Question 1

Which of the following is an implicit cost of production?

Accepted Answer

A)  the loss in the value of capital equipment due to wear and tear 
B)  the salary you pay yourself for running your business 
C)  the utility bill paid to water, electricity, and natural gas companies 
D)  the interest you pay your mother for the money she loaned you to start your business 
A)  the loss in the value of capital equipment due to wear and tear 
B)  the salary you pay yourself for running your business 
C)  the utility bill paid to water, electricity, and natural gas companies 
D)  the interest you pay your mother for the money she loaned you to start your business

Question 2

If marginal cost is above the average variable cost,then average variable cost is decreasing.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of market "production",as used by economist?

Accepted Answer

A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Art's College stages a play at the local theatre. 
A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Art's College stages a play at the local theatre.

Question 4

Table 11-3
  
 Table 11-3 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 11-3.What is the average variable cost per unit of production when the firm produces 90 lanterns?

Accepted Answer

A)  $490 
B)  $33.67 
C)  $7.67 
D)  $5.44 
A)  $490 
B)  $33.67 
C)  $7.67 
D)  $5.44

Question 5

Adam spent $10,000 on new equipment for his small business,"Adam's Fitness Studio." Membership at his fitness center is very low and at this rate,Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Accepted Answer

A)  The fixed cost of running the studio is $22,000. 
B)  The variable cost of running the studio is $22,000. 
C)  The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D)  The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. 
A)  The fixed cost of running the studio is $22,000. 
B)  The variable cost of running the studio is $22,000. 
C)  The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D)  The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.

Question 6

Figure 11-9  
-Refer to Figure 11-9.Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

Accepted Answer

A)  $3,600 
B)  $1,120 
C)  $592 
D)  $560 
A)  $3,600 
B)  $1,120 
C)  $592 
D)  $560

Question 7

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700,calculate the firm's average fixed cost of production if it expands output to 25 units.

Accepted Answer

A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information. 
A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information.

Question 8

When a firm produces 50,000 units of output,its total cost equals $6.5 million.When it increases its production to 70,000 units of output,its total cost increases to $9.4 million.Within this range,the marginal cost of an additional unit of output is

Accepted Answer

A)  $41.43. 
B)  $134.29. 
C)  $135. 
D)  $145. 
A)  $41.43. 
B)  $134.29. 
C)  $135. 
D)  $145.

Question 9

Which of the following is an example of a long run adjustment?

Accepted Answer

A)  Your university offers Saturday morning classes next fall. 
B)  Ford Motor Company lays off 2,000 assembly line workers. 
C)  A soybean farmer turns on the irrigation system after a month long dry spell. 
D)  Wal-Mart builds another Supercenter. 
A)  Your university offers Saturday morning classes next fall. 
B)  Ford Motor Company lays off 2,000 assembly line workers. 
C)  A soybean farmer turns on the irrigation system after a month long dry spell. 
D)  Wal-Mart builds another Supercenter.

Question 10

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 11

In 1955,the chairman of the Sony corporation offered to sell transistor radios through department stores in the United States.Sony based its selling price on its average total cost of production.If a store bought 5,000 radios,Sony would sell them at $29.95 each.For 10,000 there would be a discount,and for more than 10,000 the price would begin to climb.Based on this information,10,000 radios was located at the

Accepted Answer

A)  minimum point on Sony's average total cost curve. 
B)  maximum point on Sony's average total cost curve. 
C)  minimum point on Sony's marginal cost curve. 
D)  maximum point on Sony's marginal cost curve. 
A)  minimum point on Sony's average total cost curve. 
B)  maximum point on Sony's average total cost curve. 
C)  minimum point on Sony's marginal cost curve. 
D)  maximum point on Sony's marginal cost curve.

Question 12

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Accepted Answer

A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of labor increases. 
D)  marginal product of labor increases. 
A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of labor increases. 
D)  marginal product of labor increases.

