Question 1

Average total cost and marginal cost express information that is already contained in a firm's total cost.

Accepted Answer

A) True 
 B)False

Question 2

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?

Accepted Answer

A)  $0 
B)  $20,000 
C)  $65,000 
D)  $85,000 
A)  $0 
B)  $20,000 
C)  $65,000 
D)  $85,000

Question 3

Which of the following expressions is correct?

Accepted Answer

A)  accounting profit = economic profit + implicit costs 
B)  accounting profit = total revenue - implicit costs 
C)  economic profit = accounting profit + explicit costs 
D)  economic profit = total revenue - implicit costs 
A)  accounting profit = economic profit + implicit costs 
B)  accounting profit = total revenue - implicit costs 
C)  economic profit = accounting profit + explicit costs 
D)  economic profit = total revenue - implicit costs

Question 4

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Accepted Answer

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

Question 5

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves.

Accepted Answer

A) True 
 B)False

Question 6

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

Accepted Answer

A)  diseconomies of scale because total cost is rising as output rises. 
B)  diseconomies of scale because average total cost is rising as output rises. 
C)  economies of scale because total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises. 
A)  diseconomies of scale because total cost is rising as output rises. 
B)  diseconomies of scale because average total cost is rising as output rises. 
C)  economies of scale because total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises.

Question 7

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are L = 12, Q = 122) and L = 13, Q = 130). Then the marginal product of the 13th worker is

Accepted Answer

A)  8 units of output. 
B)  10 units of output. 
C)  122 units of output. 
D)  132 units of output. 
A)  8 units of output. 
B)  10 units of output. 
C)  122 units of output. 
D)  132 units of output.

Question 8

Several related measures of cost can be derived from a firm's total cost.

Accepted Answer

A) True 
 B)False

Question 9

Table 13-16
Listed in the table are the long-run total costs for three different firms.
  
-Refer to Table 13-16. Which firm is experiencing constant returns to scale?

Accepted Answer

A)  Firm A only 
B)  Firm B only 
C)  Firm C only 
D)  Firm A and Firm B only 
A)  Firm A only 
B)  Firm B only 
C)  Firm C only 
D)  Firm A and Firm B only

Question 10

Table 13-16
Listed in the table are the long-run total costs for three different firms.
  
-Refer to Table 13-16. Which firm is experiencing diseconomies of scale?

Accepted Answer

A)  Firm A only 
B)  Firm B only 
C)  Firm C only 
D)  Firm A and Firm B only 
A)  Firm A only 
B)  Firm B only 
C)  Firm C only 
D)  Firm A and Firm B only

Question 11

Consider a small hair styling salon. List some examples of implicit costs of this business.

Accepted Answer

the lost earnings of the owner

Question 12

A firm's opportunity costs of production are equal to its

Accepted Answer

A)  explicit costs only. 
B)  implicit costs only. 
C)  explicit costs + implicit costs. 
D)  explicit costs + implicit costs + total revenue. 
A)  explicit costs only. 
B)  implicit costs only. 
C)  explicit costs + implicit costs. 
D)  explicit costs + implicit costs + total revenue.

Question 13

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Accepted Answer

A)  competition. 
B)  opportunity costs. 
C)  specialization. 
D)  incentives. 
A)  competition. 
B)  opportunity costs. 
C)  specialization. 
D)  incentives.

Question 14

Consider a small family wheat farm. List some examples of implicit costs of farming.

Accepted Answer

the lost earnings of any famil

Question 15

A firm's total profit equals its marginal revenue minus its marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

A production function describes

Accepted Answer

A)  how a firm maximizes profits. 
B)  how a firm turns inputs into output. 
C)  the minimal cost of producing a given level of output. 
D)  the relationship between cost and output. 
A)  how a firm maximizes profits. 
B)  how a firm turns inputs into output. 
C)  the minimal cost of producing a given level of output. 
D)  the relationship between cost and output.

Question 17

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve.

Accepted Answer

A) True 
 B)False

Question 18

Scenario 13-3
Kachina is a senior majoring in graphic design at Awesome University AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 per hour for her consulting services. She also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Kachina $20 per hour.
-Refer to Scenario 13-3. If Kachina can work additional hours at either job, what is the opportunity cost if she spends one hour reading a novel?

Accepted Answer

A)  $20 
B)  $25 
C)  $100 
D)  $125 
A)  $20 
B)  $25 
C)  $100 
D)  $125

Question 19

Table 13-3
  
-Refer to Table 13-3. At which number of workers does diminishing marginal product begin?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 20

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?

Accepted Answer

A)  18 bouquets 
B)  19 bouquets 
C)  20 bouquets 
D)  38 bouquets 
A)  18 bouquets 
B)  19 bouquets 
C)  20 bouquets 
D)  38 bouquets

Exam 12: The Costs of Production

Average total cost and marginal cost express information that is already contained in a firm's total cost.

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?

Which of the following expressions is correct?

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves.

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are L = 12, Q = 122) and L = 13, Q = 130). Then the marginal product of the 13th worker is

Several related measures of cost can be derived from a firm's total cost.

Table 13-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-16. Which firm is experiencing constant returns to scale?

Table 13-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-16. Which firm is experiencing diseconomies of scale?

Consider a small hair styling salon. List some examples of implicit costs of this business.

A firm's opportunity costs of production are equal to its

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Consider a small family wheat farm. List some examples of implicit costs of farming.

A firm's total profit equals its marginal revenue minus its marginal cost.

A production function describes

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve.

Table 13-3 -Refer to Table 13-3. At which number of workers does diminishing marginal product begin?

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?

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

Filters

Suppose that a firm's longrun average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing