Question 1

A student might describe information about the costs of production as

Accepted Answer

A)  dry and technical. 
B)  boring. 
C)  crucial to understanding firms and market structures. 
D)  All of the above could be correct. 
A)  dry and technical. 
B)  boring. 
C)  crucial to understanding firms and market structures. 
D)  All of the above could be correct.

Question 2

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 implicit 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 3

Scenario 13-10
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each.
-Refer to Scenario 13-10. An accountant would calculate the total cost for one photo frame to be

Accepted Answer

A)  $10. 
B)  $5. 
C)  $15. 
D)  $25. 
A)  $10. 
B)  $5. 
C)  $15. 
D)  $25.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A)  $300 
B)  $400 
C)  $700 
D)  $1,650 
A)  $300 
B)  $400 
C)  $700 
D)  $1,650

Question 6

Scenario 13-2
Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-2. Suppose Chelsea purchases the factory using her own money. What is Chelsea's annual implicit opportunity cost of purchasing the factory?

Accepted Answer

A)  $2,000 
B)  $3,000 
C)  $4,500 
D)  $5,000 
A)  $2,000 
B)  $3,000 
C)  $4,500 
D)  $5,000

Question 7

Scenario 13-10
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each.
-Refer to Scenario 13-10. An accountant would calculate the total profit for one photo frame to be

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $25.

Question 8

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.  
-Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

Accepted Answer

A)  output levels less than M 
B)  output levels between M and N 
C)  output levels greater than N 
D)  All of the above are correct as long as the firm is operating in the long run. 
A)  output levels less than M 
B)  output levels between M and N 
C)  output levels greater than N 
D)  All of the above are correct as long as the firm is operating in the long run.

Question 9

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 accounting profit from farming equals

Accepted Answer

A)  $-80. 
B)  $130. 
C)  $170. 
D)  $260. 
A)  $-80. 
B)  $130. 
C)  $170. 
D)  $260.

Question 10

Table 13-2  
-Refer to Table 13-2. What is the marginal product of the third 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 11

Table 13-5  
-Refer to Table 13-5. Diminishing marginal product begins with the addition of the

Accepted Answer

A)  second worker. 
B)  third worker. 
C)  fourth worker. 
D)  fifth worker. 
A)  second worker. 
B)  third worker. 
C)  fourth worker. 
D)  fifth worker.

Question 12

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

Accepted Answer

Total output of four workers =

Question 13

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 diseconomies of 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 14

Figure 13-2  
-Refer to Figure 13-2. The graph illustrates a typical production function. Based on its shape, what does the corresponding total cost curve look like?

Accepted Answer

A)  an upward-sloping curve that increases at an increasing rate 
B)  an upward-sloping curve that increases at a decreasing rate 
C)  a downward-sloping curve 
D)  a horizontal straight line 
A)  an upward-sloping curve that increases at an increasing rate 
B)  an upward-sloping curve that increases at a decreasing rate 
C)  a downward-sloping curve 
D)  a horizontal straight line

Question 15

Consider a small family wheat farm. List some examples of explicit costs of farming.

Accepted Answer

seeds, fertilizer, pesticide,

Question 16

Which of the following statements is correct?

Accepted Answer

A)  Opportunity costs equal explicit minus implicit costs. 
B)  Economists consider opportunity costs to be included in a firm's total revenues. 
C)  Economists consider opportunity costs to be included in a firm's costs of production. 
D)  All of the above are correct. 
A)  Opportunity costs equal explicit minus implicit costs. 
B)  Economists consider opportunity costs to be included in a firm's total revenues. 
C)  Economists consider opportunity costs to be included in a firm's costs of production. 
D)  All of the above are correct.

Question 17

Can economic profit ever exceed accounting profit?

Accepted Answer

No. Economic profit = Accounting profit

Question 18

An entrepreneur's motivation to start a business arises from

Accepted Answer

A)  an innate love for the type of business that he or she starts. 
B)  a desire to earn a profit. 
C)  an altruistic desire to provide the world with a good product. 
D)  All of the above could be correct. 
A)  an innate love for the type of business that he or she starts. 
B)  a desire to earn a profit. 
C)  an altruistic desire to provide the world with a good product. 
D)  All of the above could be correct.

Question 19

Scenario 13-12
Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time.
-Refer to Scenario 13-12. Ariana's economic profit for the year was

Accepted Answer

A)  $-394,000. 
B)  $-6,000. 
C)  $3,000. 
D)  $6,000. 
A)  $-394,000. 
B)  $-6,000. 
C)  $3,000. 
D)  $6,000.

Question 20

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 implicit costs will equal

Accepted Answer

A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $165,700. 
A)  $55,200. 
B)  $75,200. 
C)  $80,500. 
D)  $165,700.

Exam 13: The Costs of Production

A student might describe information about the costs of production as

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

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

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

Table 13-5 -Refer to Table 13-5. Diminishing marginal product begins with the addition of the

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

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 diseconomies of scale?

Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical production function. Based on its shape, what does the corresponding total cost curve look like?

Consider a small family wheat farm. List some examples of explicit costs of farming.

Which of the following statements is correct?

Can economic profit ever exceed accounting profit?

An entrepreneur's motivation to start a business arises from

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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