Question 1

Which of the following always decreases when output increases?

Accepted Answer

A)  total fixed cost 
B)  marginal cost 
C)  average variable cost 
D)  average fixed cost 
E)  total cost 
A)  total fixed cost 
B)  marginal cost 
C)  average variable cost 
D)  average fixed cost 
E)  total cost

Question 2

Suppose Billy owns a hair salon in Dallas.He has one large hair dryer for which he paid $1,000.If he can sell the dryer one year later for $800,his total economic depreciation equals

Accepted Answer

A)  $1,000. 
B)  $200. 
C)  $800. 
D)  $1,800. 
E)  None of the above answers is correct. 
A)  $1,000. 
B)  $200. 
C)  $800. 
D)  $1,800. 
E)  None of the above answers is correct.

Question 3

The primary goal of a business firm is to

Accepted Answer

A)  promote fairness. 
B)  make a quality product. 
C)  promote workforce job satisfaction. 
D)  maximize profit. 
E)  increase its production. 
A)  promote fairness. 
B)  make a quality product. 
C)  promote workforce job satisfaction. 
D)  maximize profit. 
E)  increase its production.

Question 4

Accountants calculate

Accepted Answer

A)  economic depreciation as part of the firm's cost. 
B)  depreciation using Internal Revenue Service rules. 
C)  the opportunity cost of all the resources the firm uses. 
D)  all the firm's implicit costs but only a few of its explicit costs. 
E)  All of the above answers are correct. 
A)  economic depreciation as part of the firm's cost. 
B)  depreciation using Internal Revenue Service rules. 
C)  the opportunity cost of all the resources the firm uses. 
D)  all the firm's implicit costs but only a few of its explicit costs. 
E)  All of the above answers are correct.

Question 5

If we know the amount of total cost,average total cost,average variable cost,and marginal cost for each level of output,how can we find the level of output where the marginal product is the greatest?

Accepted Answer

A)  It is the output for which the marginal cost equals average variable cost. 
B)  It is the output for which the total cost is maximized. 
C)  It is the output for which the marginal cost is minimized. 
D)  It is the output for which the marginal cost equals average total cost. 
E)  There is no way to find where marginal product is the greatest knowing only cost data. 
A)  It is the output for which the marginal cost equals average variable cost. 
B)  It is the output for which the total cost is maximized. 
C)  It is the output for which the marginal cost is minimized. 
D)  It is the output for which the marginal cost equals average total cost. 
E)  There is no way to find where marginal product is the greatest knowing only cost data.

Question 6

A firm's long-run average cost curve shows the ________ average cost at which it is possible to produce each output when the firm has had ________ time to change both its labor force and its plant.

Accepted Answer

A)  highest; sufficient 
B)  lowest; sufficient 
C)  lowest; insufficient 
D)  highest; insufficient 
E)  average; sufficient 
A)  highest; sufficient 
B)  lowest; sufficient 
C)  lowest; insufficient 
D)  highest; insufficient 
E)  average; sufficient

Question 7

Which of the following is true in the long run?

Accepted Answer

A)  Total cost equals fixed cost. 
B)  Total cost is constant. 
C)  All costs are variable. 
D)  Marginal cost equals zero. 
E)  None of the above is true in the long run. 
A)  Total cost equals fixed cost. 
B)  Total cost is constant. 
C)  All costs are variable. 
D)  Marginal cost equals zero. 
E)  None of the above is true in the long run.

Question 8

When an economist uses the term "cost" referring to a firm,the economist refers to the

Accepted Answer

A)  price of the good to the consumer. 
B)  explicit cost of producing a good or service but not the implicit cost of producing a good or service. 
C)  implicit cost of producing a good or service but not the explicit cost of producing a good or service. 
D)  opportunity cost of producing a good or service, which includes both implicit and explicit cost. 
E)  cost that can be actually verified and measured. 
A)  price of the good to the consumer. 
B)  explicit cost of producing a good or service but not the implicit cost of producing a good or service. 
C)  implicit cost of producing a good or service but not the explicit cost of producing a good or service. 
D)  opportunity cost of producing a good or service, which includes both implicit and explicit cost. 
E)  cost that can be actually verified and measured.

Question 9

-The table above gives costs at Jan's Bike Shop.Unfortunately,Jan's record keeping has been spotty.Each worker is paid $100 a day.Labor costs are the only variable costs of production.What is the total cost of producing 50 bikes?

Accepted Answer

A)  $100 
B)  $200 
C)  $300 
D)  $400 
E)  $500 
A)  $100 
B)  $200 
C)  $300 
D)  $400 
E)  $500

Question 10

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

Accepted Answer

A)  Labor's marginal product has increased. 
B)  Diseconomies of scale were absent in the larger plant. 
C)  The firm's scale initially was so large that it experienced diseconomies of scale. 
D)  The firm's scale initially was too small to experience economies of scale. 
E)  Its long-run marginal cost was smaller with the larger plant than with the smaller plant. 
A)  Labor's marginal product has increased. 
B)  Diseconomies of scale were absent in the larger plant. 
C)  The firm's scale initially was so large that it experienced diseconomies of scale. 
D)  The firm's scale initially was too small to experience economies of scale. 
E)  Its long-run marginal cost was smaller with the larger plant than with the smaller plant.

Question 11

Chuck owns a factory that produces leather footballs.His total fixed cost equaled $86,000 last year.His total cost equaled $286,000 last year.Hence Chuck's

Accepted Answer

A)  total variable cost was zero. 
B)  incurred an economic loss. 
C)  total variable cost equaled $200,000. 
D)  total variable cost equaled $372,000. 
E)  None of the above answers is correct. 
A)  total variable cost was zero. 
B)  incurred an economic loss. 
C)  total variable cost equaled $200,000. 
D)  total variable cost equaled $372,000. 
E)  None of the above answers is correct.

Question 12

The short run is a time period during which

Accepted Answer

A)  some of the firm's resources are fixed. 
B)  all of the firm's resources are fixed. 
C)  all of the firm's resources are variable. 
D)  the fixed cost equals zero. 
E)  the firm cannot increase its output. 
A)  some of the firm's resources are fixed. 
B)  all of the firm's resources are fixed. 
C)  all of the firm's resources are variable. 
D)  the fixed cost equals zero. 
E)  the firm cannot increase its output.

Question 13

-The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table.Based on the table,the marginal cost of producing the fourth gallon of ice cream is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $5. 
D)  $8. 
E)  $32. 
A)  $2. 
B)  $3. 
C)  $5. 
D)  $8. 
E)  $32.

Question 14

The figure above shows some of a firm's cost curves.
-Based on the figure above,curve A is the firm's

Accepted Answer

A)  marginal cost curve. 
B)  total cost curve. 
C)  average total cost curve. 
D)  total variable cost curve. 
E)  total fixed cost curve. 
A)  marginal cost curve. 
B)  total cost curve. 
C)  average total cost curve. 
D)  total variable cost curve. 
E)  total fixed cost curve.

Question 15

Average total cost equals

Accepted Answer

A)  marginal cost divided by output. 
B)  average fixed cost plus average variable cost. 
C)  total fixed cost plus total variable cost. 
D)  marginal cost plus opportunity cost. 
E)  marginal cost multiplied by the quantity of output. 
A)  marginal cost divided by output. 
B)  average fixed cost plus average variable cost. 
C)  total fixed cost plus total variable cost. 
D)  marginal cost plus opportunity cost. 
E)  marginal cost multiplied by the quantity of output.

Question 16

Decreasing marginal returns

Accepted Answer

A)  can be avoided if a firm watches costs. 
B)  affect all firms, but at different production levels. 
C)  affect all firms at the same level of production. 
D)  disappear when the firm produces a large enough level of output. 
E)  mean that the average product of labor starts as a negative number and then becomes positive. 
A)  can be avoided if a firm watches costs. 
B)  affect all firms, but at different production levels. 
C)  affect all firms at the same level of production. 
D)  disappear when the firm produces a large enough level of output. 
E)  mean that the average product of labor starts as a negative number and then becomes positive.

Question 17

Bill is an economics professor who earns $37,000 teaching but decides to leave and fulfill his dream of catering barbecues.During his year of barbecuing he earned total revenue of $60,000.He spent $30,000 on food and supplies.He also paid his wife $10,000 to help serve food.The normal profit for an entrepreneur running a barbecue business is $3,000.Bill also rented an industrial grill/fry truck for $12,000.Bill had an economic

Accepted Answer

A)  profit of $20,000. 
B)  loss of -$32,000. 
C)  loss of -$42,000. 
D)  profit of $28,000. 
E)  profit of zero. 
A)  profit of $20,000. 
B)  loss of -$32,000. 
C)  loss of -$42,000. 
D)  profit of $28,000. 
E)  profit of zero.

Question 18

The total product curve shows the relationship between total product and

Accepted Answer

A)  cost. 
B)  the quantity of labor. 
C)  the average product. 
D)  the marginal product. 
E)  the marginal cost. 
A)  cost. 
B)  the quantity of labor. 
C)  the average product. 
D)  the marginal product. 
E)  the marginal cost.

Question 19

-The above figure represents the average total cost curves of a wheat farmer.
a.Which average total cost curve has the lowest average total cost of producing 30,000 bushels of wheat?
b.Over what range of output is the farmer experiencing economies of scale?
c.Over what range of output is the farmer experiencing diseconomies of scale?
d.Which average total cost curve has the lowest possible average cost of production?
e.Which average total cost curve represents the largest plant?

Accepted Answer

a.ATC? has the lowest average total cost

Question 20

The marginal product of labor is

Accepted Answer

A)  total product divided by labor. 
B)  the change in total product divided by the increase in labor. 
C)  a measure of labor. 
D)  output that does not meet quality specifications. 
E)  total product minus the quantity of labor. 
A)  total product divided by labor. 
B)  the change in total product divided by the increase in labor. 
C)  a measure of labor. 
D)  output that does not meet quality specifications. 
E)  total product minus the quantity of labor.

Which of the following always decreases when output increases?

Suppose Billy owns a hair salon in Dallas.He has one large hair dryer for which he paid $1,000.If he can sell the dryer one year later for $800,his total economic depreciation equals

The primary goal of a business firm is to

Accountants calculate

If we know the amount of total cost,average total cost,average variable cost,and marginal cost for each level of output,how can we find the level of output where the marginal product is the greatest?

A firm's long-run average cost curve shows the average cost at which it is possible to produce each output when the firm has had time to change both its labor force and its plant.

Which of the following is true in the long run?

When an economist uses the term "cost" referring to a firm,the economist refers to the

-The table above gives costs at Jan's Bike Shop.Unfortunately,Jan's record keeping has been spotty.Each worker is paid $100 a day.Labor costs are the only variable costs of production.What is the total cost of producing 50 bikes?

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

Chuck owns a factory that produces leather footballs.His total fixed cost equaled $86,000 last year.His total cost equaled $286,000 last year.Hence Chuck's

The short run is a time period during which

-The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table.Based on the table,the marginal cost of producing the fourth gallon of ice cream is

The figure above shows some of a firm's cost curves. -Based on the figure above,curve A is the firm's

Average total cost equals

Decreasing marginal returns

The total product curve shows the relationship between total product and

The marginal product of labor is

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 14: Production and Cost

Which of the following always decreases when output increases?

Suppose Billy owns a hair salon in Dallas.He has one large hair dryer for which he paid $1,000.If he can sell the dryer one year later for $800,his total economic depreciation equals

The primary goal of a business firm is to

Accountants calculate

If we know the amount of total cost,average total cost,average variable cost,and marginal cost for each level of output,how can we find the level of output where the marginal product is the greatest?

A firm's long-run average cost curve shows the ________ average cost at which it is possible to produce each output when the firm has had ________ time to change both its labor force and its plant.

Which of the following is true in the long run?

When an economist uses the term "cost" referring to a firm,the economist refers to the

-The table above gives costs at Jan's Bike Shop.Unfortunately,Jan's record keeping has been spotty.Each worker is paid $100 a day.Labor costs are the only variable costs of production.What is the total cost of producing 50 bikes?

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

Chuck owns a factory that produces leather footballs.His total fixed cost equaled $86,000 last year.His total cost equaled $286,000 last year.Hence Chuck's

The short run is a time period during which

-The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table.Based on the table,the marginal cost of producing the fourth gallon of ice cream is

The figure above shows some of a firm's cost curves. -Based on the figure above,curve A is the firm's

Average total cost equals

Decreasing marginal returns

The total product curve shows the relationship between total product and

The marginal product of labor is

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

A firm's long-run average cost curve shows the average cost at which it is possible to produce each output when the firm has had time to change both its labor force and its plant.