Question 1

A firm's total profit equals its marginal revenue minus its marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

Economies of scale often arise because higher production levels allow specialization among workers.

Accepted Answer

A) True 
 B)False

Question 3

Industrial organization is the study of

Accepted Answer

A)  how labor unions organize workers in industries. 
B)  which managers are the most successful. 
C)  how industries organize for political advantage. 
D)  how firms' decisions regarding prices and quantities depend on the market conditions they face. 
A)  how labor unions organize workers in industries. 
B)  which managers are the most successful. 
C)  how industries organize for political advantage. 
D)  how firms' decisions regarding prices and quantities depend on the market conditions they face.

Question 4

Total revenue minus only explicit costs is called

Accepted Answer

A)  accounting profit. 
B)  economic profit. 
C)  average total cost. 
D)  implicit profit. 
A)  accounting profit. 
B)  economic profit. 
C)  average total cost. 
D)  implicit profit.

Question 5

Scenario 13-13
Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000.
-Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual accounting profit of her cookie jar business?

Accepted Answer

A)  $36,000 
B)  $35,950 
C)  $30,000 
D)  $29,950 
A)  $36,000 
B)  $35,950 
C)  $30,000 
D)  $29,950

Question 6

Figure 13-2  
-Refer to Figure 13-2. The graph illustrates a typical

Accepted Answer

A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  marginal product of labor curve. 
A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  marginal product of labor curve.

Question 7

When comparing short-run average total cost with long-run average total cost at a given level of output,

Accepted Answer

A)  short-run average total cost is typically above long-run average total cost. 
B)  short-run average total cost is typically the same as long-run average total cost. 
C)  short-run average total cost is typically below long-run average total cost. 
D)  the relationship between short-run and long-run average total cost follows no clear pattern. 
A)  short-run average total cost is typically above long-run average total cost. 
B)  short-run average total cost is typically the same as long-run average total cost. 
C)  short-run average total cost is typically below long-run average total cost. 
D)  the relationship between short-run and long-run average total cost follows no clear pattern.

Question 8

A firm's opportunity costs of production are equal to its

Accepted Answer

A)  explicit costs only. 
B)  implicit costs only. 
C)  explicit costs + implicit costs. 
D)  explicit costs + implicit costs + total revenue. 
A)  explicit costs only. 
B)  implicit costs only. 
C)  explicit costs + implicit costs. 
D)  explicit costs + implicit costs + total revenue.

Question 9

Scenario 13-3
Kachina is a senior majoring in graphic design at Awesome University (AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 per hour for her consulting services. She also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Kachina $20 per hour.
-Refer to Scenario 13-3. Which of the following statements is correct?

Accepted Answer

A)  Kachina should increase the number of hours she works for the Economics Department to make her income comparable to her consulting business income. 
B)  Kachina cannot be maximizing her well-being if she continues to work for the Economics Department. 
C)  If Kachina chooses one hour at the beach with her friends rather than spend one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach. 
D)  Both b) and c) are correct 
A)  Kachina should increase the number of hours she works for the Economics Department to make her income comparable to her consulting business income. 
B)  Kachina cannot be maximizing her well-being if she continues to work for the Economics Department. 
C)  If Kachina chooses one hour at the beach with her friends rather than spend one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach. 
D)  Both b) and c) are correct

Question 10

Table 13-1
  
-Refer to Table 13-1. What is total output when 3 workers are hired?

Accepted Answer

A)  15 
B)  60 
C)  105 
D)  135 
A)  15 
B)  60 
C)  105 
D)  135

Question 11

Table 13-5
  
-Refer to Table 13-5. The marginal product of the fourth worker is

Accepted Answer

A)  9,000 units. 
B)  8,000 units. 
C)  7,000 units. 
D)  5,000 units. 
A)  9,000 units. 
B)  8,000 units. 
C)  7,000 units. 
D)  5,000 units.

Question 12

The difference between accounting profit and economic profit relates to

Accepted Answer

A)  the manner in which revenues are defined. 
B)  how marginal revenue is calculated. 
C)  the manner in which costs are defined. 
D)  the price of the good in the market. 
A)  the manner in which revenues are defined. 
B)  how marginal revenue is calculated. 
C)  the manner in which costs are defined. 
D)  the price of the good in the market.

Question 13

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

Accepted Answer

A)  marginal product decreases. 
B)  total output decreases. 
C)  marginal product increases but at a decreasing rate. 
D)  Both a and b are correct. 
A)  marginal product decreases. 
B)  total output decreases. 
C)  marginal product increases but at a decreasing rate. 
D)  Both a and b are correct.

Question 14

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

Accepted Answer

A) True 
 B)False

Question 15

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Accepted Answer

A) True 
 B)False

Question 16

Describe how an accounting firm could experience diseconomies of scale.

Accepted Answer

Problems with coordination can cause dis

Question 17

When a factory is operating in the short run,

Accepted Answer

A)  it cannot alter variable costs. 
B)  total cost and variable cost are usually the same. 
C)  average fixed cost rises as output increases. 
D)  it cannot adjust the quantity of fixed inputs. 
A)  it cannot alter variable costs. 
B)  total cost and variable cost are usually the same. 
C)  average fixed cost rises as output increases. 
D)  it cannot adjust the quantity of fixed inputs.

Question 18

Table 13-17
Consider the following table of long-run total cost for four different firms:
  
-Refer to Table 13-17. Which firm has diseconomies of scale over the entire range of output?

Accepted Answer

A)  Firm 1 only 
B)  Firm 2 only 
C)  Firms 1 and 2 only 
D)  Firm 3 only 
A)  Firm 1 only 
B)  Firm 2 only 
C)  Firms 1 and 2 only 
D)  Firm 3 only

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Scenario 13-8
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
-Refer to Scenario 13-8. What are Wanda's total economic costs per glass?

Accepted Answer

A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02 
A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02

A firm's total profit equals its marginal revenue minus its marginal cost.

Economies of scale often arise because higher production levels allow specialization among workers.

Industrial organization is the study of

Total revenue minus only explicit costs is called

Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical

When comparing short-run average total cost with long-run average total cost at a given level of output,

A firm's opportunity costs of production are equal to its

Table 13-1 -Refer to Table 13-1. What is total output when 3 workers are hired?

Table 13-5 -Refer to Table 13-5. The marginal product of the fourth worker is

The difference between accounting profit and economic profit relates to

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

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Describe how an accounting firm could experience diseconomies of scale.

When a factory is operating in the short run,

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has diseconomies of scale over the entire range of output?

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

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

A firm's total profit equals its marginal revenue minus its marginal cost.

Economies of scale often arise because higher production levels allow specialization among workers.

Industrial organization is the study of

Total revenue minus only explicit costs is called

Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical

When comparing short-run average total cost with long-run average total cost at a given level of output,

A firm's opportunity costs of production are equal to its

Table 13-1 -Refer to Table 13-1. What is total output when 3 workers are hired?

Table 13-5 -Refer to Table 13-5. The marginal product of the fourth worker is

The difference between accounting profit and economic profit relates to

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

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Describe how an accounting firm could experience diseconomies of scale.

When a factory is operating in the short run,

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has diseconomies of scale over the entire range of output?

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

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