Question 1

If total fixed cost increases, which of the following will NOT change?

Accepted Answer

A)  Average fixed cost 
B)  Marginal cost 
C)  Average total cost 
D)  Total cost 
E)  ALL costs increase when total fixed cost increases. 
A)  Average fixed cost 
B)  Marginal cost 
C)  Average total cost 
D)  Total cost 
E)  ALL costs increase when total fixed cost increases. B

Question 2

Darryl runs a sheep station near Broken Hill. The interest on the debt he incurred to buy his sheep station totals $3,000 per year. For Darryl, the interest is

Accepted Answer

A)  part of his economic profit. 
B)  his normal profit. 
C)  an implicit cost. 
D)  his normal cost. 
E)  an explicit cost. 
A)  part of his economic profit. 
B)  his normal profit. 
C)  an implicit cost. 
D)  his normal cost. 
E)  an explicit cost. E

Question 3

The marginal product of labour is the change in

Accepted Answer

A)  average product from employing one more worker. 
B)  total revenue from employing one more worker. 
C)  total cost from employing one more worker. 
D)  total output from employing one more worker. 
E)  total output divided by the change in cost from employing one more worker. 
A)  average product from employing one more worker. 
B)  total revenue from employing one more worker. 
C)  total cost from employing one more worker. 
D)  total output from employing one more worker. 
E)  total output divided by the change in cost from employing one more worker. D

Question 4

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 labour force and its plant.

Accepted Answer

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

Question 5

Economic profit equals total revenue minus total

Accepted Answer

A)  implicit costs. 
B)  accounting costs. 
C)  explicit costs. 
D)  entrepreneur's costs. 
E)  opportunity costs. 
A)  implicit costs. 
B)  accounting costs. 
C)  explicit costs. 
D)  entrepreneur's costs. 
E)  opportunity costs.

Question 6

-Anna owns a dog-grooming salon in Brunswick. The above table has Anna's total product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon. These are her only costs. When Anna has a staff of 2 workers, her total cost equals

Accepted Answer

A)  $300. 
B)  $1,200. 
C)  $600. 
D)  $12.00. 
E)  $10.00. 
A)  $300. 
B)  $1,200. 
C)  $600. 
D)  $12.00. 
E)  $10.00.

Question 7

Suppose a firm's total revenue is $1,000,000. The firm has incurred explicit costs of $750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of normal profit. What is the firm's economic profit?

Accepted Answer

A)  $190,000 
B)  $180,000 
C)  $250,000 
D)  $200,000 
E)  $167,000 
A)  $190,000 
B)  $180,000 
C)  $250,000 
D)  $200,000 
E)  $167,000

Question 8

Jill runs a factory in Canberra that makes lie detectors. This month, Jill's 34 workers produced 680 machines. Jill's average product of labour equalled ________ lie detectors per worker.

Accepted Answer

A)  34 
B)  23 
C)  680 
D)  20 
E)  None of the above answers is correct. 
A)  34 
B)  23 
C)  680 
D)  20 
E)  None of the above answers is correct.

Question 9

Which of the following costs can be positive when output is zero?

Accepted Answer

A)  Marginal cost 
B)  Average variable cost 
C)  Total fixed cost 
D)  Total variable cost 
E)  None of the above because when output is zero there are no costs. 
A)  Marginal cost 
B)  Average variable cost 
C)  Total fixed cost 
D)  Total variable cost 
E)  None of the above because when output is zero there are no costs.

Question 10

If 10 workers can produce 1,500 units of output and 11 workers can produce 1,600 units of output, then the average product of 11 workers is

Accepted Answer

A)  136.4 units. 
B)  145.5 units. 
C)  100 units. 
D)  1,600 units. 
E)  1,500 units. 
A)  136.4 units. 
B)  145.5 units. 
C)  100 units. 
D)  1,600 units. 
E)  1,500 units.

