Question 1

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

Accepted Answer

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

Question 2

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 3

Table 13-18  
-Refer to Table 13-18. What is the average variable cost of producing 500 units of output?

Accepted Answer

AVC = VC/Q

Question 4

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 5

Suppose that Christine owns her own CPA firm. She uses only two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Christine most likely considers

Accepted Answer

A)  both labor and capital to be fixed. 
B)  both labor and capital to be variable. 
C)  capital to be variable and labor to be fixed. 
D)  labor to be variable and capital to be fixed. 
A)  both labor and capital to be fixed. 
B)  both labor and capital to be variable. 
C)  capital to be variable and labor to be fixed. 
D)  labor to be variable and capital to be fixed.

Question 6

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

Accepted Answer

the lost earnings of the owner

Question 7

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 8

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 explicit 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 9

Suppose that a firm's long­run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. 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)  coordination problems. 
A)  economies of scale. 
B)  constant returns to scale. 
C)  diseconomies of scale. 
D)  coordination problems.

Question 10

Figure 13-2  
-Refer to Figure 13-2. The graph illustrates a typical

Accepted Answer

A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  marginal product of labor curve. 
A)  total-cost curve. 
B)  production function. 
C)  production possibilities frontier. 
D)  marginal product of labor curve.

Question 11

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Which of the following expressions is correct?

Accepted Answer

A)  accounting profit = total revenue - explicit costs 
B)  economic profit = total revenue - implicit costs 
C)  economic profit = total revenue - explicit costs 
D)  Both a and b are correct. 
A)  accounting profit = total revenue - explicit costs 
B)  economic profit = total revenue - implicit costs 
C)  economic profit = total revenue - explicit costs 
D)  Both a and b are correct.

Question 14

Scenario 13-13
Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000.
-Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual economic profit of her cookie jar business?

Accepted Answer

A)  $36,000 
B)  $35,950 
C)  $30,000 
D)  $29,950 
A)  $36,000 
B)  $35,950 
C)  $30,000 
D)  $29,950

Question 15

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 16

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 explicit 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 17

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

Accepted Answer

A)  in the short run but not in the long run. 
B)  in the long run but not in the short run. 
C)  both in the short run and in the long run. 
D)  neither in the short run nor in the long run. 
A)  in the short run but not in the long run. 
B)  in the long run but not in the short run. 
C)  both in the short run and in the long run. 
D)  neither in the short run nor in the long run.

Question 18

Table 13-3  
-Refer to Table 13-3. The marginal product of the second worker is

Accepted Answer

A)  90 units. 
B)  85 units. 
C)  80 units. 
D)  20 units. 
A)  90 units. 
B)  85 units. 
C)  80 units. 
D)  20 units.

Question 19

An example of an explicit cost for the owner of a tattoo parlor would be the wages that she could earn if she worked as a graphic artist for an advertising agency.

Accepted Answer

A) True 
 B)False

Question 20

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Accepted Answer

When average total cost curve

Exam 13: The Costs of Production

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

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

Table 13-18 -Refer to Table 13-18. What is the average variable cost of producing 500 units of output?

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

Suppose that Christine owns her own CPA firm. She uses only two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Christine most likely considers

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

Analyzing the behavior of the firm enhances our understanding of

Suppose that a firm's long­run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing

Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Which of the following expressions is correct?

Which of the following expressions is correct?

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?

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

Table 13-3 -Refer to Table 13-3. The marginal product of the second worker is

An example of an explicit cost for the owner of a tattoo parlor would be the wages that she could earn if she worked as a graphic artist for an advertising agency.

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal 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

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Suppose that a firm's longrun average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing