Question 1

Table 13-18
  
-Refer to Table 13-18. What is the shape of the firm's total­cost curve?

Accepted Answer

The firm's total­cost curve wo

Question 2

Accounting profit is greater than or equal to economic profit.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements about a production function is correct for a firm that uses labor to produce output?

Accepted Answer

A)  The production function depicts the relationship between the quantity of labor and the quantity of output. 
B)  The slope of the production function measures marginal product. 
C)  The slopes of the production function and the total cost curve are inversely related; if one is increasing, the other is decreasing. 
D)  All of the above are correct. 
A)  The production function depicts the relationship between the quantity of labor and the quantity of output. 
B)  The slope of the production function measures marginal product. 
C)  The slopes of the production function and the total cost curve are inversely related; if one is increasing, the other is decreasing. 
D)  All of the above are correct.

Question 4

Suppose that a firm's long­run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. 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

A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's

Accepted Answer

A)  total revenue was $3.5 million. 
B)  economic profit was $3.5 million. 
C)  accounting profit was $3.5 million. 
D)  explicit costs were $3.5 million. 
A)  total revenue was $3.5 million. 
B)  economic profit was $3.5 million. 
C)  accounting profit was $3.5 million. 
D)  explicit costs were $3.5 million.

Question 6

Table 13-19
  
-Refer to Table 13-19. What is the marginal product of the second worker?

Accepted Answer

250 - 100

Question 7

Scenario 13-9
Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-9. Ellie's annual economic costs will equal

Accepted Answer

A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $135,700. 
A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $135,700.

Question 8

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.  
-Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

Accepted Answer

A)  ATCA 
B)  ATCB 
C)  ATCC 
D)  ATCD 
A)  ATCA 
B)  ATCB 
C)  ATCC 
D)  ATCD

Question 9

Scenario 13-5
Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
-Refer to Scenario 13-5. Emily's explicit cost of capital is

Accepted Answer

A)  $2,000. 
B)  $4,000. 
C)  $12,000. 
D)  $14,000. 
A)  $2,000. 
B)  $4,000. 
C)  $12,000. 
D)  $14,000.

Question 10

Accountants keep track of the money that flows into and out of firms.

Accepted Answer

A) True 
 B)False

Question 11

Average total cost reveals how much total cost will change as the firm alters its level of production.

Accepted Answer

A) True 
 B)False

Question 12

The average-fixed-cost curve is constant.

Accepted Answer

A) True 
 B)False

Question 13

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

Accepted Answer

A)  -$39,000. 
B)  $124,000. 
C)  $163,000. 
D)  $184,000. 
A)  -$39,000. 
B)  $124,000. 
C)  $163,000. 
D)  $184,000.

Question 14

If long-run average total cost is rising, then the firm is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 15

Economies of scale often arise because higher production levels allow specialization among workers.

Accepted Answer

A) True 
 B)False

Question 16

Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes?

Accepted Answer

A)  macroeconomics 
B)  industrial organization 
C)  labor economics 
D)  monetary economics 
A)  macroeconomics 
B)  industrial organization 
C)  labor economics 
D)  monetary economics

Question 17

Table 13-2
  
-Refer to Table 13-2. What is the marginal product of the second 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 18

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

Accepted Answer

A)  The cost of something is what you give up to get it. 
B)  A country's standard of living depends on its ability to produce goods and services. 
C)  Prices rise when the government prints too much money. 
D)  Governments can sometimes improve market outcomes. 
A)  The cost of something is what you give up to get it. 
B)  A country's standard of living depends on its ability to produce goods and services. 
C)  Prices rise when the government prints too much money. 
D)  Governments can sometimes improve market outcomes.

Question 19

Scenario 13-5
Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
-Refer to Scenario 13-5. Emily's total opportunity cost of capital is

Accepted Answer

A)  $2,000. 
B)  $4,000. 
C)  $12,000. 
D)  $14,000. 
A)  $2,000. 
B)  $4,000. 
C)  $12,000. 
D)  $14,000.

Question 20

When a firm's only variable input is labor, then the slope of the production function measures the

Accepted Answer

A)  quantity of labor. 
B)  quantity of output. 
C)  total cost. 
D)  marginal product of labor. 
A)  quantity of labor. 
B)  quantity of output. 
C)  total cost. 
D)  marginal product of labor.

Exam 12: The Costs of Production

Table 13-18 -Refer to Table 13-18. What is the shape of the firm's total­cost curve?

Accounting profit is greater than or equal to economic profit.

Which of the following statements about a production function is correct for a firm that uses labor to produce output?

Suppose that a firm's long­run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing

A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's

Table 13-19 -Refer to Table 13-19. What is the marginal product of the second worker?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

Accountants keep track of the money that flows into and out of firms.

Average total cost reveals how much total cost will change as the firm alters its level of production.

The average-fixed-cost curve is constant.

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

If long-run average total cost is rising, then the firm is experiencing economies of scale.

Economies of scale often arise because higher production levels allow specialization among workers.

Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes?

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

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

When a firm's only variable input is labor, then the slope of the production function measures the

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

Table 13-18 -Refer to Table 13-18. What is the shape of the firm's totalcost curve?

Suppose that a firm's longrun average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing