Question 1

Which of the following is a short run adjustment?

Accepted Answer

A)  A bakery hiring two additional bakers. 
B)  Two new firms enter the textile industry. 
C)  Three firms leave the bicycle industry. 
D)  A computer hardware company builds a new factory. 
A)  A bakery hiring two additional bakers. 
B)  Two new firms enter the textile industry. 
C)  Three firms leave the bicycle industry. 
D)  A computer hardware company builds a new factory.

Question 2

If the cost of variable inputs used in a firm's production process rose,which of the following would not occur?

Accepted Answer

A)  Its AVC curve would shift up. 
B)  Its ATC curve would shift up. 
C)  Its MC curve would shift up. 
D)  Its AFC curve would shift up. 
A)  Its AVC curve would shift up. 
B)  Its ATC curve would shift up. 
C)  Its MC curve would shift up. 
D)  Its AFC curve would shift up.

Question 3

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

Accepted Answer

A) True 
 B)False

Question 4

Economists normally assume that the goal of a firm is to:

Accepted Answer

A)  sell as many units of output as possible. 
B)  maximize profits. 
C)  sell products at the highest prices possible. 
D)  maximize sales revenue. 
A)  sell as many units of output as possible. 
B)  maximize profits. 
C)  sell products at the highest prices possible. 
D)  maximize sales revenue.

Question 5

Exhibit 11-8 The table below shows how total cost varies with output in a factory producing watches:
  Refer to Exhibit 11-8.The marginal cost of producing a third watch equals:

Accepted Answer

A)  $50. 
B)  $69. 
C)  $5. 
D)  $4. 
A)  $50. 
B)  $69. 
C)  $5. 
D)  $4.

Question 6

In the short run,if a firm's total product is increasing:

Accepted Answer

A)  its marginal product must be increasing. 
B)  its marginal product must be positive. 
C)  its marginal product could be increasing or decreasing. 
D)  both b. and c. are true. 
A)  its marginal product must be increasing. 
B)  its marginal product must be positive. 
C)  its marginal product could be increasing or decreasing. 
D)  both b. and c. are true.

Question 7

If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11th unit is $30,what is the average total cost of 11 units?

Accepted Answer

A)  $23.00 
B)  $20.09 
C)  $30.00 
D)  $39.09 
A)  $23.00 
B)  $20.09 
C)  $30.00 
D)  $39.09

Question 8

The short run is not the same length of time for all firms and industries because:

Accepted Answer

A)  entrepreneurs have different tastes and preferences. 
B)  the average product of labor varies across industries. 
C)  the life span of capital and the extent of capital specialization will vary across firms and industries. 
D)  The marginal product of capital begins to diminish at different levels of capital utilization across firms. 
A)  entrepreneurs have different tastes and preferences. 
B)  the average product of labor varies across industries. 
C)  the life span of capital and the extent of capital specialization will vary across firms and industries. 
D)  The marginal product of capital begins to diminish at different levels of capital utilization across firms.

Question 9

Average fixed cost is:

Accepted Answer

A)  total cost divided by the number of units produced over a given period. 
B)  total fixed cost divided by the number of units produced over a given period. 
C)  the price of a fixed factor of production. 
D)  fixed cost divided by the number of units of a fixed input employed over a given period. 
A)  total cost divided by the number of units produced over a given period. 
B)  total fixed cost divided by the number of units produced over a given period. 
C)  the price of a fixed factor of production. 
D)  fixed cost divided by the number of units of a fixed input employed over a given period.

Question 10

A firm has $300 million in revenues and explicit costs of $100 million.If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year,the firm's accounting profit is:

Accepted Answer

A)  $50 million. 
B)  $150 million. 
C)  $185 million. 
D)  $200 million. 
A)  $50 million. 
B)  $150 million. 
C)  $185 million. 
D)  $200 million.

Question 11

Exhibit 11-6   Refer to Exhibit 11-6.The average fixed cost curve is the curve labeled:

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 12

Exhibit 11-10   Refer to Exhibit 11-10.Which of the following curves represent the LRATC?

Accepted Answer

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

Question 13

The production function describes:

Accepted Answer

A)  the relationship between the quantity of inputs utilized and the quantity of output produced. 
B)  how inputs are most profitably used in production. 
C)  the most cost-effective method of combining various inputs in the production process. 
D)  the relationship between a firm's revenue and its level of production. 
A)  the relationship between the quantity of inputs utilized and the quantity of output produced. 
B)  how inputs are most profitably used in production. 
C)  the most cost-effective method of combining various inputs in the production process. 
D)  the relationship between a firm's revenue and its level of production.

