Question 1

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements? shine business

Accepted Answer

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

Question 2

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.

Accepted Answer

A) True 
 B)False

Question 3

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000. Which of the following statements is correct?

Accepted Answer

A)  Bev's total explicit costs are $25,300. 
B)  Bev's total implicit costs are $300. 
C)  Bev's accounting profits exceed her economic profits by $300. 
D)  Bev's economic profit is $4,700. 
A)  Bev's total explicit costs are $25,300. 
B)  Bev's total implicit costs are $300. 
C)  Bev's accounting profits exceed her economic profits by $300. 
D)  Bev's economic profit is $4,700.

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 accounting 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

Explicit costs

Accepted Answer

A)  require an outlay of money by the firm. 
B)  include all of the firm's opportunity costs. 
C)  include the value of the business owner's time. 
D)  Both b and c are correct. 
A)  require an outlay of money by the firm. 
B)  include all of the firm's opportunity costs. 
C)  include the value of the business owner's time. 
D)  Both b and c are correct.

Question 6

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. 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 7

When a firm's long­run average total costs do not vary as output increases, the firm exhibits

Accepted Answer

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

Question 8

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

Accepted Answer

A)  diseconomies of scale because total cost is rising as output rises. 
B)  diseconomies of scale because average total cost is rising as output rises. 
C)  economies of scale because total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises. 
A)  diseconomies of scale because total cost is rising as output rises. 
B)  diseconomies of scale because average total cost is rising as output rises. 
C)  economies of scale because total cost is rising as output rises. 
D)  economies of scale because average total cost is falling as output rises.

Question 9

Figure 13-10  
-Refer to Figure 13-10. The three average total cost curves on the diagram labeled ATC1, ATC2, and ATC3 most likely correspond to three different

Accepted Answer

A)  time horizons. 
B)  products. 
C)  firms. 
D)  factory sizes. 
A)  time horizons. 
B)  products. 
C)  firms. 
D)  factory sizes.

Question 10

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

Accepted Answer

450 + 50 =

Question 11

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm

Accepted Answer

A)  gets flatter as output increases. 
B)  gets steeper as output increases. 
C)  is constant for all ranges of output. 
D)  is unrelated to the production function. 
A)  gets flatter as output increases. 
B)  gets steeper as output increases. 
C)  is constant for all ranges of output. 
D)  is unrelated to the production function.

Question 12

The total cost to the firm of producing zero units of output is

Accepted Answer

A)  zero in both the short run and the long run. 
B)  its fixed cost in the short run and zero in the long run. 
C)  its fixed cost in both the short run and the long run. 
D)  its variable cost in both the short run and the long run. 
A)  zero in both the short run and the long run. 
B)  its fixed cost in the short run and zero in the long run. 
C)  its fixed cost in both the short run and the long run. 
D)  its variable cost in both the short run and the long run.

Question 13

Figure 13-1  
-Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP1 to TP2?

Accepted Answer

A)  There is less capital equipment available to the firm. 
B)  Labor skills have become rusty and outdated in the firm. 
C)  The firm has developed improved production technology. 
D)  The firm is now receiving a higher price for its product. 
A)  There is less capital equipment available to the firm. 
B)  Labor skills have become rusty and outdated in the firm. 
C)  The firm has developed improved production technology. 
D)  The firm is now receiving a higher price for its product.

Question 14

A firm that wants to achieve economies of scale could do so by

Accepted Answer

A)  assigning limited tasks to its employees, so they can master those tasks. 
B)  employing a smaller number of workers. 
C)  producing a smaller quantity of output. 
D)  producing an output level higher than the efficient scale. 
A)  assigning limited tasks to its employees, so they can master those tasks. 
B)  employing a smaller number of workers. 
C)  producing a smaller quantity of output. 
D)  producing an output level higher than the efficient scale.

Question 15

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Accepted Answer

A) True 
 B)False

Question 16

Figure 13-10  
-Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

Accepted Answer

A)  Q1 to Q2. 
B)  Q2 to Q3. 
C)  Q3 to Q4. 
D)  Q4 to Q5. 
A)  Q1 to Q2. 
B)  Q2 to Q3. 
C)  Q3 to Q4. 
D)  Q4 to Q5.

Question 17

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 accounting profit for the family farm?

Accepted Answer

Accounting profit = Total reve

Question 18

Table 13-17
Consider the following table of long-run total cost for four different firms:  
-Refer to Table 13-17. Which firm has economies of scale over the entire range of output?

Accepted Answer

A)  Firm 1 only 
B)  Firms 1 and 2 only 
C)  Firm 2 only 
D)  Firm 3 only 
A)  Firm 1 only 
B)  Firms 1 and 2 only 
C)  Firm 2 only 
D)  Firm 3 only

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.  
-Refer to Figure 13-9. In the long run, the firm can operate on which of the following average total cost curves?

Accepted Answer

A)  ATCA 
B)  ATCB 
C)  ATCC 
D)  All of the above are correct. 
A)  ATCA 
B)  ATCB 
C)  ATCC 
D)  All of the above are correct.

Exam 13: The Costs of Production

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements? shine business

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.

Explicit costs

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

When a firm's long­run average total costs do not vary as output increases, the firm exhibits

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

Figure 13-10 -Refer to Figure 13-10. The three average total cost curves on the diagram labeled ATC1, ATC2, and ATC3 most likely correspond to three different

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

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm

The total cost to the firm of producing zero units of output is

Figure 13-1 -Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP1 to TP2?

A firm that wants to achieve economies of scale could do so by

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Figure 13-10 -Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has economies of scale over the entire range of output?

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

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. In the long run, the firm can operate on which of the following average total cost curves?

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 an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

When a firm's longrun average total costs do not vary as output increases, the firm exhibits