Question 1

For a firm, the relationship between the quantity of inputs and quantity of output is called the

Accepted Answer

A)  profit function. 
B)  production function. 
C)  total-cost function. 
D)  quantity function. 
A)  profit function. 
B)  production function. 
C)  total-cost function. 
D)  quantity function.

Question 2

Scenario 13-4
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%.
-Refer to Scenario 13-4. Abdul's explicit cost of capital is

Accepted Answer

A)  $8,000. 
B)  $4,000. 
C)  $2,000. 
D)  $1,000. 
A)  $8,000. 
B)  $4,000. 
C)  $2,000. 
D)  $1,000.

Question 3

Which of the following statements is not correct?

Accepted Answer

A)  In the long run, there are no fixed costs. 
B)  Marginal cost is independent of fixed costs. 
C)  Economies of scale is a short-run concept. 
D)  Diminishing marginal product explains increasing marginal cost. 
A)  In the long run, there are no fixed costs. 
B)  Marginal cost is independent of fixed costs. 
C)  Economies of scale is a short-run concept. 
D)  Diminishing marginal product explains increasing marginal cost.

Question 4

Total revenue minus both explicit and implicit costs is called

Accepted Answer

A)  accounting profit. 
B)  economic profit. 
C)  average total cost. 
D)  total cost. 
A)  accounting profit. 
B)  economic profit. 
C)  average total cost. 
D)  total cost.

Question 5

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 could earn $6,000 per year preparing taxes. In calculating the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as part of her business's

Accepted Answer

A)  total revenue. 
B)  explicit costs. 
C)  implicit costs. 
D)  marginal costs. 
A)  total revenue. 
B)  explicit costs. 
C)  implicit costs. 
D)  marginal costs.

Question 6

Table 13-20
Listed in the table are the long-run total costs for three different firms.  
-Refer to Table 13-20. Firm B is experiencing diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 7

Accounting profit is greater than or equal to economic profit.

Accepted Answer

A) True 
 B)False

Question 8

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are

Accepted Answer

A)  $100, and her economic profits are $100. 
B)  $100, and her economic profits are $0. 
C)  $0, and her economic profits are $100. 
D)  $0, and her economic profits are $-100. 
A)  $100, and her economic profits are $100. 
B)  $100, and her economic profits are $0. 
C)  $0, and her economic profits are $100. 
D)  $0, and her economic profits are $-100.

Question 9

Figure 13-10  
-Refer to Figure 13-10. The firm experiences economies 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 10

Figure 13-3  
-Refer to Figure 13-3. The changing slope of the total cost curve reflects

Accepted Answer

A)  decreasing average variable cost. 
B)  decreasing average total cost. 
C)  decreasing marginal product. 
D)  increasing fixed cost. 
A)  decreasing average variable cost. 
B)  decreasing average total cost. 
C)  decreasing marginal product. 
D)  increasing fixed cost.

Question 11

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 12

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

Accepted Answer

A)  $150. 
B)  $299.50. 
C)  $300. 
D)  $600. 
A)  $150. 
B)  $299.50. 
C)  $300. 
D)  $600.

Question 13

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

Accepted Answer

A)  an explicit cost. 
B)  an accounting cost 
C)  an implicit cost. 
D)  forgone accounting profit. 
A)  an explicit cost. 
B)  an accounting cost 
C)  an implicit cost. 
D)  forgone accounting profit.

Question 14

Table 13-2  
-Refer to Table 13-2. What is the marginal product of the fourth 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 15

Which of the following would be an example of an implicit cost?

Accepted Answer

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

Question 16

In setting the production level, a firm's cost curves

Accepted Answer

A)  by themselves do not tell us what decisions the firm will make. 
B)  dictate what decisions the firm will make. 
C)  have no bearing on what decisions the firm will make. 
D)  None of the above is correct. 
A)  by themselves do not tell us what decisions the firm will make. 
B)  dictate what decisions the firm will make. 
C)  have no bearing on what decisions the firm will make. 
D)  None of the above is correct.

Question 17

The typical total-cost curve is U-shaped.

Accepted Answer

A) True 
 B)False

Question 18

Table 13-1  
-Refer to Table 13-1. What is total output when 1 worker is hired?

Accepted Answer

A)  10 
B)  30 
C)  45 
D)  75 
A)  10 
B)  30 
C)  45 
D)  75

Question 19

Table 13-20
Listed in the table are the long-run total costs for three different firms.  
-Refer to Table 13-20. Firm B is experiencing constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 20

Marginal costs are costs that do not vary with the quantity of output produced.

Accepted Answer

A) True 
 B)False

Exam 13: The Costs of Production

For a firm, the relationship between the quantity of inputs and quantity of output is called the

Which of the following statements is not correct?

Total revenue minus both explicit and implicit costs is called

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing diseconomies of scale.

Accounting profit is greater than or equal to economic profit.

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

Figure 13-3 -Refer to Figure 13-3. The changing slope of the total cost curve reflects

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

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

Which of the following would be an example of an implicit cost?

In setting the production level, a firm's cost curves

The typical total-cost curve is U-shaped.

Table 13-1 -Refer to Table 13-1. What is total output when 1 worker is hired?

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing constant returns to scale.

Marginal costs are costs that do not vary with the quantity of output produced.

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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