Question 1

Briefly describe why measuring a firm's costs is more complicated than measuring its revenues.

Accepted Answer

A firm's revenues can be calculated by m

Question 2

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements? (i) shoe polish
(ii) rent on the shoe stand
(iii) wages Pete could earn delivering newspapers
(iv) interest that Pete's money was earning before he spent his savings to set up the shoe­
Shine business

Accepted Answer

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

Question 3

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's profit.

Accepted Answer

A)  Tyler says his profit is $25,900, and Greg says his profit is $66,500. 
B)  Tyler says his profit is $35,000, and Greg says he lost $5,900. 
C)  Tyler says his profit is $34,100, and Greg says he lost $6,500. 
D)  Tyler says his profit is $34,100, and Greg says his profit is $34,100. 
A)  Tyler says his profit is $25,900, and Greg says his profit is $66,500. 
B)  Tyler says his profit is $35,000, and Greg says he lost $5,900. 
C)  Tyler says his profit is $34,100, and Greg says he lost $6,500. 
D)  Tyler says his profit is $34,100, and Greg says his profit is $34,100.

Question 4

Analyzing the behavior of the firm enhances our understanding of

Accepted Answer

A)  what decisions lie behind the market supply curve. 
B)  how consumers allocate their income to purchase scarce resources. 
C)  how financial institutions set interest rates. 
D)  whether resources are allocated fairly. 
A)  what decisions lie behind the market supply curve. 
B)  how consumers allocate their income to purchase scarce resources. 
C)  how financial institutions set interest rates. 
D)  whether resources are allocated fairly.

Question 5

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

Accepted Answer

A)  Tyler says his costs are $25,900, and Greg says his costs are $66,500. 
B)  Tyler says his costs are $25,000, and Greg says his costs are $65,000. 
C)  Tyler says his costs are $66,500, and Greg says his costs are $66,500. 
D)  Tyler says his costs are $75,000, and Greg says his costs are $41,500. 
A)  Tyler says his costs are $25,900, and Greg says his costs are $66,500. 
B)  Tyler says his costs are $25,000, and Greg says his costs are $65,000. 
C)  Tyler says his costs are $66,500, and Greg says his costs are $66,500. 
D)  Tyler says his costs are $75,000, and Greg says his costs are $41,500.

Question 6

Katya owns a math-tutoring business. Her accountant most likely includes which of the following costs on her financial statements? (i) workbooks containing practice problems
(ii) rent for the storefront
(iii) wages Katya could earn as a bookkeeper
(iv) interest that Katya's money was earning before she spent her savings to set up the
Tutoring business

Accepted Answer

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

Question 7

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Accepted Answer

When average total cost curve

Question 8

Table 13-18
  
-Refer to Table 13-18. What is the total output of four workers?

Accepted Answer

450 + 50 =

Question 9

Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible.
(ii) set the price of the product as high as possible.
(iii) maximize profit.

Accepted Answer

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

Question 10

Total revenue equals

Accepted Answer

A)  marginal revenue - marginal cost. 
B)  price/quantity. 
C)  price x quantity. 
D)  output - input. 
A)  marginal revenue - marginal cost. 
B)  price/quantity. 
C)  price x quantity. 
D)  output - input.

Question 11

Constant returns to 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)  long-run average total costs do not vary as output increases. 
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)  long-run average total costs do not vary as output increases.

Question 12

Scenario 13-5
Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
-Refer to Scenario 13-5. Emily's implicit cost of capital is

Accepted Answer

A)  $2,000. 
B)  $4,000. 
C)  $12,000. 
D)  $14,000. 
A)  $2,000. 
B)  $4,000. 
C)  $12,000. 
D)  $14,000.

Question 13

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Accepted Answer

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

Question 14

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

Accepted Answer

A)  in the short run but not in the long run. 
B)  in the long run but not in the short run. 
C)  both in the short run and in the long run. 
D)  neither in the short run nor in the long run. 
A)  in the short run but not in the long run. 
B)  in the long run but not in the short run. 
C)  both in the short run and in the long run. 
D)  neither in the short run nor in the long run.

Question 15

A production function is a relationship between inputs and

Accepted Answer

A)  quantity of output. 
B)  revenue. 
C)  costs. 
D)  profit. 
A)  quantity of output. 
B)  revenue. 
C)  costs. 
D)  profit.

Question 16

Table 13-17
Consider the following table of long-run total cost for four different firms:
  
-Refer to Table 13-17. Firm 4's efficient scale occurs at what quantity?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 17

A key difference between accountants and economists is their different treatment of the cost of capital. Does this cause an accountant's estimate of total costs to be higher or lower than an economist's estimate? Explain.

Accepted Answer

An accountant would not include the forg

Question 18

Table 13-20
Listed in the table are the long-run total costs for three different firms.
  
-Refer to Table 13-20. Firm A is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 19

Figure 13-2  
-Refer to Figure 13-2. As the number of workers increases,

Accepted Answer

A)  total output increases but at a decreasing rate. 
B)  marginal product increases but at a decreasing rate. 
C)  marginal product increases at an increasing rate. 
D)  total output decreases. 
A)  total output increases but at a decreasing rate. 
B)  marginal product increases but at a decreasing rate. 
C)  marginal product increases at an increasing rate. 
D)  total output decreases.

Question 20

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

Accepted Answer

A) True 
 B)False

Briefly describe why measuring a firm's costs is more complicated than measuring its revenues.

Analyzing the behavior of the firm enhances our understanding of

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Table 13-18 -Refer to Table 13-18. What is the total output of four workers?

Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible. (ii) set the price of the product as high as possible. (iii) maximize profit.

Total revenue equals

Constant returns to scale occur when a firm's

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

A production function is a relationship between inputs and

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Firm 4's efficient scale occurs at what quantity?

A key difference between accountants and economists is their different treatment of the cost of capital. Does this cause an accountant's estimate of total costs to be higher or lower than an economist's estimate? Explain.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing economies of scale.

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

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

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Exam 13: The Costs of Production

Briefly describe why measuring a firm's costs is more complicated than measuring its revenues.

Analyzing the behavior of the firm enhances our understanding of

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Table 13-18 -Refer to Table 13-18. What is the total output of four workers?

Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible. (ii) set the price of the product as high as possible. (iii) maximize profit.

Total revenue equals

Constant returns to scale occur when a firm's

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

A production function is a relationship between inputs and

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Firm 4's efficient scale occurs at what quantity?

A key difference between accountants and economists is their different treatment of the cost of capital. Does this cause an accountant's estimate of total costs to be higher or lower than an economist's estimate? Explain.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing economies of scale.

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

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

Filters