Question 1

Which of the following explains why long-run average cost at first decreases as output increases?

Accepted Answer

A)  diseconomies of scale 
B)  less-efficient use of inputs 
C)  fixed costs becoming spread out over more units of output 
D)  gains from specialization of inputs 
A)  diseconomies of scale 
B)  less-efficient use of inputs 
C)  fixed costs becoming spread out over more units of output 
D)  gains from specialization of inputs

Question 2

Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's

Accepted Answer

A)  accounting profit was $9 million. 
B)  economic profit was $9 million. 
C)  total revenue was $9 million. 
D)  explicit costs were $9 million. 
A)  accounting profit was $9 million. 
B)  economic profit was $9 million. 
C)  total revenue was $9 million. 
D)  explicit costs were $9 million.

Question 3

Total revenue minus both explicit and implicit costs is called

Accepted Answer

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

Question 4

Scenario 13-14
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
-Refer to Scenario 13-14. Farmer Brown's total­cost curve is

Accepted Answer

A)  increasing at an increasing rate. 
B)  increasing at a decreasing rate. 
C)  increasing at a constant rate. 
D)  decreasing. 
A)  increasing at an increasing rate. 
B)  increasing at a decreasing rate. 
C)  increasing at a constant rate. 
D)  decreasing.

Question 5

Table 13-2
  
-Refer to Table 13-2. What is the marginal product of the second worker?

Accepted Answer

A)  300 units 
B)  200 units 
C)  100 units 
D)  50 units 
A)  300 units 
B)  200 units 
C)  100 units 
D)  50 units

Question 6

Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each.
-Refer to Scenario 13-11. The explicit cost for one birdhouse is

Accepted Answer

A)  $4. 
B)  $5. 
C)  $8. 
D)  $9. 
A)  $4. 
B)  $5. 
C)  $8. 
D)  $9.

Question 7

What might cause economies of scale?

Accepted Answer

specializa

Question 8

An example of an opportunity cost that is also an implicit cost is

Accepted Answer

A)  a lease payment. 
B)  the cost of raw materials. 
C)  the value of the business owner's time. 
D)  All of the above are correct. 
A)  a lease payment. 
B)  the cost of raw materials. 
C)  the value of the business owner's time. 
D)  All of the above are correct.

Question 9

Although economists and accountants treat many costs differently, they both treat the cost of capital the same.

Accepted Answer

A) True 
 B)False

Question 10

Foregone investment opportunities are an example of

Accepted Answer

A)  an explicit cost. 
B)  an implicit cost. 
C)  revenues. 
D)  profits. 
A)  an explicit cost. 
B)  an implicit cost. 
C)  revenues. 
D)  profits.

Question 11

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

Accepted Answer

A)  an explicit cost. 
B)  an accounting cost 
C)  an implicit cost. 
D)  forgone accounting profit. 
A)  an explicit cost. 
B)  an accounting cost 
C)  an implicit cost. 
D)  forgone accounting profit.

Question 12

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Accepted Answer

A)  The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. 
B)  The farmer is able to produce 5,400 bushels of wheat when he hires 4 workers. 
C)  The farmer is able to produce 5,200 bushels of wheat when he hires 4 workers. 
D)  Any of the above could be correct. 
A)  The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. 
B)  The farmer is able to produce 5,400 bushels of wheat when he hires 4 workers. 
C)  The farmer is able to produce 5,200 bushels of wheat when he hires 4 workers. 
D)  Any of the above could be correct.

Question 13

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. What is Christine's annual opportunity cost of the financial capital that she invested in her business?

Accepted Answer

A)  $5 
B)  $50 
C)  $100 
D)  $200 
A)  $5 
B)  $50 
C)  $100 
D)  $200

Question 14

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A)  $30 
B)  $140 
C)  $170 
D)  $300 
A)  $30 
B)  $140 
C)  $170 
D)  $300

Question 15

Economic profit is greater than or equal to accounting profit.

Accepted Answer

A) True 
 B)False

Question 16

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accepted Answer

A) True 
 B)False

Question 17

Accounting profit is equal to

Accepted Answer

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

Question 18

Figure 13-3  
-Refer to Figure 13-3. Which of the following is true of the production function (not pictured) that underlies this total cost function? (i) Total output increases as the quantity of inputs increases but at a decreasing rate.
(ii) Marginal product is diminishing for all levels of input usage.
(iii) The slope of the production function decreases as the quantity of inputs increases.

Accepted Answer

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

Question 19

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Atul can bottle and sell three cases per week. What is the maximum total output possible if Riva hires Atul?

Accepted Answer

A)  3 cases 
B)  4 cases 
C)  7 cases 
D)  11 cases 
A)  3 cases 
B)  4 cases 
C)  7 cases 
D)  11 cases

Question 20

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits

Accepted Answer

A)  diminishing profitability. 
B)  increasing returns to scale. 
C)  increasing marginal product. 
D)  decreasing marginal product. 
A)  diminishing profitability. 
B)  increasing returns to scale. 
C)  increasing marginal product. 
D)  decreasing marginal product.

Which of the following explains why long-run average cost at first decreases as output increases?

Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's

Total revenue minus both explicit and implicit costs is called

Table 13-2 -Refer to Table 13-2. What is the marginal product of the second worker?

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. The explicit cost for one birdhouse is

What might cause economies of scale?

An example of an opportunity cost that is also an implicit cost is

Although economists and accountants treat many costs differently, they both treat the cost of capital the same.

Foregone investment opportunities are an example of

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Economic profit is greater than or equal to accounting profit.

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accounting profit is equal to

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Atul can bottle and sell three cases per week. What is the maximum total output possible if Riva hires Atul?

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits

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

Which of the following explains why long-run average cost at first decreases as output increases?

Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's

Total revenue minus both explicit and implicit costs is called

Table 13-2 -Refer to Table 13-2. What is the marginal product of the second worker?

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. The explicit cost for one birdhouse is

What might cause economies of scale?

An example of an opportunity cost that is also an implicit cost is

Although economists and accountants treat many costs differently, they both treat the cost of capital the same.

Foregone investment opportunities are an example of

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Economic profit is greater than or equal to accounting profit.

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accounting profit is equal to

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Atul can bottle and sell three cases per week. What is the maximum total output possible if Riva hires Atul?

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits

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