Question 11

-The above table shows the total product schedule for Hair Today, a hair-styling salon. The average product when four workers are hired is

Accepted Answer

A)  15 hair stylings. 
B)  20 hair stylings. 
C)  240 hair stylings. 
D)  10 hair stylings. 
E)  the same as when five workers are hired. 
A)  15 hair stylings. 
B)  20 hair stylings. 
C)  240 hair stylings. 
D)  10 hair stylings. 
E)  the same as when five workers are hired.

Question 12

-Paulette owns a pizza parlour. Her total cost schedule is in the above table. Her marginal cost of producing the fifth pizza is

Accepted Answer

A)  between $10.01 and $14.00. 
B)  between $8.01 and $10.00. 
C)  between $14.01 and $78.00. 
D)  more than $78.01. 
E)  $8. 
A)  between $10.01 and $14.00. 
B)  between $8.01 and $10.00. 
C)  between $14.01 and $78.00. 
D)  more than $78.01. 
E)  $8.

Question 13

Suppose Billy owns a hair salon in Collingwood. 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)  $800. 
B)  $200. 
C)  $1,000. 
D)  $1,800. 
E)  None of the above answers is correct. 
A)  $800. 
B)  $200. 
C)  $1,000. 
D)  $1,800. 
E)  None of the above answers is correct.

Question 14

Decreasing marginal returns occur in the short run as more labour is hired to work in a fixed sized plant because

Accepted Answer

A)  the plant becomes less specialised. 
B)  adding more workers exhausts the possible gains from specialisation. 
C)  the entrepreneur does not know how to manage more workers. 
D)  less efficient and less productive workers are hired. 
E)  each worker will produce more than the worker previously hired. 
A)  the plant becomes less specialised. 
B)  adding more workers exhausts the possible gains from specialisation. 
C)  the entrepreneur does not know how to manage more workers. 
D)  less efficient and less productive workers are hired. 
E)  each worker will produce more than the worker previously hired.

Question 15

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

Accepted Answer

A)  Between the 5th and 6th workers. 
B)  At the 5th worker. 
C)  Between the 4th and 5th workers. 
D)  Between zero workers and the 3rd worker. 
E)  Between the 6th and 7th workers. 
A)  Between the 5th and 6th workers. 
B)  At the 5th worker. 
C)  Between the 4th and 5th workers. 
D)  Between zero workers and the 3rd worker. 
E)  Between the 6th and 7th workers.

Question 16

The total product is 10 units. The average total cost is $30 and the average fixed cost is $10. What is the amount of the TOTAL variable cost?

Accepted Answer

A)  $300 
B)  $10 
C)  $200 
D)  $20 
E)  It is impossible to determine with the information given. 
A)  $300 
B)  $10 
C)  $200 
D)  $20 
E)  It is impossible to determine with the information given.

Question 17

Diseconomies of scale is

Accepted Answer

A)  a short-run phenomenon. 
B)  a long-run phenomenon. 
C)  the result of decreasing marginal returns. 
D)  possible only when the firm's plant size is fixed. 
E)  the result of increasing marginal returns. 
A)  a short-run phenomenon. 
B)  a long-run phenomenon. 
C)  the result of decreasing marginal returns. 
D)  possible only when the firm's plant size is fixed. 
E)  the result of increasing marginal returns.

Question 18

The relationship between the MP and MC curves is

Accepted Answer

A)  that the MP is not defined when the MC curve has a negative slope. 
B)  there is no predictable relationship. 
C)  over the range where the MC curve has a positive slope, the MP curve also has a positive slope. 
D)  over the range where the MP curve has a positive slope, the MC curve has a negative slope. 
E)  over the range where the MP curve has a negative slope, the MC curve also has a negative slope. 
A)  that the MP is not defined when the MC curve has a negative slope. 
B)  there is no predictable relationship. 
C)  over the range where the MC curve has a positive slope, the MP curve also has a positive slope. 
D)  over the range where the MP curve has a positive slope, the MC curve has a negative slope. 
E)  over the range where the MP curve has a negative slope, the MC curve also has a negative slope.

Question 19

-Kenya owns a lawn-mowing company. His total product schedule is in the above table. The marginal product of the fourth worker is ________ lawns mowed per week.

