Question 1

Which of the following is most likely a long-run decision for a firm?

Accepted Answer

A)  The amount of inventory to stock. 
B)  The price at which to sell the product. 
C)  The hours a store should stay open. 
D)  How many warehouses to build. 
E)  The number of workers to hire. 
A)  The amount of inventory to stock. 
B)  The price at which to sell the product. 
C)  The hours a store should stay open. 
D)  How many warehouses to build. 
E)  The number of workers to hire.

Question 2

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2)L2, where Q is the output of sweaters per day. Now suppose the firm is operating with 8 units ofcapital (K=8) and 10 units of labour (L=10). What is the output of sweaters?

Accepted Answer

A)  30 sweaters per day 
B)  60 sweaters per day 
C)  80 sweaters per day 
D)  140 sweaters per day 
E)  155 sweaters per day 
A)  30 sweaters per day 
B)  60 sweaters per day 
C)  80 sweaters per day 
D)  140 sweaters per day 
E)  155 sweaters per day

Question 3

In the short run, the firm's product curves show

Accepted Answer

A)  TP is at its maximum when MP = O. 
B)  AP is at its minimum when MP = AP. 
C)  when MP > AP, AP is decreasing. 
D)  TP begins to decrease when AP begins to decrease. 
E)  when the MP curve cuts the AP curve from below, the AP curve begins to fall. 
A)  TP is at its maximum when MP = O. 
B)  AP is at its minimum when MP = AP. 
C)  when MP > AP, AP is decreasing. 
D)  TP begins to decrease when AP begins to decrease. 
E)  when the MP curve cuts the AP curve from below, the AP curve begins to fall.

Question 4

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.   TABLE 7-4
-Refer to Table 7-4. The total cost of producing 175 units of output is

Accepted Answer

A)  $75. 
B)  $100. 
C)  $150. 
D)  $175. 
E)  $350. 
A)  $75. 
B)  $100. 
C)  $150. 
D)  $175. 
E)  $350.

Question 5

In the short run, when capital is a fixed factor, a rise in the cost of labour

Accepted Answer

A)  shifts the AVC curve down. 
B)  shifts the marginal cost curve upwards. 
C)  leaves the ATC curve unchanged. 
D)  leaves the MC curve unchanged. 
E)  shifts the total product curve downwards. 
A)  shifts the AVC curve down. 
B)  shifts the marginal cost curve upwards. 
C)  leaves the ATC curve unchanged. 
D)  leaves the MC curve unchanged. 
E)  shifts the total product curve downwards.

Question 6

Consider a firm in the short run. If total product is at its maximum, then

Accepted Answer

A)  average product must be falling and be equal to zero. 
B)  marginal product must be greater than zero and must be falling. 
C)  average product must equal marginal product. 
D)  marginal product must be falling and be equal to zero. 
E)  average product must be rising and must lie above marginal product. 
A)  average product must be falling and be equal to zero. 
B)  marginal product must be greater than zero and must be falling. 
C)  average product must equal marginal product. 
D)  marginal product must be falling and be equal to zero. 
E)  average product must be rising and must lie above marginal product.

Question 7

A single proprietorship is a form of business organization which

Accepted Answer

A)  has unlimited access to money capital. 
B)  has a single owner but has directors who are responsible for the firm's debts. 
C)  allows easy transferability of ownership by the trading of shares. 
D)  has limited liability. 
E)  has one owner-manager who is personally responsible for the firm's actions and debts. 
A)  has unlimited access to money capital. 
B)  has a single owner but has directors who are responsible for the firm's debts. 
C)  allows easy transferability of ownership by the trading of shares. 
D)  has limited liability. 
E)  has one owner-manager who is personally responsible for the firm's actions and debts.

Question 8

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When
answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.   TABLE 7-4
-Refer to Table 7-4. Average variable costs for 175 units of output is approximately

Accepted Answer

A)  25 cents. 
B)  32 cents. 
C)  43 cents. 
D)  57 cents. 
E)  $1.00. 
A)  25 cents. 
B)  32 cents. 
C)  43 cents. 
D)  57 cents. 
E)  $1.00.

Question 9

Refer to Table 7-2.

Accepted Answer

A)  $31 200. 
B)  $63 500. 
C)  $32 700. 
D)  $33 500. 
E)  $32 300. 
A)  $31 200. 
B)  $63 500. 
C)  $32 700. 
D)  $33 500. 
E)  $32 300.

Question 10

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When
answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.   TABLE 7-4
-Refer to Table 7-4. The total fixed cost of producing 305 units of output is

Accepted Answer

A)  $100. 
B)  $125. 
C)  $112.50. 
D)  $225 
E)  $305. 
A)  $100. 
B)  $125. 
C)  $112.50. 
D)  $225 
E)  $305.

Question 11

Suppose a firm is producing 100 units of output, incurring a total cost of $10 000 and total variable cost of $6000. It can be concluded that average fixed cost is

Accepted Answer

A)  $40. 
B)  $60. 
C)  $100. 
D)  $160. 
E)  $4000. 
A)  $40. 
B)  $60. 
C)  $100. 
D)  $160. 
E)  $4000.

Question 12

The opportunity cost to a firm of using an asset is zero if

Accepted Answer

A)  no money was spent to acquire the asset. 
B)  the asset has no alternative uses. 
C)  the asset was given to the firm for free. 
D)  the asset has zero sunk costs associated with it. 
E)  the asset is already owned by the firm. 
A)  no money was spent to acquire the asset. 
B)  the asset has no alternative uses. 
C)  the asset was given to the firm for free. 
D)  the asset has zero sunk costs associated with it. 
E)  the asset is already owned by the firm.

Question 13

Which one of the following types of cost declines over the whole range of output?

Accepted Answer

A)  marginal cost 
B)  average variable cost 
C)  total fixed cost 
D)  average fixed cost 
E)  total variable cost 
A)  marginal cost 
B)  average variable cost 
C)  total fixed cost 
D)  average fixed cost 
E)  total variable cost

Question 14

It is assumed in standard economic theory that a firm makes decisions in an effort to

Accepted Answer

A)  become as large as possible. 
B)  have a highly diversified product. 
C)  maximize its profits. 
D)  maximize its revenue. 
E)  be favoured politically. 
A)  become as large as possible. 
B)  have a highly diversified product. 
C)  maximize its profits. 
D)  maximize its revenue. 
E)  be favoured politically.

Question 15

The table below provides the annual revenues and costs for a family-owned firm producing catered meals.   TABLE 7-1
-Refer to Table 7-1. The accounting profits for this family-owned firm are

Accepted Answer

A)  $0 
B)  $10 000 
C)  $30 000 
D)  $500 000 
E)  -$15 000 
A)  $0 
B)  $10 000 
C)  $30 000 
D)  $500 000 
E)  -$15 000

Which of the following is most likely a long-run decision for a firm?

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2)L2, where Q is the output of sweaters per day. Now suppose the firm is operating with 8 units ofcapital (K=8) and 10 units of labour (L=10). What is the output of sweaters?

In the short run, the firm's product curves show

In the short run, when capital is a fixed factor, a rise in the cost of labour

Consider a firm in the short run. If total product is at its maximum, then

A single proprietorship is a form of business organization which

Refer to Table 7-2.

Suppose a firm is producing 100 units of output, incurring a total cost of $10 000 and total variable cost of $6000. It can be concluded that average fixed cost is

The opportunity cost to a firm of using an asset is zero if

Which one of the following types of cost declines over the whole range of output?

It is assumed in standard economic theory that a firm makes decisions in an effort to

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1. The accounting profits for this family-owned firm are

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

Filters

Exam 7: Producers in the Short Run

Which of the following is most likely a long-run decision for a firm?

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2)L2, where Q is the output of sweaters per day. Now suppose the firm is operating with 8 units ofcapital (K=8) and 10 units of labour (L=10). What is the output of sweaters?

In the short run, the firm's product curves show

In the short run, when capital is a fixed factor, a rise in the cost of labour

Consider a firm in the short run. If total product is at its maximum, then

A single proprietorship is a form of business organization which

Refer to Table 7-2.

Suppose a firm is producing 100 units of output, incurring a total cost of $10 000 and total variable cost of $6000. It can be concluded that average fixed cost is

The opportunity cost to a firm of using an asset is zero if

Which one of the following types of cost declines over the whole range of output?

It is assumed in standard economic theory that a firm makes decisions in an effort to

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1. The accounting profits for this family-owned firm are

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

Filters