Question 1

The reason the average total cost curve declines initially is because of:

Accepted Answer

A)  Falling average fixed cost. 
B)  Falling average variable costs. 
C)  Falling marginal cost. 
D)  Falling average fixed cost and falling average variable costs. 
A)  Falling average fixed cost. 
B)  Falling average variable costs. 
C)  Falling marginal cost. 
D)  Falling average fixed cost and falling average variable costs.

Question 2

Distinguish between explicit and implicit costs and give an example of each.Why would accounting profit be greater then or equal to economic profit?

Accepted Answer

a)Explicit costs are a monetary payment

Question 3

A firm's rising factor costs can be offset by:

Accepted Answer

A)  Increases in productivity. 
B)  Diminishing marginal product. 
C)  Diminishing marginal utility. 
D)  Rising marginal cost. 
A)  Increases in productivity. 
B)  Diminishing marginal product. 
C)  Diminishing marginal utility. 
D)  Rising marginal cost.

Question 4

Economic costs are greater than accounting costs:

Accepted Answer

A)  Only if implicit costs are greater than zero. 
B)  Only if explicit costs are greater than implicit costs. 
C)  Only in the long run. 
D)  In the short run but not the long run. 
A)  Only if implicit costs are greater than zero. 
B)  Only if explicit costs are greater than implicit costs. 
C)  Only in the long run. 
D)  In the short run but not the long run.

Question 5

Which of the following definitions is correct?

Accepted Answer

A)  Economic costs + accounting costs = Profit. 
B)  Economic profit = accounting profit - implicit costs. 
C)  Economic profit - implicit costs = accounting profits. 
D)  Economic costs + explicit costs + implicit costs. 
A)  Economic costs + accounting costs = Profit. 
B)  Economic profit = accounting profit - implicit costs. 
C)  Economic profit - implicit costs = accounting profits. 
D)  Economic costs + explicit costs + implicit costs.

Question 6

Land,labor,capital and entrepreneurship are called:

Accepted Answer

A)  Factors of production. 
B)  Factors of demand. 
C)  Fixed costs. 
D)  Variable costs. 
A)  Factors of production. 
B)  Factors of demand. 
C)  Fixed costs. 
D)  Variable costs.

Question 7

Marginal cost is equal to the change in variable costs divided by the change in output.

Accepted Answer

A) True 
 B)False

Question 8

The law of diminishing returns means that:

Accepted Answer

A)  The total product production function will eventually increase at a decreasing rate. 
B)  The marginal product will increase at an increasing rate. 
C)  Average total costs are rising and then falling as output is increased. 
D)  Average fixed cost will fall as production increases. 
A)  The total product production function will eventually increase at a decreasing rate. 
B)  The marginal product will increase at an increasing rate. 
C)  Average total costs are rising and then falling as output is increased. 
D)  Average fixed cost will fall as production increases.

Question 9

Table 5.1-Labor and output data  
-What is the marginal physical product of the first unit of labor in Table 5.1?

Accepted Answer

A)  0 
B)  14 
C)  16 
D)  30 
A)  0 
B)  14 
C)  16 
D)  30

Question 10

Investment decisions are long-run decisions.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5.1:  
-In Figure 5.1,diminishing marginal returns first occur with the:

Accepted Answer

A)  Second worker. 
B)  Third worker. 
C)  Fifth worker. 
D)  Sixth worker. 
A)  Second worker. 
B)  Third worker. 
C)  Fifth worker. 
D)  Sixth worker.

Question 12

If the marginal physical product of an input is decreasing,output will also be decreasing.

Accepted Answer

A) True 
 B)False

Question 13

The change in total output that results from one additional unit of input is the:

Accepted Answer

A)  Marginal physical product. 
B)  Average product of the input. 
C)  Unit cost of the input. 
D)  Input price. 
A)  Marginal physical product. 
B)  Average product of the input. 
C)  Unit cost of the input. 
D)  Input price.

Question 14

Which of the following is most likely a fixed cost?

Accepted Answer

A)  Raw materials 
B)  Labor cost 
C)  Shipping costs 
D)  Property taxes 
A)  Raw materials 
B)  Labor cost 
C)  Shipping costs 
D)  Property taxes

Question 15

If an additional unit of labor costs $30 and has an MPP of 50 units of output,the marginal cost is:

Accepted Answer

A)  $0.60. 
B)  $1.66. 
C)  $15.00. 
D)  $1500.00. 
A)  $0.60. 
B)  $1.66. 
C)  $15.00. 
D)  $1500.00.