Accepted Answer

A)  320 
B)  25 
C)  5 
D)  80 
E)  20 
A)  320 
B)  25 
C)  5 
D)  80 
E)  20

Question 20

Interest is considered a(n)

Accepted Answer

A)  form of depreciation if the cost of borrowing increases. 
B)  implicit cost when the firm owner uses his or her own funds to buy capital. 
C)  explicit cost when the firm pays a bank to borrow money. 
D)  return to entrepreneurship if the firm owner uses his or her own funds to buy capital. 
E)  Both answers A and B are true. 
A)  form of depreciation if the cost of borrowing increases. 
B)  implicit cost when the firm owner uses his or her own funds to buy capital. 
C)  explicit cost when the firm pays a bank to borrow money. 
D)  return to entrepreneurship if the firm owner uses his or her own funds to buy capital. 
E)  Both answers A and B are true.

If total fixed cost increases, which of the following will NOT change?

Darryl runs a sheep station near Broken Hill. The interest on the debt he incurred to buy his sheep station totals $3,000 per year. For Darryl, the interest is

The marginal product of labour is the change in

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 labour force and its plant.

Economic profit equals total revenue minus total

-Anna owns a dog-grooming salon in Brunswick. The above table has Anna's total product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon. These are her only costs. When Anna has a staff of 2 workers, her total cost equals

Jill runs a factory in Canberra that makes lie detectors. This month, Jill's 34 workers produced 680 machines. Jill's average product of labour equalled ________ lie detectors per worker.

Which of the following costs can be positive when output is zero?

If 10 workers can produce 1,500 units of output and 11 workers can produce 1,600 units of output, then the average product of 11 workers is

-The above table shows the total product schedule for Hair Today, a hair-styling salon. The average product when four workers are hired is

-Paulette owns a pizza parlour. Her total cost schedule is in the above table. Her marginal cost of producing the fifth pizza is

Suppose Billy owns a hair salon in Collingwood. 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

Decreasing marginal returns occur in the short run as more labour is hired to work in a fixed sized plant because

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

The total product is 10 units. The average total cost is $30 and the average fixed cost is $10. What is the amount of the TOTAL variable cost?

Diseconomies of scale is

The relationship between the MP and MC curves is

-Kenya owns a lawn-mowing company. His total product schedule is in the above table. The marginal product of the fourth worker is ________ lawns mowed per week.

Interest is considered a(n)

Getting Started

The Australian 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

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 13: Production and Cost

If total fixed cost increases, which of the following will NOT change?

Darryl runs a sheep station near Broken Hill. The interest on the debt he incurred to buy his sheep station totals $3,000 per year. For Darryl, the interest is

The marginal product of labour is the change in

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 labour force and its plant.

Economic profit equals total revenue minus total

-Anna owns a dog-grooming salon in Brunswick. The above table has Anna's total product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon. These are her only costs. When Anna has a staff of 2 workers, her total cost equals

Jill runs a factory in Canberra that makes lie detectors. This month, Jill's 34 workers produced 680 machines. Jill's average product of labour equalled ________ lie detectors per worker.

Which of the following costs can be positive when output is zero?

If 10 workers can produce 1,500 units of output and 11 workers can produce 1,600 units of output, then the average product of 11 workers is

-The above table shows the total product schedule for Hair Today, a hair-styling salon. The average product when four workers are hired is

-Paulette owns a pizza parlour. Her total cost schedule is in the above table. Her marginal cost of producing the fifth pizza is

Suppose Billy owns a hair salon in Collingwood. 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

Decreasing marginal returns occur in the short run as more labour is hired to work in a fixed sized plant because

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

The total product is 10 units. The average total cost is $30 and the average fixed cost is $10. What is the amount of the TOTAL variable cost?

Diseconomies of scale is

The relationship between the MP and MC curves is

-Kenya owns a lawn-mowing company. His total product schedule is in the above table. The marginal product of the fourth worker is ________ lawns mowed per week.

Interest is considered a(n)

Getting Started

The Australian 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

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 labour force and its plant.