Question 1

At the minimum efficient scale

Accepted Answer

A) all possible economies of scale have not been exhausted. 
B) the firm has achieved the lowest possible average cost of production. 
C) any increases in the scale of operation will encounter further economies of scale. 
D) marginal cost is at its minimum. 
A) all possible economies of scale have not been exhausted. 
B) the firm has achieved the lowest possible average cost of production. 
C) any increases in the scale of operation will encounter further economies of scale. 
D) marginal cost is at its minimum.

Question 2

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 3

Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7.When output level is 100,what is the total cost of production?

Accepted Answer

A) $20 
B) $1,000 
C) $1,200 
D) $2,000 
A) $20 
B) $1,000 
C) $1,200 
D) $2,000

Question 4

Assume that you observe the long-run average cost curve of ACME Bookstores,a national chain.Starting from the point on the curve where output is zero and moving to the right,which of the following lists the behavior of long-run average costs in the correct sequence (that is,which will be observed first,second,etc. )?

Accepted Answer

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

Question 5

Which of the following would be categorized as an implicit cost? a.not being able to spend your $10,000 savings if you sink the money in your business
B.the cost of purchasing supplies for your house-cleaning business
C.the cost of purchasing auto insurance for your dry-cleaning delivery business

Accepted Answer

A) a only 
B) a and c only 
C) b and c only 
D) all of the above 
A) a only 
B) a and c only 
C) b and c only 
D) all of the above

Question 6

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 7

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore

Accepted Answer

A) the marginal product of the 5th worker is negative. 
B) the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C) the average product of the 5th worker is negative. 
D) the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers. 
A) the marginal product of the 5th worker is negative. 
B) the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C) the average product of the 5th worker is negative. 
D) the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers.

Question 8

Suppose a firm uses labor and capital to produce output.The last unit of labor hired has a marginal product of 12 units of output,and the last unit of capital employed has a marginal product of 20 units.Use the optimal combination of inputs rule to calculate the price of capital if the price of labor is $6 per unit.The price of capital is

Accepted Answer

A) $2. 
B) $10. 
C) $20. 
D) impossible to determine with the information given. 
A) $2. 
B) $10. 
C) $20. 
D) impossible to determine with the information given.

Question 9

An explicit cost is defined as

Accepted Answer

A) a cost that does not change as output changes. 
B) a nonmonetary opportunity cost. 
C) a cost that involves spending money. 
D) a nonmonetary accounting cost. 
A) a cost that does not change as output changes. 
B) a nonmonetary opportunity cost. 
C) a cost that involves spending money. 
D) a nonmonetary accounting cost.

Question 10

Figure 11-6 contains information about the short run cost structure of a firm.
-Refer to Figure 11-6.In the figure above which letter represents the average variable cost curve?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 11

Which of the following are implicit costs for a typical firm?

Accepted Answer

A) opportunity costs of capital owned and used by the firm 
B) the cost of labor hired by the firm 
C) utilities cost 
D) a business licensing fee 
A) opportunity costs of capital owned and used by the firm 
B) the cost of labor hired by the firm 
C) utilities cost 
D) a business licensing fee

Question 12

An isocost line shows

Accepted Answer

A) combinations of two inputs that result in the same total cost for a firm. 
B) combinations of two inputs that result in the same total output for a firm. 
C) combinations of the two inputs that result in the same profit for a firm. 
D) the different levels of total cost that result from various combinations of two inputs. 
A) combinations of two inputs that result in the same total cost for a firm. 
B) combinations of two inputs that result in the same total output for a firm. 
C) combinations of the two inputs that result in the same profit for a firm. 
D) the different levels of total cost that result from various combinations of two inputs.

Question 13

Marginal cost is calculated for a particular increase in output by

Accepted Answer

A) multiplying the total cost by the change in output. 
B) multiplying the change in total cost by the change in output. 
C) dividing the total cost by the change in output. 
D) dividing the change in total cost by the change in output. 
A) multiplying the total cost by the change in output. 
B) multiplying the change in total cost by the change in output. 
C) dividing the total cost by the change in output. 
D) dividing the change in total cost by the change in output.

