Question 1

(Last Word) Which of the following is predicted to deliver a Third Industrial Revolution characterized by low production and transportation costs?

Accepted Answer

A)  new technology in additive manufacturing 
B)  new technology in energy production involving fusion reactors 
C)  significant decreases in petroleum prices with the discovery of new oil fields and new extraction techniques 
D)  new transportation technology involving antigravitational fields 
A)  new technology in additive manufacturing 
B)  new technology in energy production involving fusion reactors 
C)  significant decreases in petroleum prices with the discovery of new oil fields and new extraction techniques 
D)  new transportation technology involving antigravitational fields A

Question 2

At the point where diminishing marginal returns of an input sets in, the

Accepted Answer

A)  average product starts to decrease. 
B)  marginal product starts to decrease. 
C)  total product starts to decrease. 
D)  average product exceeds the marginal product. 
A)  average product starts to decrease. 
B)  marginal product starts to decrease. 
C)  total product starts to decrease. 
D)  average product exceeds the marginal product. B

Question 3

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

Accepted Answer

A)  AP continues to rise so long as TP is rising. 
B)  AP reaches a maximum before TP reaches a maximum. 
C)  TP reaches a maximum when the MP of the variable input becomes zero. 
D)  MP cuts AP at the maximum AP. 
A)  AP continues to rise so long as TP is rising. 
B)  AP reaches a maximum before TP reaches a maximum. 
C)  TP reaches a maximum when the MP of the variable input becomes zero. 
D)  MP cuts AP at the maximum AP. A

Question 4

Marginal cost is the

Accepted Answer

A)  rate of change in total fixed cost that results from producing one more unit of output. 
B)  change in total cost that results from producing one more unit of output. 
C)  change in average variable cost that results from producing one more unit of output. 
D)  change in average total cost that results from producing one more unit of output. 
A)  rate of change in total fixed cost that results from producing one more unit of output. 
B)  change in total cost that results from producing one more unit of output. 
C)  change in average variable cost that results from producing one more unit of output. 
D)  change in average total cost that results from producing one more unit of output.

Question 5

Which of the following statements is true, given the total cost function: Total cost = 10Q + 5Q2 + 100?

Accepted Answer

A)  Total cost at Q = 4 is 120. 
B)  Average total cost at Q = 10 is 70. 
C)  Total cost at Q = 5 is 175. 
D)  Average fixed cost is zero at Q = 100. 
A)  Total cost at Q = 4 is 120. 
B)  Average total cost at Q = 10 is 70. 
C)  Total cost at Q = 5 is 175. 
D)  Average fixed cost is zero at Q = 100.

Question 6

An explicit cost is

Accepted Answer

A)  omitted when accounting profits are calculated. 
B)  a money payment made for resources not owned by the firm itself. 
C)  an implicit cost to the resource owner who receives that payment. 
D)  always in excess of a resource's opportunity cost. 
A)  omitted when accounting profits are calculated. 
B)  a money payment made for resources not owned by the firm itself. 
C)  an implicit cost to the resource owner who receives that payment. 
D)  always in excess of a resource's opportunity cost.

Question 7

Accounting profits are typically

Accepted Answer

A)  greater than economic profits because the former do not take explicit costs into account. 
B)  equal to economic profits because accounting costs include all opportunity costs. 
C)  smaller than economic profits because the former do not take implicit costs into account. 
D)  greater than economic profits because the former do not take implicit costs into account. 
A)  greater than economic profits because the former do not take explicit costs into account. 
B)  equal to economic profits because accounting costs include all opportunity costs. 
C)  smaller than economic profits because the former do not take implicit costs into account. 
D)  greater than economic profits because the former do not take implicit costs into account.

Question 8

When diminishing marginal returns starts occurring, the addition of successive units of a variable resource to a fixed resource will cause the firm's production to diminish.

Accepted Answer

A) True 
 B)False

Question 9

Which statement best illustrates the law of diminishing returns from studying?

Accepted Answer

A)  As hours of studying decrease, the student's GPA will also diminish. 
B)  As study hours increase, the amount of learning will increase at a diminishing rate. 
C)  Students with higher GPAs tend to study fewer hours on the night before a big exam. 
D)  Students who cram the night before a big exam do not show much improvement in their learning. 
A)  As hours of studying decrease, the student's GPA will also diminish. 
B)  As study hours increase, the amount of learning will increase at a diminishing rate. 
C)  Students with higher GPAs tend to study fewer hours on the night before a big exam. 
D)  Students who cram the night before a big exam do not show much improvement in their learning.

Question 10

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

Accepted Answer

A)  5 percent 
B)  10 percent 
C)  20 percent 
D)  25 percent 
A)  5 percent 
B)  10 percent 
C)  20 percent 
D)  25 percent

Question 11

Economic cost can best be defined as

Accepted Answer

A)  any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers. 
B)  any contractual obligation to labor or material suppliers. 
C)  a payment that must be made to obtain and retain the services of a resource. 
D)  all costs exclusive of payments to fixed factors of production. 
A)  any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers. 
B)  any contractual obligation to labor or material suppliers. 
C)  a payment that must be made to obtain and retain the services of a resource. 
D)  all costs exclusive of payments to fixed factors of production.

