs. 
B)  are able to vary some, but not all, inputs. 
C)  can vary inputs, but only by varying all inputs in equal proportion. 
D)  cannot increase production at all. 
A)  are free to vary all inputs. 
B)  are able to vary some, but not all, inputs. 
C)  can vary inputs, but only by varying all inputs in equal proportion. 
D)  cannot increase production at all.

Question 13

If both the marginal cost and the average variable cost curves are U-shaped,which of the following is true over the range of output for which the average variable cost curve has a negative slope?

Accepted Answer

A)  The marginal cost curve must have a negative slope. 
B)  The average total cost curve must have a negative slope. 
C)  The marginal cost curve is below the average variable cost curve. 
D)  both (b) and (c) are correct. 
A)  The marginal cost curve must have a negative slope. 
B)  The average total cost curve must have a negative slope. 
C)  The marginal cost curve is below the average variable cost curve. 
D)  both (b) and (c) are correct.

Question 14

Exhibit 11-7   Refer to Exhibit 11-7.At output level 0Q,total variable cost equals:

Accepted Answer

A)  area ADQ0. 
B)  area ADEB. 
C)  area CFQ0. 
D)  area BEQ0. 
A)  area ADQ0. 
B)  area ADEB. 
C)  area CFQ0. 
D)  area BEQ0.

Question 15

The vertical distance between the average total cost curve and the average variable cost curve equals:

Accepted Answer

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

Question 16

Over the range of diminishing marginal product,if the variable input to a firm is increased:

Accepted Answer

A)  output will increase more than in proportion to the increase in the input. 
B)  output will increase less than in proportion to the increase in the input. 
C)  output will increase exactly in proportion to the increase in the input. 
D)  output will increase more than in proportion to the increase in the inputs at first, but it will eventually increase less than in proportion to the increase in the input. 
A)  output will increase more than in proportion to the increase in the input. 
B)  output will increase less than in proportion to the increase in the input. 
C)  output will increase exactly in proportion to the increase in the input. 
D)  output will increase more than in proportion to the increase in the inputs at first, but it will eventually increase less than in proportion to the increase in the input.

Question 17

If a firm experiences increasing returns to scale at all levels of output:

Accepted Answer

A)  the slope of its long-run total cost curve is everywhere negative. 
B)  the slope of its short-run average cost curve is everywhere negative. 
C)  the slope of its long-run average total cost curve is everywhere negative. 
D)  the slope of its production function is everywhere negative. 
A)  the slope of its long-run total cost curve is everywhere negative. 
B)  the slope of its short-run average cost curve is everywhere negative. 
C)  the slope of its long-run average total cost curve is everywhere negative. 
D)  the slope of its production function is everywhere negative.

Question 18

Kelly,who grows geraniums to sell,is currently producing a level of output at which her marginal cost equals her average variable cost.What must be true about Kelly's average variable cost at this level of output?

Accepted Answer

A)  It is at a minimum. 
B)  It is at a maximum. 
C)  It is neither at its maximum nor its minimum. 
D)  It is greater than the average total cost. 
A)  It is at a minimum. 
B)  It is at a maximum. 
C)  It is neither at its maximum nor its minimum. 
D)  It is greater than the average total cost.

Question 19

If both the marginal cost and the average variable cost curves are U-shaped,at the minimum point of the average total cost curve,the marginal cost curve must be:

Accepted Answer

A)  greater than average variable cost. 
B)  less than average variable cost. 
C)  equal to average variable cost. 
D)  at its minimum. 
A)  greater than average variable cost. 
B)  less than average variable cost. 
C)  equal to average variable cost. 
D)  at its minimum.

Question 20

Which of the following is false?

Accepted Answer

A)  The total product schedule shows the total amount of output generated as the level of the fixed input increases. 
B)  The marginal product of any single input is the change in total product resulting from a small change in the amount of that input used. 
C)  As the amount of a variable input is increased, the amount of other fixed inputs being held constant, a point ultimately will be reached beyond which marginal product will decline. This is called diminishing marginal product. 
D)  A firm never knowingly allows itself to reach the point where the marginal product becomes negative. 
A)  The total product schedule shows the total amount of output generated as the level of the fixed input increases. 
B)  The marginal product of any single input is the change in total product resulting from a small change in the amount of that input used. 
C)  As the amount of a variable input is increased, the amount of other fixed inputs being held constant, a point ultimately will be reached beyond which marginal product will decline. This is called diminishing marginal product. 
D)  A firm never knowingly allows itself to reach the point where the marginal product becomes negative.

Exam 11: The Firm: Production and Costs

An economist's measurement of profit differs from an accountant's in that:

Exhibit 11-4 Refer to Exhibit 11-4.Marginal product begins to diminish:

Which of the following is a reason that marginal product will eventually begin to fall?

From the firm's perspective,is an accounting profit of zero a good result,a bad result,or merely a satisfactory result? Why? Is an economic profit of zero a good result,a bad result,or merely a satisfactory result? Why?

The marginal cost of a good is:

Exhibit 11-7 Refer to Exhibit 11-7.At output level 0Q,total fixed cost equals:

Cassie produces and sells 400 jars of homemade jelly each month for $3 each.Each month,she pays $200 for jars,$150 for ingredients,and uses her own time,with an opportunity cost of $300.Her economic profits each month are:

Total variable costs:

Average fixed cost:

Exhibit 11-1 Refer to Exhibit 11-1.The total product of labor diminishes with the addition of the ____ picker.

When there are diseconomies of scale in production:

The short run is that period in which firms:

If both the marginal cost and the average variable cost curves are U-shaped,which of the following is true over the range of output for which the average variable cost curve has a negative slope?

Exhibit 11-7 Refer to Exhibit 11-7.At output level 0Q,total variable cost equals:

The vertical distance between the average total cost curve and the average variable cost curve equals:

Over the range of diminishing marginal product,if the variable input to a firm is increased:

If a firm experiences increasing returns to scale at all levels of output:

Kelly,who grows geraniums to sell,is currently producing a level of output at which her marginal cost equals her average variable cost.What must be true about Kelly's average variable cost at this level of output?

If both the marginal cost and the average variable cost curves are U-shaped,at the minimum point of the average total cost curve,the marginal cost curve must be:

Which of the following is false?

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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