Question 13

Which of the following is the best example of a short run adjustment?

Accepted Answer

A)  A local bakery purchases another commercial oven as part of its capacity expansion. 
B)  Your local Wal-Mart hires two more associates. 
C)  Smith University completed negotiations to acquire a large piece of land to build its new library. 
D)  Toyota builds a new assembly plant in Texas. 
A)  A local bakery purchases another commercial oven as part of its capacity expansion. 
B)  Your local Wal-Mart hires two more associates. 
C)  Smith University completed negotiations to acquire a large piece of land to build its new library. 
D)  Toyota builds a new assembly plant in Texas.

Question 14

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine,are these two inputs being used in the least cost combination and what should be done if they are not?

Accepted Answer

The marginal product per dollar spent on

Question 15

Suppose the price of capital and labor remain constant but that the average educational level of workers has increased and therefore,productivity of labor increases.This would lead a firm

Accepted Answer

A)  to adopt a more capital-intensive production technology. 
B)  to adopt a more labor-intensive technology. 
C)  to keep its output and production technology unchanged, but to use fewer units of labor. 
D)  to use only labor to produce the product. 
A)  to adopt a more capital-intensive production technology. 
B)  to adopt a more labor-intensive technology. 
C)  to keep its output and production technology unchanged, but to use fewer units of labor. 
D)  to use only labor to produce the product.

Question 16

Vipsana's Gyros House sells gyros.The cost of ingredients (pita,meat,spices,etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?

Accepted Answer

A)  $100 
B)  $124.40 
C)  $220 
D)  $240 
A)  $100 
B)  $124.40 
C)  $220 
D)  $240

Question 17

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

Accepted Answer

A) True 
 B)False

Question 18

When the average total cost is $16 and the total cost is $800,then the number of units the firm is producing is

Accepted Answer

A)  impossible to determined with the information given. 
B)  12,800. 
C)  784. 
D)  50. 
A)  impossible to determined with the information given. 
B)  12,800. 
C)  784. 
D)  50.

Question 19

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 20

If a firm decreases its plant size and finds that its long-run average costs have decreased,then

Accepted Answer

A)  its labor is more productive in a smaller plant. 
B)  its diseconomies of scale are less. 
C)  the firm should reduce its plant size even more. 
D)  the firm is now profitable. 
A)  its labor is more productive in a smaller plant. 
B)  its diseconomies of scale are less. 
C)  the firm should reduce its plant size even more. 
D)  the firm is now profitable.

Exam 11: Technology, production, and Costs

Which of the following is an implicit cost of production?

If marginal cost is above the average variable cost,then average variable cost is decreasing.

Which of the following is an example of market "production",as used by economist?

Table 11-3 Table 11-3 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-3.What is the average variable cost per unit of production when the firm produces 90 lanterns?

Adam spent $10,000 on new equipment for his small business,"Adam's Fitness Studio." Membership at his fitness center is very low and at this rate,Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Figure 11-9 -Refer to Figure 11-9.Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700,calculate the firm's average fixed cost of production if it expands output to 25 units.

When a firm produces 50,000 units of output,its total cost equals $6.5 million.When it increases its production to 70,000 units of output,its total cost increases to $9.4 million.Within this range,the marginal cost of an additional unit of output is

Which of the following is an example of a long run adjustment?

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

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Which of the following is the best example of a short run adjustment?

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine,are these two inputs being used in the least cost combination and what should be done if they are not?

Suppose the price of capital and labor remain constant but that the average educational level of workers has increased and therefore,productivity of labor increases.This would lead a firm

Vipsana's Gyros House sells gyros.The cost of ingredients (pita,meat,spices,etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

When the average total cost is $16 and the total cost is $800,then the number of units the firm is producing is

The short run is the time period during which a firm has at least one input constraint.

If a firm decreases its plant size and finds that its long-run average costs have decreased,then

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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