Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of an implicit cost?

Accepted Answer

A)  salaries paid to owners who work for the firm 
B)  interest on money borrowed to finance equipment purchases 
C)  cash payments for raw materials 
D)  foregone rent on office space owned and used by the firm 
A)  salaries paid to owners who work for the firm 
B)  interest on money borrowed to finance equipment purchases 
C)  cash payments for raw materials 
D)  foregone rent on office space owned and used by the firm

Question 3

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accepted Answer

A) True 
 B)False

Question 4

Figure 13-3  
-Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function (not pictured)?

Accepted Answer

A)  Output increases at a decreasing rate with additional units of input. 
B)  Output increases at an increasing rate with additional units of input. 
C)  Output decreases at a decreasing rate with additional units of input. 
D)  Output decreases at an increasing rate with additional units of input. 
A)  Output increases at a decreasing rate with additional units of input. 
B)  Output increases at an increasing rate with additional units of input. 
C)  Output decreases at a decreasing rate with additional units of input. 
D)  Output decreases at an increasing rate with additional units of input.

Question 5

In the short run, if a firm produces nothing, total costs are zero.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 13-22
Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair coloring and other chemicals, etc.), and $50,000 on equipment (mirrors, chairs, scissors, curling irons, etc.), including maintenance. The owner could have earned $50,000 working at another salon.
-Refer to Scenario 13-22. What is the accounting profit for the hair styling salon?

Accepted Answer

Accounting profit = Total reve

Question 7

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

Accepted Answer

A) True 
 B)False

Question 8

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Accepted Answer

A)  The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. 
B)  The farmer is able to produce 5,400 bushels of wheat when he hires 4 workers. 
C)  The farmer is able to produce 5,200 bushels of wheat when he hires 4 workers. 
D)  Any of the above could be correct. 
A)  The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. 
B)  The farmer is able to produce 5,400 bushels of wheat when he hires 4 workers. 
C)  The farmer is able to produce 5,200 bushels of wheat when he hires 4 workers. 
D)  Any of the above could be correct.

Question 9

The things that must be forgone to acquire a good are called

Accepted Answer

A)  implicit costs. 
B)  opportunity costs. 
C)  explicit costs. 
D)  accounting costs. 
A)  implicit costs. 
B)  opportunity costs. 
C)  explicit costs. 
D)  accounting costs.

Question 10

According to the mathematical laws that govern the relationship between average total cost and marginal cost, where must these two curves intersect?

Accepted Answer

The two curves will

Question 11

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

Accepted Answer

A)  The cost of something is what you give up to get it. 
B)  A country's standard of living depends on its ability to produce goods and services. 
C)  Prices rise when the government prints too much money. 
D)  Governments can sometimes improve market outcomes. 
A)  The cost of something is what you give up to get it. 
B)  A country's standard of living depends on its ability to produce goods and services. 
C)  Prices rise when the government prints too much money. 
D)  Governments can sometimes improve market outcomes.

Question 12

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 total accounting profits?

Accepted Answer

A)  $150 
B)  $126 
C)  $96 
D)  $24 
A)  $150 
B)  $126 
C)  $96 
D)  $24

Question 13

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

Accepted Answer

A)  55 bouquets 
B)  35 bouquets 
C)  22.5 bouquets 
D)  15 bouquets 
A)  55 bouquets 
B)  35 bouquets 
C)  22.5 bouquets 
D)  15 bouquets

Question 14

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

Accepted Answer

Total output of four workers =

Question 15

Table 13-19  
-Refer to Table 13-19. What is the average fixed cost of producing 430 units of output?

Accepted Answer

AFC = FC/Q

Question 16

Describe the relationship between average variable cost and marginal cost.

Accepted Answer

If marginal cost (MC) is greater than av

Question 17

Bob Edwards owns a bagel shop. Bob hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced. The results indicate a U-shaped average total cost curve. Bob's economist explains that ATC is U-shaped for two reasons. The first is the existence of diminishing marginal product, which causes it to rise. What would be the second reason? Assume that the marginal cost curve is linear. (Hint: The second reason relates to average fixed cost)

Accepted Answer

Average fixed cost always decl

Question 18

Economic profit is equal to total revenue minus the

Accepted Answer

A)  explicit cost of producing goods and services. 
B)  opportunity cost of producing goods and services. 
C)  accounting cost of producing goods and services. 
D)  implicit cost of producing goods and services. 
A)  explicit cost of producing goods and services. 
B)  opportunity cost of producing goods and services. 
C)  accounting cost of producing goods and services. 
D)  implicit cost of producing goods and services.

Question 19

Total revenue equals

Accepted Answer

A)  price x quantity. 
B)  price/quantity. 
C)  (price x quantity) - total cost. 
D)  output - input. 
A)  price x quantity. 
B)  price/quantity. 
C)  (price x quantity) - total cost. 
D)  output - input.

Question 20

When a factory is operating in the short run,

Accepted Answer

A)  it cannot alter variable costs. 
B)  total cost and variable cost are usually the same. 
C)  average fixed cost rises as output increases. 
D)  it cannot adjust the quantity of fixed inputs. 
A)  it cannot alter variable costs. 
B)  total cost and variable cost are usually the same. 
C)  average fixed cost rises as output increases. 
D)  it cannot adjust the quantity of fixed inputs.

Exam 13: The Costs of Production

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

Which of the following is an example of an implicit cost?

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Figure 13-3 -Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function (not pictured)?

In the short run, if a firm produces nothing, total costs are zero.

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The things that must be forgone to acquire a good are called

According to the mathematical laws that govern the relationship between average total cost and marginal cost, where must these two curves intersect?

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

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

Table 13-19 -Refer to Table 13-19. What is the average fixed cost of producing 430 units of output?

Describe the relationship between average variable cost and marginal cost.

Economic profit is equal to total revenue minus the

Total revenue equals

When a factory is operating in the short run,

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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