Question 1

A change in a variable cost causes a parallel upward shift in the marginal cost curve.

Accepted Answer

A) True 
 B)False  False

Question 2

Costs that are independent of the firm's level of output are called

Accepted Answer

A)  fixed costs. 
B)  marginal costs. 
C)  opportunity costs. 
D)  sunk costs. 
A)  fixed costs. 
B)  marginal costs. 
C)  opportunity costs. 
D)  sunk costs. A

Question 3

A firm is defined in Economics as

Accepted Answer

A)  a corporation that creates demand for the goods it produces. 
B)  an entity that produces and sells goods that individuals demand. 
C)  an individual or group of individuals providing public services at no charge. 
D)  any group of individuals seeking to increase their income. 
A)  a corporation that creates demand for the goods it produces. 
B)  an entity that produces and sells goods that individuals demand. 
C)  an individual or group of individuals providing public services at no charge. 
D)  any group of individuals seeking to increase their income. B

Question 4

Marginal benefit is defined as

Accepted Answer

A)  the net gain from a particular level of an activity. 
B)  the additional benefit gained from the last unit of an activity. 
C)  the difference between total benefits and total costs of a particular level of an activity. 
D)  the difference between variable costs and fixed costs. 
A)  the net gain from a particular level of an activity. 
B)  the additional benefit gained from the last unit of an activity. 
C)  the difference between total benefits and total costs of a particular level of an activity. 
D)  the difference between variable costs and fixed costs.

Question 5

Define the terms marginal revenue and marginal cost.What action should a firm take if its marginal revenue exceeds its marginal cost? Explain.

Accepted Answer

Marginal revenue is the change in total

Question 6

When should a firm increase its production?

Accepted Answer

A)  When it is earning a positive profit. 
B)  When its revenues are too low to cover the firm's fixed costs. 
C)  When there is a fall in the price of its product. 
D)  When its marginal revenue exceeds its marginal cost. 
A)  When it is earning a positive profit. 
B)  When its revenues are too low to cover the firm's fixed costs. 
C)  When there is a fall in the price of its product. 
D)  When its marginal revenue exceeds its marginal cost.

Question 7

Marginal Cost measures the slope of the total cost and total variable cost curves.

Accepted Answer

A) True 
 B)False

Question 8

Marginal Cost of Production

The following questions refer to the following table which shows a firm's marginal cost of production.
 
-Refer to Marginal Cost of Production.Suppose the firm has $20 in fixed costs,and demand for the firm's product is horizontal at a price of $24 per unit.What is the firm's maximum profit?

Accepted Answer

A)  $21. 
B)  $24. 
C)  $71. 
D)  $91. 
A)  $21. 
B)  $24. 
C)  $71. 
D)  $91.

Question 9

A firm would find it profitable to increase its production when

Accepted Answer

A)  its marginal revenue exceeds its marginal cost. 
B)  its fixed costs decrease. 
C)  higher resource costs raise its marginal costs. 
D)  new competitors reduce the demand for the firm's product. 
A)  its marginal revenue exceeds its marginal cost. 
B)  its fixed costs decrease. 
C)  higher resource costs raise its marginal costs. 
D)  new competitors reduce the demand for the firm's product.

Question 10

Total cost and marginal cost can both be plotted on the same graph since both include a measure of quantity.

Accepted Answer

A) True 
 B)False

Question 11

Higher fixed costs may cause a firm to shut down its operations but will not otherwise affect its production and pricing decisions.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would not increase the price of books?

Accepted Answer

A)  A new literacy program that encourages reading. 
B)  A $10,000 permission fee paid for the right to reprint an author's work. 
C)  An increase in the price of the ink used to print the books. 
D)  Higher costs for the glycerin used to make the glue with which the books are bound. 
A)  A new literacy program that encourages reading. 
B)  A $10,000 permission fee paid for the right to reprint an author's work. 
C)  An increase in the price of the ink used to print the books. 
D)  Higher costs for the glycerin used to make the glue with which the books are bound.

Question 13

Demand and Total Cost of Production

The following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production.
 
-Refer to Demand and Total Cost of Production.The marginal cost of producing the second unit is

Accepted Answer

A)  $4 per unit. 
B)  $7 per unit. 
C)  $11 per unit. 
D)  $15 per unit. 
A)  $4 per unit. 
B)  $7 per unit. 
C)  $11 per unit. 
D)  $15 per unit.

Question 14

As more of an activity is undertaken,it is reasonable to assume that

Accepted Answer

A)  the total benefits will decline. 
B)  the marginal benefits will decline. 
C)  the fixed costs will decline. 
D)  the marginal benefits will increase. 
A)  the total benefits will decline. 
B)  the marginal benefits will decline. 
C)  the fixed costs will decline. 
D)  the marginal benefits will increase.

Question 15

Marginal Cost of Production

The following questions refer to the following table which shows a firm's marginal cost of production.
 
-Refer to Marginal Cost of Production.Suppose demand for the firm's product is horizontal at a price of $24 per unit.How much output should the firm produce in order to maximize its profit?

