Question 1

Marginal cost is equal to the

Accepted Answer

A)  change in total cost divided by the change in output. 
B)  change in average total costs divided by the change in output. 
C)  change in total product divided by the change in output. 
D)  change in average product divided by the change in output. 
A)  change in total cost divided by the change in output. 
B)  change in average total costs divided by the change in output. 
C)  change in total product divided by the change in output. 
D)  change in average product divided by the change in output.

Question 2

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

Question 3

Which of the following describes how output changes in the short run? Because of specialisation and the division of labour,as more workers are hired

Accepted Answer

A)  output will first increase at an increasing rate, then output will increase at a decreasing rate. 
B)  output will first decrease at an increasing rate, then increase at a decreasing rate. 
C)  the marginal product of labour will first decrease, then increase at a decreasing rate. 
D)  the marginal product of labour will first be negative and then will be positive. 
A)  output will first increase at an increasing rate, then output will increase at a decreasing rate. 
B)  output will first decrease at an increasing rate, then increase at a decreasing rate. 
C)  the marginal product of labour will first decrease, then increase at a decreasing rate. 
D)  the marginal product of labour will first be negative and then will be positive.

Question 4

Table 6-8
   Elegant Settings manufactures stainless steel cutlery. Table 7-8 shows the company's cost data.
-Refer to Table 6-8.Elegant Settings experiences

Accepted Answer

A)  economies of scale up to an output level of 400. 
B)  diminishing returns up to an output level of 400. 
C)  increasing returns beyond an output level of 400. 
D)  economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400. 
A)  economies of scale up to an output level of 400. 
B)  diminishing returns up to an output level of 400. 
C)  increasing returns beyond an output level of 400. 
D)  economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Question 5

Which of the following is an implicit cost of production?

Accepted Answer

A)  Interest paid on a loan to a bank 
B)  Wages paid to labour plus the cost of carrying benefits for workers 
C)  The utility bill paid to water, electricity, and natural gas companies 
D)  Rent that could have been earned on a building owned and used by the firm 
A)  Interest paid on a loan to a bank 
B)  Wages paid to labour plus the cost of carrying benefits for workers 
C)  The utility bill paid to water, electricity, and natural gas companies 
D)  Rent that could have been earned on a building owned and used by the firm

Question 6

When the marginal product of labour rises

Accepted Answer

A)  the marginal cost of production will exceed the average total cost. 
B)  the marginal cost of production also rises. 
C)  the marginal cost of production falls. 
D)  the average total cost of production also rises. 
A)  the marginal cost of production will exceed the average total cost. 
B)  the marginal cost of production also rises. 
C)  the marginal cost of production falls. 
D)  the average total cost of production also rises.

Question 7

When a firm's long-run average cost curve is horizontal for a range of output,then that range of production displays

Accepted Answer

A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  constant average fixed costs. 
A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  constant average fixed costs.

Question 8

The average total cost of production

Accepted Answer

A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied by the level of output. 
A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied by the level of output.

Question 9

Which of the following statements is true?

Accepted Answer

A)  Opportunity cost = explicit cost - implicit cost. 
B)  Total cost = fixed cost + implicit cost. 
C)  Total cost = fixed cost + variable cost. 
D)  Variable cost = wages + salaries + benefits. 
A)  Opportunity cost = explicit cost - implicit cost. 
B)  Total cost = fixed cost + implicit cost. 
C)  Total cost = fixed cost + variable cost. 
D)  Variable cost = wages + salaries + benefits.

Question 10

Which of the following explains why the marginal cost curve has a U shape?

Accepted Answer

A)  Initially, the marginal product of labour falls, then rises. 
B)  Initially, the average product of labour rises, then falls. 
C)  Initially, the marginal product of labour rises, then falls. 
D)  Initially, the average cost of production rises, then falls. 
A)  Initially, the marginal product of labour falls, then rises. 
B)  Initially, the average product of labour rises, then falls. 
C)  Initially, the marginal product of labour rises, then falls. 
D)  Initially, the average cost of production rises, then falls.

Question 11

At the minimum efficient scale

Accepted Answer

A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum. 
A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum.

Question 12

If,after hiring the 6th worker,a firm's output falls,then the marginal product of the 6th worker is negative.

Accepted Answer

A) True 
 B)False

Question 13

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory.In the following graph,the relationship between costs and output for the smaller factory is represented by the curve ATC1,and the relationship between costs and output for the larger factory is represented by the curve ATC2.   a.If Argyle expects to produce 3600 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain.
b.If Argyle expects to produce 5000 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain.
c.If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6500 sweaters per week,why isn't it also lower when Argyle produces 4000 sweaters per week?

