Question 1

Which of the following statements is correct?

Accepted Answer

A)  Opportunity costs equal explicit minus implicit costs. 
B)  Economists consider opportunity costs to be included in a firm's total revenues. 
C)  Economists consider opportunity costs to be included in a firm's costs of production. 
D)  All of the above are correct. 
A)  Opportunity costs equal explicit minus implicit costs. 
B)  Economists consider opportunity costs to be included in a firm's total revenues. 
C)  Economists consider opportunity costs to be included in a firm's costs of production. 
D)  All of the above are correct.

Question 2

The shape of the total-cost curve is unrelated to the shape of the production function.

Accepted Answer

A) True 
 B)False

Question 3

Describe the relationship between average variable cost and marginal cost.

Accepted Answer

If marginal cost (MC) is greater than av

Question 4

Figure 13-3  
-Refer to Figure 13-3. The graph illustrates a typical

Accepted Answer

A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  fixed-cost curve. 
A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  fixed-cost curve.

Question 5

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

Accepted Answer

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

Question 6

Scenario 13-9
Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-9. Ellie's annual accounting costs will equal

Accepted Answer

A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $165,700. 
A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $165,700.

Question 7

The difference between accounting profit and economic profit is

Accepted Answer

A)  explicit costs. 
B)  implicit costs. 
C)  total revenue. 
D)  marginal product. 
A)  explicit costs. 
B)  implicit costs. 
C)  total revenue. 
D)  marginal product.

Question 8

Adam Smith used a famous example of what type of firm to illustrate economies of scale?

Accepted Answer

A)  Apple 
B)  a pin factory 
C)  a lumber mill 
D)  a British university 
A)  Apple 
B)  a pin factory 
C)  a lumber mill 
D)  a British university

Question 9

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Accepted Answer

A) True 
 B)False

Question 10

Table 13-4
Charles's Math Tutoring
  
-Refer to Table 13-4. Suppose that Charles's math tutoring company has a fixed cost of $50 per month for his cell phone. Each worker costs Charles $60 per day. As output increases from 45 to 70 students, Charles's total cost curve

Accepted Answer

A)  increases but gets flatter. 
B)  increases and gets steeper. 
C)  decreases and gets flatter. 
D)  decreases but gets steeper. 
A)  increases but gets flatter. 
B)  increases and gets steeper. 
C)  decreases and gets flatter. 
D)  decreases but gets steeper.

Question 11

Scenario 13-9
Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-9. Ellie's annual implicit costs will equal

Accepted Answer

A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $165,700. 
A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $165,700.

Question 12

If the total cost curve gets steeper as output increases, the firm is experiencing

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing marginal product. 
D)  increasing marginal product. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing marginal product. 
D)  increasing marginal product.

Question 13

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Accepted Answer

A) True 
 B)False

Question 14

Table 13-6
Wooden Chair Factory
  
-Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?

Accepted Answer

A)  5 chairs per hour 
B)  15 chairs per hour 
C)  25 chairs per hour 
D)  70 chairs per hour 
A)  5 chairs per hour 
B)  15 chairs per hour 
C)  25 chairs per hour 
D)  70 chairs per hour

Question 15

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 implicit 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

Question 16

Scenario 13-10
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each.
-Refer to Scenario 13-10. An accountant would calculate the total cost for one photo frame to be

Accepted Answer

A)  $10. 
B)  $5. 
C)  $15. 
D)  $25. 
A)  $10. 
B)  $5. 
C)  $15. 
D)  $25.

Question 17

Economies of scale arise when

Accepted Answer

A)  an economy is self-sufficient in production. 
B)  individuals in a society are self-sufficient. 
C)  fixed costs are large relative to variable costs. 
D)  workers are able to specialize in a particular task. 
A)  an economy is self-sufficient in production. 
B)  individuals in a society are self-sufficient. 
C)  fixed costs are large relative to variable costs. 
D)  workers are able to specialize in a particular task.

Question 18

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Accepted Answer

A) True 
 B)False

Question 19

The length of the short run

Accepted Answer

A)  is different for different types of firms. 
B)  can never exceed 3 years. 
C)  can never exceed 1 year. 
D)  is always less than 6 months. 
A)  is different for different types of firms. 
B)  can never exceed 3 years. 
C)  can never exceed 1 year. 
D)  is always less than 6 months.

Question 20

Scenario 13-12
Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time.
-Refer to Scenario 13-12. Ariana's economic profit for the year was

Accepted Answer

A)  $-394,000. 
B)  $-6,000. 
C)  $3,000. 
D)  $6,000. 
A)  $-394,000. 
B)  $-6,000. 
C)  $3,000. 
D)  $6,000.

Which of the following statements is correct?

The shape of the total-cost curve is unrelated to the shape of the production function.

Describe the relationship between average variable cost and marginal cost.

Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical

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

The difference between accounting profit and economic profit is

Adam Smith used a famous example of what type of firm to illustrate economies of scale?

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. Suppose that Charles's math tutoring company has a fixed cost of $50 per month for his cell phone. Each worker costs Charles $60 per day. As output increases from 45 to 70 students, Charles's total cost curve

If the total cost curve gets steeper as output increases, the firm is experiencing

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?

Economies of scale arise when

For a typical firm, fixed costs increase in direct proportion to the increases in output.

The length of the short run

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

Exam 13: The Costs of Production

Which of the following statements is correct?

The shape of the total-cost curve is unrelated to the shape of the production function.

Describe the relationship between average variable cost and marginal cost.

Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical

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

The difference between accounting profit and economic profit is

Adam Smith used a famous example of what type of firm to illustrate economies of scale?

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. Suppose that Charles's math tutoring company has a fixed cost of $50 per month for his cell phone. Each worker costs Charles $60 per day. As output increases from 45 to 70 students, Charles's total cost curve

If the total cost curve gets steeper as output increases, the firm is experiencing

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?

Economies of scale arise when

For a typical firm, fixed costs increase in direct proportion to the increases in output.

The length of the short run

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