Question 1

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 2

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 3

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. According to Ellie's accountant, which of the following revenue totals will yield her business $50,000 in profits?

Accepted Answer

A)  $55,200 
B)  $105,200 
C)  $132,500 
D)  $185,700 
A)  $55,200 
B)  $105,200 
C)  $132,500 
D)  $185,700

Question 4

The shape of the total-cost curve is inversely related to the shape of the production function.

Accepted Answer

A) True 
 B)False

Question 5

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 implicit 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 6

Explicit costs

Accepted Answer

A)  do not require an outlay of money by the firm. 
B)  enter into the accountant's measurement of a firm's profit. 
C)  enter into the economist's measurement of a firm's profit. 
D)  Both b and c are correct. 
A)  do not require an outlay of money by the firm. 
B)  enter into the accountant's measurement of a firm's profit. 
C)  enter into the economist's measurement of a firm's profit. 
D)  Both b and c are correct.

Question 7

Table 13-19  
-Refer to Table 13-19. What is the shape of the average-fixed-cost curve?

Accepted Answer

AFC is always declining as out

Question 8

Accountants often ignore implicit costs.

Accepted Answer

A) True 
 B)False

Question 9

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Accepted Answer

A) True 
 B)False

Question 10

The value of a business owner's time is an example of

Accepted Answer

A)  an opportunity cost. 
B)  a fixed cost. 
C)  an explicit cost. 
D)  total revenue. 
A)  an opportunity cost. 
B)  a fixed cost. 
C)  an explicit cost. 
D)  total revenue.

Question 11

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False

Question 12

Table 13-18  
-Refer to Table 13-18. What is the marginal product of the third worker?

Accepted Answer

450 - 350

Question 13

The marginal product of any input is the

Accepted Answer

A)  increase in total cost associated with a one-unit increase in production. 
B)  change in total output associated with a $1.00 increase in total cost. 
C)  increase in total cost resulting from the hiring of an additional worker. 
D)  increase in total output obtained from one additional unit of that input. 
A)  increase in total cost associated with a one-unit increase in production. 
B)  change in total output associated with a $1.00 increase in total cost. 
C)  increase in total cost resulting from the hiring of an additional worker. 
D)  increase in total output obtained from one additional unit of that input.

Question 14

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

Accepted Answer

A)  230 units. 
B)  100 units. 
C)  77 units. 
D)  60 units. 
A)  230 units. 
B)  100 units. 
C)  77 units. 
D)  60 units.

Question 15

Economists normally assume that the goal of a firm is to

Accepted Answer

A)  maximize its total revenue. 
B)  maximize its profit. 
C)  minimize its explicit costs. 
D)  minimize its total cost. 
A)  maximize its total revenue. 
B)  maximize its profit. 
C)  minimize its explicit costs. 
D)  minimize its total cost.

Question 16

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

Accepted Answer

A)  7,000 pounds 
B)  3,500 pounds 
C)  3,000 pounds 
D)  1,000 pounds 
A)  7,000 pounds 
B)  3,500 pounds 
C)  3,000 pounds 
D)  1,000 pounds

Question 17

Which of these assumptions is often realistic for a firm in the short run?

Accepted Answer

A)  The firm can vary both the size of its factory and the number of workers it employs. 
B)  The firm can vary the size of its factory but not the number of workers it employs. 
C)  The firm can vary the number of workers it employs but not the size of its factory. 
D)  The firm can vary neither the size of its factory nor the number of workers it employs. 
A)  The firm can vary both the size of its factory and the number of workers it employs. 
B)  The firm can vary the size of its factory but not the number of workers it employs. 
C)  The firm can vary the number of workers it employs but not the size of its factory. 
D)  The firm can vary neither the size of its factory nor the number of workers it employs.

Question 18

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 19

Scenario 13-21
Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel, $40,000 on seed, fertilizer, and pesticides, and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations.
-Refer to Scenario 13-21. What is the economic profit for the family farm?

Accepted Answer

Accounting profit = Total reve

Question 20

Which of the following is an example of an implicit cost? (i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm
(ii) interest paid on the firm's debt
(iii) rent paid by the firm to lease office space

Accepted Answer

A)  (ii) and (iii) only 
B)  (i) and (iii) only 
C)  (i) only 
D)  (iii) only 
A)  (ii) and (iii) only 
B)  (i) and (iii) only 
C)  (i) only 
D)  (iii) only

Exam 13: The Costs of Production

A production function describes

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

The shape of the total-cost curve is inversely related to the shape of the production function.

Explicit costs

Table 13-19 -Refer to Table 13-19. What is the shape of the average-fixed-cost curve?

Accountants often ignore implicit costs.

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

The value of a business owner's time is an example of

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Table 13-18 -Refer to Table 13-18. What is the marginal product of the third worker?

The marginal product of any input is the

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

Economists normally assume that the goal of a firm is to

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

Which of these assumptions is often realistic for a firm in the short run?

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

Which of the following is an example of an implicit cost? (i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm (ii) interest paid on the firm's debt (iii) rent paid by the firm to lease office space

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

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