Question 1

Which of the following statements is correct?

Accepted Answer

A)  Assuming that explicit costs are positive, economic profit is greater than accounting profit. 
B)  Assuming that implicit costs are positive, accounting profit is greater than economic profit. 
C)  Assuming that explicit costs are positive, accounting profit is equal to economic profit. 
D)  Assuming that implicit costs are positive, economic profit is positive. 
A)  Assuming that explicit costs are positive, economic profit is greater than accounting profit. 
B)  Assuming that implicit costs are positive, accounting profit is greater than economic profit. 
C)  Assuming that explicit costs are positive, accounting profit is equal to economic profit. 
D)  Assuming that implicit costs are positive, economic profit is positive.

Question 2

Table 13-18  
-Refer to Table 13-18. What is the shape of the average-total-cost curve?

Accepted Answer

ATC = TC/Q, where TC is graphed on the v

Question 3

Scenario 13-1
Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

Accepted Answer

A)  $3,000 
B)  $6,000 
C)  $15,000 
D)  $18,000 
A)  $3,000 
B)  $6,000 
C)  $15,000 
D)  $18,000

Question 4

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 5, Q = 125) and (L = 6, Q = 152). Then the marginal product of the 6th worker is

Accepted Answer

A)  25 units of output. 
B)  27 units of output. 
C)  37 units of output. 
D)  162 units of output. 
A)  25 units of output. 
B)  27 units of output. 
C)  37 units of output. 
D)  162 units of output.

Question 5

In the short run, a firm that produces and sells house paint can adjust

Accepted Answer

A)  where to produce along its long-run average-total-cost curve. 
B)  the size of its factories. 
C)  how many workers to hire. 
D)  All of the above are correct. 
A)  where to produce along its long-run average-total-cost curve. 
B)  the size of its factories. 
C)  how many workers to hire. 
D)  All of the above are correct.

Question 6

Table 13-2  
-Refer to Table 13-2. What is the marginal product of the first 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 7

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 economies of scale.

Accepted Answer

A) True 
 B)False

Question 8

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. An economist would calculate Ziva's total cost of farming to equal

Accepted Answer

A)  $130. 
B)  $250. 
C)  $300. 
D)  $380. 
A)  $130. 
B)  $250. 
C)  $300. 
D)  $380.

Question 9

What might cause economies of scale?

Accepted Answer

specializa

Question 10

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

Accepted Answer

A)  increasing marginal product. 
B)  diminishing marginal product. 
C)  diminishing total product. 
D)  Both b and c are correct. 
A)  increasing marginal product. 
B)  diminishing marginal product. 
C)  diminishing total product. 
D)  Both b and c are correct.

Question 11

Table 13-3  
-Refer to Table 13-3. The marginal product of the fourth worker is

Accepted Answer

A)  10 units. 
B)  60 units. 
C)  230 units. 
D)  240 units. 
A)  10 units. 
B)  60 units. 
C)  230 units. 
D)  240 units.

Question 12

Which is greater -- economic profit or accounting profit?

Accepted Answer

Economic profit = Accounting profit - Im

Question 13

Table 13-19  
-Refer to Table 13-19. What is the shape of this firm's total­cost curve?

Accepted Answer

This firm's total­cost curve would be in

Question 14

A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's

Accepted Answer

A)  total revenue was $3.5 million. 
B)  economic profit was $3.5 million. 
C)  accounting profit was $3.5 million. 
D)  explicit costs were $3.5 million. 
A)  total revenue was $3.5 million. 
B)  economic profit was $3.5 million. 
C)  accounting profit was $3.5 million. 
D)  explicit costs were $3.5 million.

Question 15

What effect, if any, does diminishing marginal product have on the shape of the marginal cost curve?

Accepted Answer

Diminishing marginal

Question 16

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

Accepted Answer

A) True 
 B)False

Question 17

Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's

Accepted Answer

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

Question 18

At low levels of production, the firm

Accepted Answer

A)  benefits from increased size because it can take advantage of greater specialization. 
B)  has the potential for economies of scale. 
C)  is unlikely to experiences acute problems with coordination. 
D)  All of the above are correct. 
A)  benefits from increased size because it can take advantage of greater specialization. 
B)  has the potential for economies of scale. 
C)  is unlikely to experiences acute problems with coordination. 
D)  All of the above are correct.

Question 19

Suppose that for a particular business there are no implicit costs. Then

Accepted Answer

A)  accounting profit will be greater than economic profit. 
B)  accounting profit will be the same as economic profit. 
C)  accounting profit will be less than economic profit. 
D)  the relationship between accounting profit and economic profit cannot be determined without more information. 
A)  accounting profit will be greater than economic profit. 
B)  accounting profit will be the same as economic profit. 
C)  accounting profit will be less than economic profit. 
D)  the relationship between accounting profit and economic profit cannot be determined without more information.

Question 20

Figure 13-3  
-Refer to Figure 13-3. Which of the following is true of the production function (not pictured) that underlies this total cost function?

Accepted Answer

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

Exam 13: The Costs of Production

Which of the following statements is correct?

Table 13-18 -Refer to Table 13-18. What is the shape of the average-total-cost curve?

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 5, Q = 125) and (L = 6, Q = 152). Then the marginal product of the 6th worker is

In the short run, a firm that produces and sells house paint can adjust

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

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 economies of scale.

What might cause economies of scale?

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

Table 13-3 -Refer to Table 13-3. The marginal product of the fourth worker is

Which is greater -- economic profit or accounting profit?

Table 13-19 -Refer to Table 13-19. What is the shape of this firm's total­cost curve?

A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's

What effect, if any, does diminishing marginal product have on the shape of the marginal cost curve?

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's

At low levels of production, the firm

Suppose that for a particular business there are no implicit costs. Then

Figure 13-3 -Refer to Figure 13-3. Which of the following is true of the production function (not pictured) that underlies this total cost function?

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

Table 13-19 -Refer to Table 13-19. What is the shape of this firm's totalcost curve?