Accepted Answer

A)  3 units. 
B)  4 units. 
C)  6 units. 
D)  7 units. 
A)  3 units. 
B)  4 units. 
C)  6 units. 
D)  7 units.

Question 16

What is the marginal cost of producing a sixth unit of output?

Accepted Answer

A)  $29. 
B)  $92. 
C)  $100. 
D)  Cannot be determined with the information available. 
A)  $29. 
B)  $92. 
C)  $100. 
D)  Cannot be determined with the information available.

Question 17

Marginal Cost of Production

The following questions refer to the following table which shows a firm's marginal cost of production.
 
-Refer to Marginal Cost of Production.If the firm has $20 in fixed costs,producing 3 units generates variable costs of

Accepted Answer

A)  $ 9. 
B)  $13. 
C)  $29. 
D)  $33. 
A)  $ 9. 
B)  $13. 
C)  $29. 
D)  $33.

Question 18

If the total benefits received from drug enforcement exceed its total costs,then the government should expand its drug enforcement activity.

Accepted Answer

A) True 
 B)False

Question 19

A firm will increase its production when

Accepted Answer

A)  its marginal revenue rises. 
B)  its marginal cost rises. 
C)  its fixed costs fall. 
D)  the demand for its product falls. 
A)  its marginal revenue rises. 
B)  its marginal cost rises. 
C)  its fixed costs fall. 
D)  the demand for its product falls.

Question 20

When faced with a rent increase,the firm's best policy is to use a small price increase to compensate for some,but not all,of the loss.

Accepted Answer

A) True 
 B)False

A change in a variable cost causes a parallel upward shift in the marginal cost curve.

Costs that are independent of the firm's level of output are called

A firm is defined in Economics as

Marginal benefit is defined as

Define the terms marginal revenue and marginal cost.What action should a firm take if its marginal revenue exceeds its marginal cost? Explain.

When should a firm increase its production?

Marginal Cost measures the slope of the total cost and total variable cost curves.

A firm would find it profitable to increase its production when

Total cost and marginal cost can both be plotted on the same graph since both include a measure of quantity.

Higher fixed costs may cause a firm to shut down its operations but will not otherwise affect its production and pricing decisions.

Which of the following would not increase the price of books?

Demand and Total Cost of Production The following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production. -Refer to Demand and Total Cost of Production.The marginal cost of producing the second unit is

As more of an activity is undertaken,it is reasonable to assume that

What is the marginal cost of producing a sixth unit of output?

Marginal Cost of Production The following questions refer to the following table which shows a firm's marginal cost of production. -Refer to Marginal Cost of Production.If the firm has $20 in fixed costs,producing 3 units generates variable costs of

If the total benefits received from drug enforcement exceed its total costs,then the government should expand its drug enforcement activity.

A firm will increase its production when

When faced with a rent increase,the firm's best policy is to use a small price increase to compensate for some,but not all,of the loss.

Supply,demand,and Equilibrium

Prices,costs and Gains From Trade

The Behavior of Consumers

Consumers in the Marketplace

Production and Costs

Competition

Welfare Economics and the Gains From Trade

Knowledge and Information

Monopoly

Market Power,collusion,and Oligopoly

The Theory of Games

External Costs and Benefits

Common Property and Public Goods

The Demand for Factors of Production

The Market for Labor

Allocating Goods Over Time

Risk and Uncertainty

What Is Economics

Filters

Exam 5: The Behavior of Firms

A change in a variable cost causes a parallel upward shift in the marginal cost curve.

Costs that are independent of the firm's level of output are called

A firm is defined in Economics as

Marginal benefit is defined as

Define the terms marginal revenue and marginal cost.What action should a firm take if its marginal revenue exceeds its marginal cost? Explain.

When should a firm increase its production?

Marginal Cost measures the slope of the total cost and total variable cost curves.

A firm would find it profitable to increase its production when

Total cost and marginal cost can both be plotted on the same graph since both include a measure of quantity.

Higher fixed costs may cause a firm to shut down its operations but will not otherwise affect its production and pricing decisions.

Which of the following would not increase the price of books?

Demand and Total Cost of Production The following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production. -Refer to Demand and Total Cost of Production.The marginal cost of producing the second unit is

As more of an activity is undertaken,it is reasonable to assume that

What is the marginal cost of producing a sixth unit of output?

Marginal Cost of Production The following questions refer to the following table which shows a firm's marginal cost of production. -Refer to Marginal Cost of Production.If the firm has $20 in fixed costs,producing 3 units generates variable costs of

If the total benefits received from drug enforcement exceed its total costs,then the government should expand its drug enforcement activity.

A firm will increase its production when

When faced with a rent increase,the firm's best policy is to use a small price increase to compensate for some,but not all,of the loss.

Supply,demand,and Equilibrium

Prices,costs and Gains From Trade

The Behavior of Consumers

Consumers in the Marketplace

Production and Costs

Competition

Welfare Economics and the Gains From Trade

Knowledge and Information

Monopoly

Market Power,collusion,and Oligopoly

The Theory of Games

External Costs and Benefits

Common Property and Public Goods

The Demand for Factors of Production

The Market for Labor

Allocating Goods Over Time

Risk and Uncertainty

What Is Economics

Filters