Question 1

A production function is a relationship between inputs and

Accepted Answer

A)   quantity of output.
B)   revenue.
C)   costs.
D)   profit.E) A) and D)
F) A) and C)

Question 2

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that marginal cost of the third worker hired is $40,and the average total cost when three workers are hired is $50.What is the total cost of production when three workers are hired?

Accepted Answer

A)   $50
B)   $90
C)   $120
D)   $150E) B) and C)
F) All of the above

Question 3

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output,then at five units of output,average total cost must be rising.

Accepted Answer

A) True 
 B)False

Question 4

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Accepted Answer

A)   the $20 million payment that the firm pays each year for accounting services
B)   the cost of the steel that is used in producing automobiles
C)   the rent that the firm pays for office space in a suburb of St.Louis
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 5

When a firm is experiencing economies of scale,

Accepted Answer

A)   long-run average total cost is minimized.
B)   long-run average total cost is greater than long-run marginal cost.
C)   long-run average total cost is less than long-run marginal cost.
D)   long-run marginal cost is minimized.E) A) and B)
F) B) and D)

Question 6

Economists assume that the typical person who starts her own business does so with the intention of

Accepted Answer

A)   donating the profits from her business to charity.
B)   capturing the highest number of sales in her industry.
C)   maximizing profits.
D)   minimizing costs.E) A) and B)
F) C) and D)

Question 7

The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.

Accepted Answer

A) True 
 B)False

Question 8

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units.Firm A exhibits

Accepted Answer

A)   diseconomies of scale because total cost is rising as output rises.
B)   diseconomies of scale because average total cost is rising as output rises.
C)   economies of scale because total cost is rising as output rises.
D)   economies of scale because average total cost is falling as output rises.E) C) and D)
F) B) and C)

Question 9

Table 13-11
 
-Refer to Table 13-11.What is variable cost when output equals 30 units?

Accepted Answer

A)   $4
B)   $40
C)   $90
D)   $130E) A) and C)
F) A) and B)

Question 10

Which of the following statements is correct?

Accepted Answer

A)   Opportunity costs equal explicit minus implicit costs.
B)   Economists consider opportunity costs to be included in a firm's total revenues.
C)   Economists consider opportunity costs to be included in a firm's costs of production.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 11

Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own catering business.To invest in her factory,she withdrew $20,000 from her savings,which paid 3 percent interest,and borrowed $30,000 from her uncle,whom she pays 3 percent interest per year.Last year she paid $25,000 for ingredients and had revenue of $60,000.She asked Louis the accountant and Greg the economist to calculate her profit for her.

Accepted Answer

A)   Louis says her costs are $25,900,and Greg says her costs are $66,500.
B)   Louis says her costs are $25,000,and Greg says her costs are $65,000.
C)   Louis says her profit is $66,500,and Greg says her costs are $66,500.
D)   Louis says her profit is $75,000,and Greg says her costs are $41,500.E) None of the above
F) B) and C)

Question 12

When marginal cost is less than average total cost,

Accepted Answer

A)   marginal cost must be falling.
B)   average variable cost must be falling.
C)   average total cost is falling.
D)   average total cost is rising.E) A) and B)
F) B) and C)

Question 13

Table 13-7
 
-Refer to Table 13-7.The average fixed cost of producing five widgets is

Accepted Answer

A)   $1.00.
B)   $2.00.
C)   $3.00.
D)   $5.00.E) A) and B)
F) A) and C)

Question 14

Total revenue minus only implicit costs is called

Accepted Answer

A)   accounting profit.
B)   economic profit.
C)   opportunity cost.
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 15

Table 13-10
Jimmy's Gigaplots Factory
 
-Refer to Table 13-10.What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Accepted Answer

A)   $2.12
B)   $3.13
C)   $20.00
D)   $24.37E) A) and B)
F) B) and C)

Question 16

Scenario 13-4
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 13-4.What are Wanda's explicit costs per glass?

Accepted Answer

A)   $0.18
B)   $0.10
C)   $0.08
D)   $0.02E) B) and C)
F) A) and D)

Question 17

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9.At output levels greater than N,the firm experiences

Accepted Answer

A)   economies of scale.
B)   constant returns to scale.
C)   diseconomies of scale.
D)   minimum efficient scale.E) B) and C)
F) None of the above

Question 18

Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"

Accepted Answer

A)   variable cost
B)   average variable cost
C)   average total cost
D)   marginal costE) B) and D)
F) All of the above

Question 19

Katherine gives piano lessons for $15 per hour.She also grows flowers,which she arranges and sells at the local farmer's market.One day she spends 5 hours planting $50 worth of seeds in her garden.Once the seeds have grown into flowers,she can sell them for $150 at the farmer's market.Which of the following statements is correct regarding Katherine's profits from selling flowers?

Accepted Answer

A)   Katherine's accounting profits are $100,and her economic profits are $25.
B)   Katherine's accounting profits are $100,and her economic profits are $75.
C)   Katherine's accounting profits are $25,and her economic profits are $100.
D)   Katherine's accounting profits are $75,and her economic profits are $125.E) B) and D)
F) A) and B)

Question 20

Variable cost divided by quantity produced is

Accepted Answer

A)   average total cost.
B)   marginal cost.
C)   profit.
D)   None of the above is correct.E) All of the above
F) A) and B)

Exam 13: The Costs of Production

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.At output levels greater than N,the firm experiences

Correct Answer
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Table 13-11 -Refer to Table 13-11.What is variable cost when output equals 30 units?

Correct Answer
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In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units.Firm A exhibits

Correct Answer
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A production function is a relationship between inputs and

Correct Answer
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Correct Answer
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When a firm is experiencing economies of scale,

Correct Answer
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Table 13-10 Jimmy's Gigaplots Factory -Refer to Table 13-10.What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Correct Answer
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Total revenue minus only implicit costs is called

Correct Answer
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Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"

Correct Answer
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Economists assume that the typical person who starts her own business does so with the intention of

Correct Answer
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The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.

Correct Answer
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Table 13-7 -Refer to Table 13-7.The average fixed cost of producing five widgets is

Correct Answer
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Which of the following statements is correct?

Correct Answer
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If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output,then at five units of output,average total cost must be rising.

Correct Answer
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For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Correct Answer
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When marginal cost is less than average total cost,

Correct Answer
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Variable cost divided by quantity produced is

Correct Answer
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Exam 13: The Costs of Production

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.At output levels greater than N,the firm experiences

Correct AnswerverifiedShow Answer

Table 13-11 -Refer to Table 13-11.What is variable cost when output equals 30 units?

Correct AnswerverifiedShow Answer

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units.Firm A exhibits

Correct AnswerverifiedShow Answer

A production function is a relationship between inputs and

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a firm is experiencing economies of scale,

Correct AnswerverifiedShow Answer

Table 13-10 Jimmy's Gigaplots Factory -Refer to Table 13-10.What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Correct AnswerverifiedShow Answer

Total revenue minus only implicit costs is called

Correct AnswerverifiedShow Answer

Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economists assume that the typical person who starts her own business does so with the intention of

Correct AnswerverifiedShow Answer

The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.

Correct AnswerverifiedShow Answer

Table 13-7 -Refer to Table 13-7.The average fixed cost of producing five widgets is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output,then at five units of output,average total cost must be rising.

Correct AnswerverifiedShow Answer

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When marginal cost is less than average total cost,

Correct AnswerverifiedShow Answer

Variable cost divided by quantity produced is

Correct AnswerverifiedShow Answer

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