Question 1

In the long run

Accepted Answer

A)  the firm's fixed costs are greater than its fixed costs in the short run. 
B)  all of the firm's costs are explicit costs; there are no implicit costs of production. 
C)  the firm is more profitable than it is in the short run. 
D)  all of the firm's costs are variable costs. 
A)  the firm's fixed costs are greater than its fixed costs in the short run. 
B)  all of the firm's costs are explicit costs; there are no implicit costs of production. 
C)  the firm is more profitable than it is in the short run. 
D)  all of the firm's costs are variable costs.

Question 2

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs.

Accepted Answer

A)  economic; legal 
B)  real; explicit 
C)  total; economic 
D)  explicit; accounting 
A)  economic; legal 
B)  real; explicit 
C)  total; economic 
D)  explicit; accounting

Question 3

If fixed costs do not change, then marginal cost

Accepted Answer

A)  also remains constant. 
B)  equals the change in variable cost divided by the change in output. 
C)  equals the change in average variable cost divided by the change in output. 
D)  equals the change in average fixed cost divided by the change in output. 
A)  also remains constant. 
B)  equals the change in variable cost divided by the change in output. 
C)  equals the change in average variable cost divided by the change in output. 
D)  equals the change in average fixed cost divided by the change in output.

Question 4

An avocado orchard employs five full-time workers. Currently, the average product of labour is 120 pounds of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados. The average product of the six workers will now be

Accepted Answer

A)  more than 120 pounds. 
B)  less than 120 pounds. 
C)  equal to 120 pounds. 
D)  less than the marginal product of labour. 
A)  more than 120 pounds. 
B)  less than 120 pounds. 
C)  equal to 120 pounds. 
D)  less than the marginal product of labour.

Question 5

-Refer to Table 7-1. What is the marginal product of the 4th worker?

Accepted Answer

A)  137 pounds 
B)  50 pounds 
C)  12.5 pounds 
D)  5 pounds 
A)  137 pounds 
B)  50 pounds 
C)  12.5 pounds 
D)  5 pounds

Question 6

Accounting costs exclude implicit costs.

Accepted Answer

A) True 
 B)False

Question 7

Sally quit her job as an auto mechanic earning $50 000 per year to start her own business. To save money, she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10 000 per year. She also invested her $20 000 savings (which earned a market interest rate of 5% per year) in her business. You are given the following information about the first year of her operations.
Total revenue $120 000
Cost of labour 40 000
Cost of materials 15 000
Equipment rental 5000
a. Calculate her economic costs.
b. Calculate her accounting costs.
c. Calculate her implicit costs.
d. Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?

Accepted Answer

+ 50 000 (opportunity cost of Sally's la

Question 8

Which of the following equations is incorrect?

Accepted Answer

A)  ATC - AFC = AVC 
B)  AVC + AFC = ATC 
C)  AFC = ATC - AVC 
D)  ATC = AVC - AFC 
A)  ATC - AFC = AVC 
B)  AVC + AFC = ATC 
C)  AFC = ATC - AVC 
D)  ATC = AVC - AFC

Question 9

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

Accepted Answer

A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs. 
A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs.

Question 10

If average total cost is falling, marginal cost must also be falling.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Table 7-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. The average product of labour will equal 60 boxes when Manny hires

Accepted Answer

A)  the second worker. 
B)  the third worker. 
C)  the fourth worker. 
D)  the fifth worker. 
A)  the second worker. 
B)  the third worker. 
C)  the fourth worker. 
D)  the fifth worker.

Question 12

-Refer to Figure 7-17. A curve that connects points a, d and e is called

Accepted Answer

A)  an input-output curve. 
B)  a total cost line. 
C)  an expansion path. 
D)  an indifference line. 
A)  an input-output curve. 
B)  a total cost line. 
C)  an expansion path. 
D)  an indifference line.

Question 13

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

Accepted Answer

A) True 
 B)False

Question 14

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  the law of supply. 
A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  the law of supply.

Question 15

One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

Accepted Answer

A)  the first workers hired get to use the best equipment. 
B)  specialisation allows a worker to focus on one task, thereby increasing her proficiency at that task. 
C)  the best workers are hired first and later hires are not as skillful. 
D)  beyond some point, a firm has hired too many workers. 
A)  the first workers hired get to use the best equipment. 
B)  specialisation allows a worker to focus on one task, thereby increasing her proficiency at that task. 
C)  the best workers are hired first and later hires are not as skillful. 
D)  beyond some point, a firm has hired too many workers.

Question 16

-Refer to Figure 7-5. The vertical difference between curves F and G measures

Accepted Answer

A)  average fixed costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  sunk costs. 
A)  average fixed costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  sunk costs.

Question 17

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?

Accepted Answer

A)  diseconomies of scale in farming 
B)  economies of scale in farming 
C)  diminishing returns to labour in farming 
D)  declining productivity 
A)  diseconomies of scale in farming 
B)  economies of scale in farming 
C)  diminishing returns to labour in farming 
D)  declining productivity

Question 18

If the firm is producing no output in the short run, then its total costs are zero.

Accepted Answer

A) True 
 B)False

Question 19

A curve that shows all the combinations of two inputs, such as labour and capital, that will produce the same level of output is called

Accepted Answer

A)  an isoquant. 
B)  an isocost line. 
C)  a budget line. 
D)  an optimal input combination curve. 
A)  an isoquant. 
B)  an isocost line. 
C)  a budget line. 
D)  an optimal input combination curve.

Question 20

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Accepted Answer

Explicit costs are costs that involve sp

In the long run

The rules of accounting generally require that costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called costs.

If fixed costs do not change, then marginal cost

An avocado orchard employs five full-time workers. Currently, the average product of labour is 120 pounds of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados. The average product of the six workers will now be

-Refer to Table 7-1. What is the marginal product of the 4th worker?

Accounting costs exclude implicit costs.

Which of the following equations is incorrect?

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

If average total cost is falling, marginal cost must also be falling.

-Refer to Table 7-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. The average product of labour will equal 60 boxes when Manny hires

-Refer to Figure 7-17. A curve that connects points a, d and e is called

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

-Refer to Figure 7-5. The vertical difference between curves F and G measures

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?

If the firm is producing no output in the short run, then its total costs are zero.

A curve that shows all the combinations of two inputs, such as labour and capital, that will produce the same level of output is called

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 7: Technology , Production and Costs

In the long run

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs.

If fixed costs do not change, then marginal cost

An avocado orchard employs five full-time workers. Currently, the average product of labour is 120 pounds of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados. The average product of the six workers will now be

-Refer to Table 7-1. What is the marginal product of the 4th worker?

Accounting costs exclude implicit costs.

Which of the following equations is incorrect?

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

If average total cost is falling, marginal cost must also be falling.

-Refer to Table 7-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. The average product of labour will equal 60 boxes when Manny hires

-Refer to Figure 7-17. A curve that connects points a, d and e is called

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

-Refer to Figure 7-5. The vertical difference between curves F and G measures

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?

If the firm is producing no output in the short run, then its total costs are zero.

A curve that shows all the combinations of two inputs, such as labour and capital, that will produce the same level of output is called

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

The rules of accounting generally require that costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called costs.