Question 1

The amount of money that a firm receives from the sale of its output is called

Accepted Answer

A)  total gross profit. 
B)  total net profit. 
C)  total revenue. 
D)  net revenue. 
A)  total gross profit. 
B)  total net profit. 
C)  total revenue. 
D)  net revenue.

Question 2

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

Accepted Answer

shampoo, conditioner, other products for

Question 3

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 4

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 economic profits are

Accepted Answer

A)  $160,000. 
B)  $150,000. 
C)  $135,000. 
D)  $125,000. 
A)  $160,000. 
B)  $150,000. 
C)  $135,000. 
D)  $125,000.

Question 5

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 6

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 accountant would calculate the total cost of farming to equal

Accepted Answer

A)  $25. 
B)  $130. 
C)  $300. 
D)  $380. 
A)  $25. 
B)  $130. 
C)  $300. 
D)  $380.

Question 7

Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings to start a coffee shop. The interest rate is 5 percent for both the bank loan and her personal savings. Her opportunity cost of capital is $250.

Accepted Answer

A) True 
 B)False

Question 8

Briefly describe why measuring a firm's costs is more complicated than measuring its revenues.

Accepted Answer

A firm's revenues can be calculated by m

Question 9

Table 13-18  
-Refer to Table 13-18. What is the total output of five workers?

Accepted Answer

Total output of four workers =

Question 10

Figure 13-2  
-Refer to Figure 13-2. As the number of workers increases,

Accepted Answer

A)  marginal product decreases. 
B)  total output decreases. 
C)  marginal product increases but at a decreasing rate. 
D)  Both a and b are correct. 
A)  marginal product decreases. 
B)  total output decreases. 
C)  marginal product increases but at a decreasing rate. 
D)  Both a and b are correct.

Question 11

The marginal product of labor is equal to the

Accepted Answer

A)  incremental cost associated with a one unit increase in labor. 
B)  incremental profit associated with a one unit increase in labor. 
C)  increase in labor necessary to generate a one unit increase in output. 
D)  increase in output obtained from a one unit increase in labor. 
A)  incremental cost associated with a one unit increase in labor. 
B)  incremental profit associated with a one unit increase in labor. 
C)  increase in labor necessary to generate a one unit increase in output. 
D)  increase in output obtained from a one unit increase in labor.

Question 12

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

Accepted Answer

A)  $20 
B)  $40 
C)  $200 
D)  $400 
A)  $20 
B)  $40 
C)  $200 
D)  $400

Question 13

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?

Accepted Answer

A)  $0 
B)  $20,000 
C)  $65,000 
D)  $85,000 
A)  $0 
B)  $20,000 
C)  $65,000 
D)  $85,000

Question 14

Scenario 13-14
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
-Refer to Scenario 13-14. Farmer Brown's production function exhibits

Accepted Answer

A)  increasing marginal product. 
B)  constant marginal product. 
C)  diminishing marginal product. 
D)  The production function is unrelated to the marginal product. 
A)  increasing marginal product. 
B)  constant marginal product. 
C)  diminishing marginal product. 
D)  The production function is unrelated to the marginal product.

Question 15

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 16

Figure 13-2  
-Refer to Figure 13-2. As the number of workers increases,

Accepted Answer

A)  total output increases but at a decreasing rate. 
B)  marginal product increases but at a decreasing rate. 
C)  marginal product increases at an increasing rate. 
D)  total output decreases. 
A)  total output increases but at a decreasing rate. 
B)  marginal product increases but at a decreasing rate. 
C)  marginal product increases at an increasing rate. 
D)  total output decreases.

Question 17

Table 13-1  
-Refer to Table 13-1. What is total output when 2 workers are hired?

Accepted Answer

A)  15 
B)  45 
C)  75 
D)  120 
A)  15 
B)  45 
C)  75 
D)  120

Question 18

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 19

Profit is defined as total revenue

Accepted Answer

A)  plus total cost. 
B)  times total cost. 
C)  minus total cost. 
D)  divided by total cost. 
A)  plus total cost. 
B)  times total cost. 
C)  minus total cost. 
D)  divided by total cost.

Question 20

An example of an explicit cost would be the wages that a business owner pays her employees.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production

The amount of money that a firm receives from the sale of its output is called

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

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

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

Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings to start a coffee shop. The interest rate is 5 percent for both the bank loan and her personal savings. Her opportunity cost of capital is $250.

Briefly describe why measuring a firm's costs is more complicated than measuring its revenues.

Table 13-18 -Refer to Table 13-18. What is the total output of five workers?

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

The marginal product of labor is equal to the

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?

The length of the short run

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

Table 13-1 -Refer to Table 13-1. What is total output when 2 workers are hired?

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

Profit is defined as total revenue

An example of an explicit cost would be the wages that a business owner pays her employees.

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 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