Accepted Answer

a.Argyle's costs will be lower with a sm

Question 14

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Accepted Answer

A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management. 
A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management.

Question 15

Figure 6-6   Figure 6-6 contains information about the short-run cost structure of a firm.
-Refer to Figure 6-6.In the figure above,which letter represents the marginal cost curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 16

If the marginal cost curve is below the average variable cost curve,then

Accepted Answer

A)  average variable cost is increasing. 
B)  average variable cost is decreasing. 
C)  marginal cost must be decreasing. 
D)  average variable cost could either be increasing or decreasing. 
A)  average variable cost is increasing. 
B)  average variable cost is decreasing. 
C)  marginal cost must be decreasing. 
D)  average variable cost could either be increasing or decreasing.

Question 17

Average fixed cost is equal to

Accepted Answer

A)  the amount of total cost that does not change as output changes in the short run. 
B)  fixed cost divided by the quantity of output produced. 
C)  fixed cost multiplied by the quantity of output produced. 
D)  average total cost plus average variable cost. 
A)  the amount of total cost that does not change as output changes in the short run. 
B)  fixed cost divided by the quantity of output produced. 
C)  fixed cost multiplied by the quantity of output produced. 
D)  average total cost plus average variable cost.

Question 18

Diminishing marginal product of labour occurs when adding another unit of labour

Accepted Answer

A)  decreases output. 
B)  changes output by an amount smaller than the output added by the previous unit of labour. 
C)  increases output by an amount larger than the output added by the previous unit of labour. 
D)  decreases output by an amount smaller than the output added by the previous unit of labour. 
A)  decreases output. 
B)  changes output by an amount smaller than the output added by the previous unit of labour. 
C)  increases output by an amount larger than the output added by the previous unit of labour. 
D)  decreases output by an amount smaller than the output added by the previous unit of labour.

Question 19

If the long-run average total cost curve is downward sloping,then the firm is experiencing decreasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 20

Table 6-7
   Table 6-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 6-7.What is the average total cost of production when the firm produces 120 lanterns?

Accepted Answer

A)  $1680 
B)  $72 
C)  $14 
D)  $12.3 
A)  $1680 
B)  $72 
C)  $14 
D)  $12.3

Marginal cost is equal to the

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.

Which of the following describes how output changes in the short run? Because of specialisation and the division of labour,as more workers are hired

Table 6-8 Elegant Settings manufactures stainless steel cutlery. Table 7-8 shows the company's cost data. -Refer to Table 6-8.Elegant Settings experiences

Which of the following is an implicit cost of production?

When the marginal product of labour rises

When a firm's long-run average cost curve is horizontal for a range of output,then that range of production displays

The average total cost of production

Which of the following statements is true?

Which of the following explains why the marginal cost curve has a U shape?

At the minimum efficient scale

If,after hiring the 6th worker,a firm's output falls,then the marginal product of the 6th worker is negative.

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Figure 6-6 Figure 6-6 contains information about the short-run cost structure of a firm. -Refer to Figure 6-6.In the figure above,which letter represents the marginal cost curve?

If the marginal cost curve is below the average variable cost curve,then

Average fixed cost is equal to

Diminishing marginal product of labour occurs when adding another unit of labour

If the long-run average total cost curve is downward sloping,then the firm is experiencing decreasing returns to scale.

Table 6-7 Table 6-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 6-7.What is the average total cost of production when the firm produces 120 lanterns?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 6: Firms,the Stock Market,and Corporate Governance

Marginal cost is equal to the

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.

Which of the following describes how output changes in the short run? Because of specialisation and the division of labour,as more workers are hired

Table 6-8 Elegant Settings manufactures stainless steel cutlery. Table 7-8 shows the company's cost data. -Refer to Table 6-8.Elegant Settings experiences

Which of the following is an implicit cost of production?

When the marginal product of labour rises

When a firm's long-run average cost curve is horizontal for a range of output,then that range of production displays

The average total cost of production

Which of the following statements is true?

Which of the following explains why the marginal cost curve has a U shape?

At the minimum efficient scale

If,after hiring the 6th worker,a firm's output falls,then the marginal product of the 6th worker is negative.

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Figure 6-6 Figure 6-6 contains information about the short-run cost structure of a firm. -Refer to Figure 6-6.In the figure above,which letter represents the marginal cost curve?

If the marginal cost curve is below the average variable cost curve,then

Average fixed cost is equal to

Diminishing marginal product of labour occurs when adding another unit of labour

If the long-run average total cost curve is downward sloping,then the firm is experiencing decreasing returns to scale.

Table 6-7 Table 6-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 6-7.What is the average total cost of production when the firm produces 120 lanterns?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters