Question 1

If you paid $100 for a truckload of cabbage on Monday,how much should you be willing to sell it for on Friday,the day before it spoils?

Accepted Answer

A) $100 
B) $100 plus normal accounting profit 
C) $50 because it has lost value since Monday 
D) whatever you can get for it

Question 2

Automobile companies typically make some of the parts for cars (for example,the body and engine)but not others (for example,the tires).Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

Accepted Answer

A) when the specifications (size,style,etc. )of the inputs change frequently 
B) when the inputs being produced have little value 
C) when market prices have not been established for the inputs 
D) when it is relatively easy to measure the quantity and quality of the input

Question 3

If most firms in an industry are earning a 7 percent rate of return on their assets,but your business is earning 9 percent,your rate of economic profit is

Accepted Answer

A) minus 2 percent. 
B) 2 percent. 
C) 9 percent. 
D) 16 percent.

Question 4

The table below presents the schedule of total costs for Sharpie's Pencil Company.

Beyond 110,000 units,the per-unit marginal cost of producing an additional 10,000 pencils is

Accepted Answer

A) 5 cents. 
B) 5.5 cents. 
C) 6 cents. 
D) 7 cents.

Question 5

Use the table below to answer the following question.

What is the marginal cost of producing the third unit of output?

Accepted Answer

A) $22 
B) $23.33 
C) $73.33 
D) This cannot be determined from the data.

Question 6

Use the table below to answer the following question.

What is the marginal cost of producing the third unit of output?

Accepted Answer

A) $20 
B) $44 
C) $70 
D) This cannot be determined from the data.

Question 7

In the short run,a firm will eventually experience rising per-unit costs because of

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) the law of supply. 
D) the law of diminishing returns.

Question 8

Which of the following is most likely to be an implicit cost of production?

Accepted Answer

A) the "competitive rate" salary the owner of the business pays herself for services provided 
B) the property taxes on a building owned by the firm 
C) the rental income foregone because the business owns its building 
D) the interest paid on outstanding loans of the business

Question 9

What amount must be earned to induce investors to continue to supply the funds necessary to maintain a firm's capital assets?

Accepted Answer

A) stockholder equity 
B) the opportunity cost of capital 
C) economic profit 
D) accounting profit

Question 10

As Product Co.adds the first four workers to its production process in the short run,its output rises from 0 to 12 to 25 to 35 to 43.Addition of the fifth worker will most likely lead to an output rate

Accepted Answer

A) greater than 51. 
B) equal to 51. 
C) less than 51. 
D) greater than 51 if the firm experiences diseconomies of scale. 
E) none of the above.

Question 11

In the short run,if average variable costs equal $45,average total costs equal $50,and output equals 100,the total fixed costs will equal

Accepted Answer

A) $5. 
B) $500. 
C) $1,000. 
D) $5,000.

Question 12

As output rises,marginal product eventually diminishes and

Accepted Answer

A) marginal cost increases. 
B) total cost falls. 
C) fixed cost increases. 
D) average product becomes negative.

Question 13

Long-run economies of scale exist when the long-run average cost curve

Accepted Answer

A) rises. 
B) remains constant. 
C) falls. 
D) does not exist.

Question 14

Use the table below to answer the following question.

Average total cost is at a minimum when the output level is

Accepted Answer

A) three units. 
B) four units. 
C) five units. 
D) six units.

Question 15

The most important implicit cost generally omitted from the accounting statement of a firm is the

Accepted Answer

A) rental cost of machinery. 
B) cost of compliance with government regulations. 
C) opportunity cost of the equity capital invested by the owners. 
D) accounting cost incurred as the result of tax compliance.

Question 16

The boss observes that her 10 workers produce 1,000 widgets a day.She concludes that she can employ 20 workers and make 2,000 widgets,30 to make 3,000,or 40 to make 4,000.Explain why this observation is either correct or incorrect.

Accepted Answer

The answer of The boss observes that her 10 workers...

Question 17

Larger firms will often have lower minimum per-unit costs than smaller firms because

Accepted Answer

A) employee shirking is less of a problem. 
B) large-scale output allows greater specialization for both labor and machines in the production process. 
C) mass production techniques,with high setup and development costs,are appropriate only when a small output is planned. 
D) all of the above are correct.

Question 18

Sunk or "historical" costs are costs

Accepted Answer

A) associated with current operational decisions. 
B) that have already been incurred as the result of past decisions. 
C) that add to the firm's marginal costs. 
D) that form the major component of the firm's variable costs.

Question 19

Use the figure to answer the following question(s).
Figure 8-1
 
-What is the firm's total cost in Figure 8-1 when it produces four units?

Accepted Answer

A) 11 
B) 15 
C) 60 
D) 75

Question 20

Figure 8-14
The following question(s)refer(s)to the below cost curves for one very small firm in a large market.
 
-Refer to Figure 8-14.If the firm produces 10 units of output,its total cost is

Accepted Answer

A) 7. 
B) 13. 
C) 70. 
D) 130.

Exam 21: Acosts and the Supply of Goods

If you paid $100 for a truckload of cabbage on Monday,how much should you be willing to sell it for on Friday,the day before it spoils?

Automobile companies typically make some of the parts for cars (for example,the body and engine) but not others (for example,the tires) .Under what conditions would you expect an automobile manufacturer to be most likely to buy inputs from other companies?

If most firms in an industry are earning a 7 percent rate of return on their assets,but your business is earning 9 percent,your rate of economic profit is

The table below presents the schedule of total costs for Sharpie's Pencil Company. Beyond 110,000 units,the per-unit marginal cost of producing an additional 10,000 pencils is

Use the table below to answer the following question. What is the marginal cost of producing the third unit of output?

Use the table below to answer the following question. What is the marginal cost of producing the third unit of output?

In the short run,a firm will eventually experience rising per-unit costs because of

Which of the following is most likely to be an implicit cost of production?

What amount must be earned to induce investors to continue to supply the funds necessary to maintain a firm's capital assets?

As Product Co.adds the first four workers to its production process in the short run,its output rises from 0 to 12 to 25 to 35 to 43.Addition of the fifth worker will most likely lead to an output rate

In the short run,if average variable costs equal $45,average total costs equal $50,and output equals 100,the total fixed costs will equal

As output rises,marginal product eventually diminishes and

Long-run economies of scale exist when the long-run average cost curve

Use the table below to answer the following question. Average total cost is at a minimum when the output level is

The most important implicit cost generally omitted from the accounting statement of a firm is the

The boss observes that her 10 workers produce 1,000 widgets a day.She concludes that she can employ 20 workers and make 2,000 widgets,30 to make 3,000,or 40 to make 4,000.Explain why this observation is either correct or incorrect.

Larger firms will often have lower minimum per-unit costs than smaller firms because

Sunk or "historical" costs are costs

Use the figure to answer the following question(s) . Figure 8-1 -What is the firm's total cost in Figure 8-1 when it produces four units?

Figure 8-14 The following question(s) refer(s) to the below cost curves for one very small firm in a large market. -Refer to Figure 8-14.If the firm produces 10 units of output,its total cost is