Question 14

The region of economies of scale is that in which:

Accepted Answer

A)  short-run marginal cost is falling as output expands. 
B)  short-run average total cost is falling as output expands. 
C)  long-run marginal cost is falling as output expands. 
D)  long-run average total cost is falling as output expands. 
A)  short-run marginal cost is falling as output expands. 
B)  short-run average total cost is falling as output expands. 
C)  long-run marginal cost is falling as output expands. 
D)  long-run average total cost is falling as output expands.

Question 15

If a technological change reduced the amount of the variable input needed by a firm to produce a unit of output:

Accepted Answer

A)  its AVC curve would shift down. 
B)  its ATC curve would shift down. 
C)  its MC curve would shift down. 
D)  All of the above would occur. 
A)  its AVC curve would shift down. 
B)  its ATC curve would shift down. 
C)  its MC curve would shift down. 
D)  All of the above would occur.

Question 16

If the total cost of producing 10 units equals $90,and the average total cost of producing 11 units equals $8.75,then the marginal cost of the eleventh unit produced:

Accepted Answer

A)  is definitely greater than the marginal cost of producing the tenth unit. 
B)  is definitely less than the marginal cost of producing the tenth unit. 
C)  is less than the average total cost of producing ten units. 
D)  is greater than the average total cost of producing ten units. 
A)  is definitely greater than the marginal cost of producing the tenth unit. 
B)  is definitely less than the marginal cost of producing the tenth unit. 
C)  is less than the average total cost of producing ten units. 
D)  is greater than the average total cost of producing ten units.

Question 17

A firm's average fixed cost when producing 2,000 units of output equals $10.When only 1,000 units of output are produced:

Accepted Answer

A)  AFC must still equal $10. 
B)  AFC must equal $20. 
C)  AFC must equal $5. 
D)  marginal cost must equal $20. 
A)  AFC must still equal $10. 
B)  AFC must equal $20. 
C)  AFC must equal $5. 
D)  marginal cost must equal $20.

Question 18

Given the following information about the cost function for Bob's Beautiful Bowling Balls:   Which of the following is true?

Accepted Answer

A)  The average fixed cost of producing 3 units is $200. 
B)  The total cost of producing 5 units is $230. 
C)  The marginal cost of the 4th unit is lower than for any other unit. 
D)  AVC falls through the first five units of output. 
A)  The average fixed cost of producing 3 units is $200. 
B)  The total cost of producing 5 units is $230. 
C)  The marginal cost of the 4th unit is lower than for any other unit. 
D)  AVC falls through the first five units of output.

Question 19

Constant returns to scale indicate that a firm is experiencing:

Accepted Answer

A)  per unit costs of production that are decreasing as the scale of output expands. 
B)  per unit costs of production that remain stable as the scale of output expands. 
C)  per unit costs of production that are increasing as the scale of output expands. 
D)  an increasing marginal product. 
A)  per unit costs of production that are decreasing as the scale of output expands. 
B)  per unit costs of production that remain stable as the scale of output expands. 
C)  per unit costs of production that are increasing as the scale of output expands. 
D)  an increasing marginal product.

Question 20

Economies of scale:

Accepted Answer

A)  are the result of a diminishing marginal product. 
B)  pertain to the long run only. 
C)  refer to the increase in output that results from the increased utilization of a single input. 
D)  imply that the average total cost curve will fall continuously as output increases in the short run. 
A)  are the result of a diminishing marginal product. 
B)  pertain to the long run only. 
C)  refer to the increase in output that results from the increased utilization of a single input. 
D)  imply that the average total cost curve will fall continuously as output increases in the short run.

Exam 11: The Firm: Production and Costs

Which of the following is a short run adjustment?

If the cost of variable inputs used in a firm's production process rose,which of the following would not occur?

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

Economists normally assume that the goal of a firm is to:

Exhibit 11-8 The table below shows how total cost varies with output in a factory producing watches: Refer to Exhibit 11-8.The marginal cost of producing a third watch equals:

In the short run,if a firm's total product is increasing:

If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11th unit is $30,what is the average total cost of 11 units?

The short run is not the same length of time for all firms and industries because:

Average fixed cost is:

A firm has $300 million in revenues and explicit costs of $100 million.If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year,the firm's accounting profit is:

Exhibit 11-6 Refer to Exhibit 11-6.The average fixed cost curve is the curve labeled:

Exhibit 11-10 Refer to Exhibit 11-10.Which of the following curves represent the LRATC?

The production function describes:

The region of economies of scale is that in which:

If a technological change reduced the amount of the variable input needed by a firm to produce a unit of output:

If the total cost of producing 10 units equals $90,and the average total cost of producing 11 units equals $8.75,then the marginal cost of the eleventh unit produced:

A firm's average fixed cost when producing 2,000 units of output equals $10.When only 1,000 units of output are produced:

Given the following information about the cost function for Bob's Beautiful Bowling Balls: Which of the following is true?

Constant returns to scale indicate that a firm is experiencing:

Economies of scale:

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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If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11^th unit is $30,what is the average total cost of 11 units?