Question 14

The slope of an isocost line determines the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is false?

Accepted Answer

A) When marginal cost equals average total cost,average total cost is at its highest value. 
B) The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points. 
C) The difference between average total cost and average fixed cost is average variable cost. 
D) Firms often refer to the process of lowering average fixed cost as "spreading the overhead." 
A) When marginal cost equals average total cost,average total cost is at its highest value. 
B) The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points. 
C) The difference between average total cost and average fixed cost is average variable cost. 
D) Firms often refer to the process of lowering average fixed cost as "spreading the overhead."

Question 16

Which of the following statements best describes the economic short run?

Accepted Answer

A) It is a period of one year or less. 
B) It is a period during which firms are free to vary all of their inputs. 
C) It is a period during which at least one of the firm's inputs is fixed. 
D) It is a period during which fixed inputs become variable inputs because of depreciation. 
A) It is a period of one year or less. 
B) It is a period during which firms are free to vary all of their inputs. 
C) It is a period during which at least one of the firm's inputs is fixed. 
D) It is a period during which fixed inputs become variable inputs because of depreciation.

Question 17

The formula for total fixed cost is

Accepted Answer

A) TFC = TC + TVC. 
B) TFC = TVC - TC. 
C) TFC = TC/TVC. 
D) TFC = TC - TVC. 
A) TFC = TC + TVC. 
B) TFC = TVC - TC. 
C) TFC = TC/TVC. 
D) TFC = TC - TVC.

Question 18

Figure 11-1  
-Refer to Figure 11-1.The marginal product of the 7th worker is

Accepted Answer

A) 66. 
B) 9.43. 
C) 2. 
D) -2. 
A) 66. 
B) 9.43. 
C) 2. 
D) -2.

Question 19

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 20

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

Accepted Answer

A) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor,while diseconomies of scale applies in the long run when all factors are variable. 
B) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor,while diseconomies of scale applies in the long run when all factors are variable. 
C) Diminishing marginal returns,which applies only in the short run when at least one factor is fixed,explains why marginal cost increases,while diseconomies of scale,which applies in the long run when all factors are variable,explains why average cost increases. 
D) Diminishing marginal returns,which applies only in the long run when all factors are variable,explains why average variable cost increases,while diseconomies of scale,which applies in the short run when at least one factor is fixed,explains why average total cost increases. 
A) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor,while diseconomies of scale applies in the long run when all factors are variable. 
B) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor,while diseconomies of scale applies in the long run when all factors are variable. 
C) Diminishing marginal returns,which applies only in the short run when at least one factor is fixed,explains why marginal cost increases,while diseconomies of scale,which applies in the long run when all factors are variable,explains why average cost increases. 
D) Diminishing marginal returns,which applies only in the long run when all factors are variable,explains why average variable cost increases,while diseconomies of scale,which applies in the short run when at least one factor is fixed,explains why average total cost increases.

Exam 11: Technology,production,and Costs

At the minimum efficient scale

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

Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7.When output level is 100,what is the total cost of production?

Which of the following would be categorized as an implicit cost? a.not being able to spend your $10,000 savings if you sink the money in your business B.the cost of purchasing supplies for your house-cleaning business C.the cost of purchasing auto insurance for your dry-cleaning delivery business

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?

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore

An explicit cost is defined as

Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6.In the figure above which letter represents the average variable cost curve?

Which of the following are implicit costs for a typical firm?

An isocost line shows

Marginal cost is calculated for a particular increase in output by

The slope of an isocost line determines the marginal rate of substitution.

Which of the following statements is false?

Which of the following statements best describes the economic short run?

The formula for total fixed cost is

Figure 11-1 -Refer to Figure 11-1.The marginal product of the 7th worker is

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?

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

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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