Question 1

The length of the short run

Accepted Answer

A)  is different for different types of firms. 
B)  can never exceed 3 years. 
C)  can never exceed 1 year. 
D)  is always less than 6 months. 
A)  is different for different types of firms. 
B)  can never exceed 3 years. 
C)  can never exceed 1 year. 
D)  is always less than 6 months.

Question 2

Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each.
-Refer to Scenario 13-11. The implicit cost for one birdhouse is

Accepted Answer

A)  $4. 
B)  $5. 
C)  $8. 
D)  $9. 
A)  $4. 
B)  $5. 
C)  $8. 
D)  $9.

Question 3

The marginal product of labor can be defined as the change in

Accepted Answer

A)  profit divided by the change in labor. 
B)  output divided by the change in labor. 
C)  labor divided by the change in output. 
D)  labor divided by the change in total cost. 
A)  profit divided by the change in labor. 
B)  output divided by the change in labor. 
C)  labor divided by the change in output. 
D)  labor divided by the change in total cost.

Question 4

Scenario 13-6
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.
-Refer to Scenario 13-6. Ziva's accounting profit from farming equals

Accepted Answer

A)  $-80. 
B)  $130. 
C)  $170. 
D)  $260. 
A)  $-80. 
B)  $130. 
C)  $170. 
D)  $260.

Question 5

Constant returns to scale occur when the firm's long­run

Accepted Answer

A)  total costs are constant as output increases. 
B)  average total costs are constant as output increases. 
C)  average cost curve is falling as output increases. 
D)  average cost curve is rising as output increases. 
A)  total costs are constant as output increases. 
B)  average total costs are constant as output increases. 
C)  average cost curve is falling as output increases. 
D)  average cost curve is rising as output increases.

Question 6

Describe the relationship between average variable cost and marginal cost.

Accepted Answer

If marginal cost MC) is greater than ave

Question 7

Describe the relationship between average total cost and marginal cost.

Accepted Answer

If marginal cost MC) is greater than ave

Question 8

Table 13-20
Listed in the table are the long-run total costs for three different firms.
  
-Refer to Table 13-20. Firm A is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 9

Figure 13-3  
-Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Accepted Answer

A)  Producing an additional cookie is always more costly than producing the previous cookie. 
B)  Total production of cookies decreases with additional units of input. 
C)  Producing additional cookies is equally costly, regardless of how many cookies are already being produced. 
D)  Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large. 
A)  Producing an additional cookie is always more costly than producing the previous cookie. 
B)  Total production of cookies decreases with additional units of input. 
C)  Producing additional cookies is equally costly, regardless of how many cookies are already being produced. 
D)  Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large.

Question 10

Analyzing the behavior of the firm enhances our understanding of

Accepted Answer

A)  what decisions lie behind the market supply curve. 
B)  how consumers allocate their income to purchase scarce resources. 
C)  how financial institutions set interest rates. 
D)  whether resources are allocated fairly. 
A)  what decisions lie behind the market supply curve. 
B)  how consumers allocate their income to purchase scarce resources. 
C)  how financial institutions set interest rates. 
D)  whether resources are allocated fairly.

Question 11

Scenario 13-8
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
-Refer to Scenario 13-8. What are Wanda's implicit costs per glass?

Accepted Answer

A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02 
A)  $0.18 
B)  $0.10 
C)  $0.08 
D)  $0.02

Question 12

Describe how an accounting firm could experience diseconomies of scale.

Accepted Answer

Problems with coordination can cause dis

Question 13

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

Accepted Answer

A) True 
 B)False

Question 14

In the long run,

Accepted Answer

A)  inputs that were fixed in the short run remain fixed. 
B)  inputs that were fixed in the short run become variable. 
C)  inputs that were variable in the short run become fixed. 
D)  variable inputs are rarely used. 
A)  inputs that were fixed in the short run remain fixed. 
B)  inputs that were fixed in the short run become variable. 
C)  inputs that were variable in the short run become fixed. 
D)  variable inputs are rarely used.

Question 15

To an economist, the field of industrial organization answers which of the following questions?

Accepted Answer

A)  Why are consumers subject to the law of demand? 
B)  Why do firms experience diminishing marginal productivities of their inputs? 
C)  How does the number of firms affect prices and the efficiency of market outcomes? 
D)  How can government intervention improve industrial production when externalities are present? 
A)  Why are consumers subject to the law of demand? 
B)  Why do firms experience diminishing marginal productivities of their inputs? 
C)  How does the number of firms affect prices and the efficiency of market outcomes? 
D)  How can government intervention improve industrial production when externalities are present?

Question 16

The amount of money that a firm pays to buy inputs is called

Accepted Answer

A)  total cost. 
B)  variable cost. 
C)  marginal cost. 
D)  fixed cost. 
A)  total cost. 
B)  variable cost. 
C)  marginal cost. 
D)  fixed cost.

Question 17

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits

Accepted Answer

A)  diminishing profitability. 
B)  increasing returns to scale. 
C)  increasing marginal product. 
D)  decreasing marginal product. 
A)  diminishing profitability. 
B)  increasing returns to scale. 
C)  increasing marginal product. 
D)  decreasing marginal product.

Question 18

Economic profit is greater than or equal to accounting profit.

Accepted Answer

A) True 
 B)False

Question 19

The opportunity cost of capital is an implicit cost almost every business incurs.

Accepted Answer

A) True 
 B)False

Question 20

The typical total-cost curve is U-shaped.

Accepted Answer

A) True 
 B)False

Exam 12: The Costs of Production

The length of the short run

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. The implicit cost for one birdhouse is

The marginal product of labor can be defined as the change in

Constant returns to scale occur when the firm's long­run

Describe the relationship between average variable cost and marginal cost.

Describe the relationship between average total cost and marginal cost.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing economies of scale.

Figure 13-3 -Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Analyzing the behavior of the firm enhances our understanding of

Describe how an accounting firm could experience diseconomies of scale.

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

In the long run,

To an economist, the field of industrial organization answers which of the following questions?

The amount of money that a firm pays to buy inputs is called

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits

Economic profit is greater than or equal to accounting profit.

The opportunity cost of capital is an implicit cost almost every business incurs.

The typical total-cost curve is U-shaped.

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

Constant returns to scale occur when the firm's longrun