Question 1

Dr.Khan starts his own dental practice after quitting his $150,000 job at The Mall Dental Clinic.His revenues for the first year are $500,000.He paid $90,000 in rent for the dental office,$60,000 for his office manager's salary,$24,000 for the dental hygienist,$150,000 for insurance,and $6,000 for other miscellaneous costs.The normal profit from running his business is $20,000.Which of the following statements is true?

Accepted Answer

A) His accounting profit is $350,000. 
B) His economic profit is $150,000. 
C) His economic profit is zero. 
D) His accounting profit is zero. 
E) None of the above answers is correct.

Question 2

Total cost includes

Accepted Answer

A) the cost of variable resources only. 
B) the cost of fixed resources only. 
C) the cost of both variable and fixed resources. 
D) the cost of neither variable nor fixed resources. 
E) all explicit costs and all the implicit costs that actually must be paid using money.

Question 3

Average total cost equals

Accepted Answer

A) the change in total cost divided by the change in output. 
B) total fixed cost divided by output. 
C) average fixed cost plus average variable cost. 
D) total cost minus total variable cost. 
E) average fixed cost plus average variable cost plus marginal cost.

Question 4

The difference between a firm's total revenue and its total cost is its ________ profit.

Accepted Answer

A) explicit 
B) normal 
C) economic 
D) accounting 
E) excess

Question 5

Jill runs a factory that makes lie detectors in Little Rock,Arkansas.This month,Jill's 34 workers produced 690 machines.Suppose Jill adds one more worker and,as a result,her factory's output increases to 700.Jill's marginal product of labor from the last worker hired equals ________.

Accepted Answer

A) 10 
B) 20 
C) 690 
D) 700 
E) None of the above answers is correct.

Question 6

The U-shape of the average variable,average total,and marginal cost curves reflects

Accepted Answer

A) increasing marginal returns. 
B) decreasing marginal returns. 
C) both increasing and decreasing marginal returns. 
D) decreasing marginal product. 
E) the point that implicit costs become a smaller fraction of total cost as output increases.

Question 7

-The table above shows a total product schedule.Suppose that labor costs $20 per worker and fixed costs are $60.The average total cost of producing 80 units equals ________ per unit.

Accepted Answer

A) $0.75 
B) $1.00 
C) $1.75 
D) $60 
E) $0.25

Question 8

A firm's fundamental goal is

Accepted Answer

A) different for each firm. 
B) to make a quality product. 
C) to maximize profit. 
D) to gain market share. 
E) to decrease its employment of workers in order to cut its costs.

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

Question 10

In the short run,firms increase output

Accepted Answer

A) only by increasing the size of their plant. 
B) only by decreasing the size of their plant. 
C) only by increasing the amount of labor used. 
D) only by decreasing the amount of labor used. 
E) either increasing the amount of labor used or increasing the size of their plant.

Question 11

-The above table gives some production and cost information for Flaming Fernando's,a restaurant that sells Fiery Frijoles.What is the average variable cost of producing 1,000 frijoles?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $3,000 
E) More information is needed to determine the answer.

Question 12

Total cost is equal to the sum of

Accepted Answer

A) total revenue and total cost. 
B) total variable cost and total product. 
C) total variable cost and total fixed cost. 
D) total fixed cost and total product. 
E) the marginal cost plus the total fixed cost plus the total variable cost.

Question 13

A firm increases its output and its average total costs remain unchanged.Is the firm experiencing increasing returns to scale,constant returns to scale,or decreasing returns to scale?

Accepted Answer

The answer of A firm increases its output and its...

Question 14

When the marginal product of an additional worker is less than the marginal product of the previous worker,there are ________ returns to labor.

Accepted Answer

A) increasing total 
B) decreasing total 
C) increasing marginal 
D) decreasing marginal 
E) constant average

Question 15

The change in cost that results from a one-unit increase in output is called the

Accepted Answer

A) average fixed cost. 
B) per-unit variable cost. 
C) per-unit total cost. 
D) marginal cost. 
E) average cost change.

Question 16

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.

Question 17

-The table above shows the total product schedule for Rick's Lawn Service,a yard care company.When does the average product of labor equal the marginal product of labor?

Accepted Answer

A) between the 4th and 5th workers 
B) at the 5th worker 
C) between the 5th and 6th workers 
D) between the 6th and 7th workers 
E) between 0 workers and the 3rd worker

Question 18

Scott owns a law-enforcement training operation in Boise,Idaho.He employs three trainers.The last trainer Scott hired increased Scott's total cost by $466 per week even though the trainer brought in only one new client.Hence Scott's

Accepted Answer

A) total variable cost equals $466. 
B) marginal cost of the last client equals $466. 
C) marginal cost of the last worker equals $233. 
D) total variable cost equals $233. 
E) total fixed cost of the last client equals $466.

Question 19

-The table above shows the total product schedule for Rick's Lawn Service,a yard care company.Increasing marginal returns

Accepted Answer

A) end when the fourth worker is hired. 
B) occur at all levels of employment. 
C) occur as long as output increases. 
D) end when the second worker is hired. 
E) never occur.

Question 20

When Ford hires Ernst and Young Consulting to help Ford redesign its marketing,Ford's payment to Ernst and Young is classified as

Accepted Answer

A) an explicit cost. 
B) depreciation. 
C) an implicit cost. 
D) normal profit. 
E) economic profit.

Exam 10: Production and Cost