Question 12

When average variable cost is at a minimum,

Accepted Answer

A)  marginal cost is at a maximum. 
B)  the average product of labor is at a minimum. 
C)  the marginal product of labor is at a minimum. 
D)  the average product of labor is at a maximum. 
A)  marginal cost is at a maximum. 
B)  the average product of labor is at a minimum. 
C)  the marginal product of labor is at a minimum. 
D)  the average product of labor is at a maximum.

Question 13

Which of the following statements is true?

Accepted Answer

A)  Diminishing marginal returns means that total output decreases as more of the variable inputs are employed. 
B)  Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs. 
C)  Diminishing marginal returns implies that there will never be increasing returns to scale. 
D)  Diminishing marginal returns implies that the firm's profits will be shrinking as it produces more of its product. 
A)  Diminishing marginal returns means that total output decreases as more of the variable inputs are employed. 
B)  Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs. 
C)  Diminishing marginal returns implies that there will never be increasing returns to scale. 
D)  Diminishing marginal returns implies that the firm's profits will be shrinking as it produces more of its product.

Question 14

When average costs are increasing, marginal costs are greater than average costs.

Accepted Answer

A) True 
 B)False

Question 15

If marginal cost is below average variable cost,

Accepted Answer

A)  average total cost is increasing but average variable cost is decreasing. 
B)  both average total cost and average variable cost are decreasing. 
C)  both average total cost and average variable cost are increasing. 
D)  average variable cost is less than average fixed cost. 
A)  average total cost is increasing but average variable cost is decreasing. 
B)  both average total cost and average variable cost are decreasing. 
C)  both average total cost and average variable cost are increasing. 
D)  average variable cost is less than average fixed cost.

Question 16

Total fixed cost (TFC)

Accepted Answer

A)  falls as the firm expands output from zero, but eventually rises. 
B)  falls continuously as total output expands. 
C)  varies directly with total output. 
D)  does not change as total output increases or decreases. 
A)  falls as the firm expands output from zero, but eventually rises. 
B)  falls continuously as total output expands. 
C)  varies directly with total output. 
D)  does not change as total output increases or decreases.

Question 17

Which of the following would be an implicit cost for a firm? The cost

Accepted Answer

A)  of worker wages and salaries for the firm. 
B)  paid for leasing a building for the firm. 
C)  paid for production supplies for the firm. 
D)  of wages forgone by the owner of the firm. 
A)  of worker wages and salaries for the firm. 
B)  paid for leasing a building for the firm. 
C)  paid for production supplies for the firm. 
D)  of wages forgone by the owner of the firm.

Question 18

When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

Accepted Answer

A)  a move to minimum efficient scale. 
B)  the law of diminishing returns. 
C)  the loss of economies of scale. 
D)  an increase in total fixed cost. 
A)  a move to minimum efficient scale. 
B)  the law of diminishing returns. 
C)  the loss of economies of scale. 
D)  an increase in total fixed cost.

Question 19

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.   Economies of scale in plant ATC-A are realized over the to levels of output; diseconomies of scale exist over the to levels of output.

Accepted Answer

A)  10, 30; 40, 100 
B)  10, 40; 80, 100 
C)  10, 50; 60, 100 
D)  10, 70; 80, 100 
A)  10, 30; 40, 100 
B)  10, 40; 80, 100 
C)  10, 50; 60, 100 
D)  10, 70; 80, 100

Question 20

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The implicit costs of Harvey's firm in the first year were

Accepted Answer

A)  $50,000. 
B)  $60,000. 
C)  $100,000. 
D)  $150,000. 
A)  $50,000. 
B)  $60,000. 
C)  $100,000. 
D)  $150,000.

Exam 9: Businesses and the Costs of Production

(Last Word) Which of the following is predicted to deliver a Third Industrial Revolution characterized by low production and transportation costs?

At the point where diminishing marginal returns of an input sets in, the

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

Marginal cost is the

Which of the following statements is true, given the total cost function: Total cost = 10Q + 5Q2 + 100?

An explicit cost is

Accounting profits are typically

When diminishing marginal returns starts occurring, the addition of successive units of a variable resource to a fixed resource will cause the firm's production to diminish.

Which statement best illustrates the law of diminishing returns from studying?

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

Economic cost can best be defined as

When average variable cost is at a minimum,

Which of the following statements is true?

When average costs are increasing, marginal costs are greater than average costs.

If marginal cost is below average variable cost,

Total fixed cost (TFC)

Which of the following would be an implicit cost for a firm? The cost

When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. Economies of scale in plant ATC-A are realized over the to levels of output; diseconomies of scale exist over the to levels of output.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Which of the following statements is true, given the total cost function: Total cost = 10Q + 5Q²+ 100?