Question 1

Foregone investment opportunities are an example of

Accepted Answer

A)  an explicit cost. 
B)  an implicit cost. 
C)  revenues. 
D)  profits. 
A)  an explicit cost. 
B)  an implicit cost. 
C)  revenues. 
D)  profits. B

Question 2

A difference between explicit and implicit costs is that

Accepted Answer

A)  explicit costs must be greater than implicit costs. 
B)  explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. 
C)  implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. 
D)  implicit costs must be greater than explicit costs. 
A)  explicit costs must be greater than implicit costs. 
B)  explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. 
C)  implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. 
D)  implicit costs must be greater than explicit costs. C

Question 3

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Accepted Answer

A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  efficient scale. 
A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  efficient scale. B

Question 4

Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's

Accepted Answer

A)  accounting profit was $9 million. 
B)  economic profit was $9 million. 
C)  total revenue was $9 million. 
D)  explicit costs were $9 million. 
A)  accounting profit was $9 million. 
B)  economic profit was $9 million. 
C)  total revenue was $9 million. 
D)  explicit costs were $9 million.

Question 5

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

Accepted Answer

A)  $150. 
B)  $299.50. 
C)  $300. 
D)  $600. 
A)  $150. 
B)  $299.50. 
C)  $300. 
D)  $600.

Question 6

When a firm experiences constant returns to scale,

Accepted Answer

A)  long-run average total cost is unchanged, even when output increases. 
B)  long-run marginal cost is greater than long-run average total cost. 
C)  long-run marginal cost is less than long-run average total cost. 
D)  the firm is likely to experience coordination problems. 
A)  long-run average total cost is unchanged, even when output increases. 
B)  long-run marginal cost is greater than long-run average total cost. 
C)  long-run marginal cost is less than long-run average total cost. 
D)  the firm is likely to experience coordination problems.

Question 7

Scenario 13-7
Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business.
-Refer to Scenario 13-7. Julia's implicit costs are

Accepted Answer

A)  0. 
B)  $10,000. 
C)  $15,000. 
D)  $25,000. 
A)  0. 
B)  $10,000. 
C)  $15,000. 
D)  $25,000.

Question 8

The marginal product of labor is equal to the

Accepted Answer

A)  incremental cost associated with a one unit increase in labor. 
B)  incremental profit associated with a one unit increase in labor. 
C)  increase in labor necessary to generate a one unit increase in output. 
D)  increase in output obtained from a one unit increase in labor. 
A)  incremental cost associated with a one unit increase in labor. 
B)  incremental profit associated with a one unit increase in labor. 
C)  increase in labor necessary to generate a one unit increase in output. 
D)  increase in output obtained from a one unit increase in labor.

Question 9

When calculating a firm's profit, an economist will subtract only

Accepted Answer

A)  explicit costs from total revenue because these are the only costs that can be measured explicitly. 
B)  implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C)  the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm. 
D)  the marginal cost because the cost of the next unit is the only relevant cost. 
A)  explicit costs from total revenue because these are the only costs that can be measured explicitly. 
B)  implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C)  the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm. 
D)  the marginal cost because the cost of the next unit is the only relevant cost.

Question 10

If the marginal cost of producing the tenth unit of output is $2.50, and if the average total cost of producing the tenth unit of output is $3, then at ten units of output, average total cost is rising.

Accepted Answer

A) True 
 B)False

Question 11

The average-total-cost curve is unaffected by diminishing marginal product.

Accepted Answer

A) True 
 B)False

Question 12

Table 13-1
  
-Refer to Table 13-1. What is total output when 3 workers are hired?

Accepted Answer

A)  15 
B)  60 
C)  105 
D)  135 
A)  15 
B)  60 
C)  105 
D)  135

Question 13

The nature of a firm's cost fixed or variable) depends on the

Accepted Answer

A)  firm's revenues. 
B)  time horizon under consideration. 
C)  price the firm charges for output. 
D)  explicit but not implicit costs. 
A)  firm's revenues. 
B)  time horizon under consideration. 
C)  price the firm charges for output. 
D)  explicit but not implicit costs.

Question 14

Table 13-2
  
-Refer to Table 13-2. What is the marginal product of the first worker?

Accepted Answer

A)  300 units 
B)  200 units 
C)  100 units 
D)  50 units 
A)  300 units 
B)  200 units 
C)  100 units 
D)  50 units

Question 15

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Accepted Answer

A)  The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. 
B)  The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers. 
C)  The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers. 
D)  Any of the above could be correct. 
A)  The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. 
B)  The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers. 
C)  The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers. 
D)  Any of the above could be correct.

Question 16

Scenario 13-2
Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-2. Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000 borrowed from a bank at an interest rate of 6 percent. What is Chelsea's annual opportunity cost of purchasing the factory?

Accepted Answer

A)  $2,000 
B)  $3,000 
C)  $4,500 
D)  $5,000 
A)  $2,000 
B)  $3,000 
C)  $4,500 
D)  $5,000

Question 17

Table 13-6
Wooden Chair Factory
  
-Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 70 chairs per hour and operates 8 hours per day, what is the factory's total labor cost per day?

Accepted Answer

A)  $72 
B)  $112 
C)  $576 
D)  $616 
A)  $72 
B)  $112 
C)  $576 
D)  $616

Question 18

Table 13-19
  
-Refer to Table 13-19. What is the shape of the average-fixed-cost curve?

Accepted Answer

AFC is always declining as out

Question 19

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

Accepted Answer

A)  $20 
B)  $40 
C)  $200 
D)  $400 
A)  $20 
B)  $40 
C)  $200 
D)  $400

Question 20

Table 13-18
  
-Refer to Table 13-18. What is the shape of the average-variable-cost curve?

Accepted Answer

AVC = VC/Q, where VC is graphed on the v

Exam 12: The Costs of Production

Foregone investment opportunities are an example of

A difference between explicit and implicit costs is that

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

When a firm experiences constant returns to scale,

The marginal product of labor is equal to the

When calculating a firm's profit, an economist will subtract only

If the marginal cost of producing the tenth unit of output is $2.50, and if the average total cost of producing the tenth unit of output is $3, then at ten units of output, average total cost is rising.

The average-total-cost curve is unaffected by diminishing marginal product.

Table 13-1 -Refer to Table 13-1. What is total output when 3 workers are hired?

The nature of a firm's cost fixed or variable) depends on the

Table 13-2 -Refer to Table 13-2. What is the marginal product of the first worker?

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Table 13-19 -Refer to Table 13-19. What is the shape of the average-fixed-cost curve?

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

Table 13-18 -Refer to Table 13-18. What is the shape of the average-variable-cost curve?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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