Question 16

The most desirable rate of output is the one that:

Accepted Answer

A)  Minimizes total costs. 
B)  Maximizes total profit. 
C)  Minimizes marginal costs. 
D)  Maximizes total revenue. 
A)  Minimizes total costs. 
B)  Maximizes total profit. 
C)  Minimizes marginal costs. 
D)  Maximizes total revenue.

Question 17

The main difference to an economist between "short-run" and "long-run" is that:

Accepted Answer

A)  Variable costs are short-run investment decisions where as fixed costs are long-run production decisions. 
B)  In the short-run all resources are fixed where as in the long-run all resources are variable. 
C)  In the long-run all resources are variable where as in the short-run at least one resource is fixed. 
D)  Fixed costs are more important then variable costs in the short-run. 
A)  Variable costs are short-run investment decisions where as fixed costs are long-run production decisions. 
B)  In the short-run all resources are fixed where as in the long-run all resources are variable. 
C)  In the long-run all resources are variable where as in the short-run at least one resource is fixed. 
D)  Fixed costs are more important then variable costs in the short-run.

Question 18

A production function shows the maximum amount of a particular good or service that can be produced with different combinations of resources.

Accepted Answer

A) True 
 B)False

Question 19

The best measure of the economic cost of doing your homework is:

Accepted Answer

A)  The tuition you pay for the class. 
B)  The amount you would have to pay to get someone else to do it. 
C)  Your instructor's salary. 
D)  The best opportunity you give up when you do your homework. 
A)  The tuition you pay for the class. 
B)  The amount you would have to pay to get someone else to do it. 
C)  Your instructor's salary. 
D)  The best opportunity you give up when you do your homework.

Question 20

A firm's production function will shift downward if worker productivity increases.

Accepted Answer

A) True 
 B)False

The reason the average total cost curve declines initially is because of:

Distinguish between explicit and implicit costs and give an example of each.Why would accounting profit be greater then or equal to economic profit?

A firm's rising factor costs can be offset by:

Economic costs are greater than accounting costs:

Which of the following definitions is correct?

Land,labor,capital and entrepreneurship are called:

Marginal cost is equal to the change in variable costs divided by the change in output.

The law of diminishing returns means that:

Table 5.1-Labor and output data -What is the marginal physical product of the first unit of labor in Table 5.1?

Investment decisions are long-run decisions.

Figure 5.1: -In Figure 5.1,diminishing marginal returns first occur with the:

If the marginal physical product of an input is decreasing,output will also be decreasing.

The change in total output that results from one additional unit of input is the:

Which of the following is most likely a fixed cost?

If an additional unit of labor costs $30 and has an MPP of 50 units of output,the marginal cost is:

The most desirable rate of output is the one that:

The main difference to an economist between "short-run" and "long-run" is that:

A production function shows the maximum amount of a particular good or service that can be produced with different combinations of resources.

The best measure of the economic cost of doing your homework is:

A firm's production function will shift downward if worker productivity increases.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 5: Supply Decisions

The reason the average total cost curve declines initially is because of:

Distinguish between explicit and implicit costs and give an example of each.Why would accounting profit be greater then or equal to economic profit?

A firm's rising factor costs can be offset by:

Economic costs are greater than accounting costs:

Which of the following definitions is correct?

Land,labor,capital and entrepreneurship are called:

Marginal cost is equal to the change in variable costs divided by the change in output.

The law of diminishing returns means that:

Table 5.1-Labor and output data -What is the marginal physical product of the first unit of labor in Table 5.1?

Investment decisions are long-run decisions.

Figure 5.1: -In Figure 5.1,diminishing marginal returns first occur with the:

If the marginal physical product of an input is decreasing,output will also be decreasing.

The change in total output that results from one additional unit of input is the:

Which of the following is most likely a fixed cost?

If an additional unit of labor costs $30 and has an MPP of 50 units of output,the marginal cost is:

The most desirable rate of output is the one that:

The main difference to an economist between "short-run" and "long-run" is that:

A production function shows the maximum amount of a particular good or service that can be produced with different combinations of resources.

The best measure of the economic cost of doing your homework is:

A firm's production function will shift downward if worker productivity increases.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters