Question 1

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False  True

Question 2

Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct? ​

Accepted Answer

A) ​Sebastian's total explicit costs are $15,400. 
B) ​Sebastian's total implicit costs are $55,600. 
C) ​Sebastian's accounting profit is $35,000. 
D) ​Sebastian's economic profit is $4,600. 
A) ​Sebastian's total explicit costs are $15,400. 
B) ​Sebastian's total implicit costs are $55,600. 
C) ​Sebastian's accounting profit is $35,000. 
D) ​Sebastian's economic profit is $4,600. A

Question 3

The marginal cost curve crosses the average total cost curve at

Accepted Answer

A) the efficient scale. 
B) the minimum point on the average total cost curve. 
C) a point where the marginal cost curve is rising. 
D) All of the above are correct. 
A) the efficient scale. 
B) the minimum point on the average total cost curve. 
C) a point where the marginal cost curve is rising. 
D) All of the above are correct. D

Question 4

​​​Table 13-7  
-Refer to Table 13-7. At which number of workers does diminishing marginal product begin?

Accepted Answer

A) ​1 
B) ​2 
C) ​3 
D) ​4 
A) ​1 
B) ​2 
C) ​3 
D) ​4

Question 5

Scenario 13-1
Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

Accepted Answer

A) $3,000 
B) $6,000 
C) $15,000 
D) $18,000 
A) $3,000 
B) $6,000 
C) $15,000 
D) $18,000

Question 6

Gwen has decided to start her own photography studio. To purchase the necessary equipment, Gwen withdrew $2,000 from her savings account, which was earning 3% interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%. What is Gwen's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A) $60 
B) $280 
C) $340 
D) $660 
A) $60 
B) $280 
C) $340 
D) $660

Question 7

When calculating a firm's profit, an economist will subtract only

Accepted Answer

A) explicit costs from total revenue because these are the only costs that can be measured explicitly. 
B) implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C) the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm. 
D) the marginal cost because the cost of the next unit is the only relevant cost. 
A) explicit costs from total revenue because these are the only costs that can be measured explicitly. 
B) implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C) the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm. 
D) the marginal cost because the cost of the next unit is the only relevant cost.

Question 8

Marginal cost is equal to

Accepted Answer

A) TC/Q. 
B) ΔATC/Q. 
C) ΔTC/ΔQ. 
D) ΔQ/ΔTC. 
A) TC/Q. 
B) ΔATC/Q. 
C) ΔTC/ΔQ. 
D) ΔQ/ΔTC.

Question 9

Average variable cost is equal to total variable cost divided by quantity of output.

Accepted Answer

A) True 
 B)False

Question 10

When a firm is operating at an efficient scale,

Accepted Answer

A) average variable cost is minimized. 
B) average fixed cost is minimized. 
C) average total cost is minimized. 
D) marginal cost is minimized. 
A) average variable cost is minimized. 
B) average fixed cost is minimized. 
C) average total cost is minimized. 
D) marginal cost is minimized.

Question 11

Which of the following expressions is correct?

Accepted Answer

A) accounting profit = total revenue - explicit costs 
B) economic profit = total revenue - implicit costs 
C) economic profit = total revenue - explicit costs 
D) Both a and b are correct. 
A) accounting profit = total revenue - explicit costs 
B) economic profit = total revenue - implicit costs 
C) economic profit = total revenue - explicit costs 
D) Both a and b are correct.

Question 12

Scenario 13-10
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each.
-Refer to Scenario 13-10. An accountant would calculate the total cost for one photo frame to be

Accepted Answer

A) $5. 
B) $10. 
C) $15. 
D) $25. 
A) $5. 
B) $10. 
C) $15. 
D) $25.

Question 13

Figure 13-5  
-Refer to Figure 13-5. Curve D intersects curve C

Accepted Answer

A) where the firm maximizes profit. 
B) at the minimum of average fixed cost. 
C) at the efficient scale. 
D) where fixed costs equal variable costs. 
A) where the firm maximizes profit. 
B) at the minimum of average fixed cost. 
C) at the efficient scale. 
D) where fixed costs equal variable costs.

Question 14

Analyzing the behavior of the firm enhances our understanding of

Accepted Answer

A) what decisions lie behind the market supply curve. 
B) how consumers allocate their income to purchase scarce resources. 
C) how financial institutions set interest rates. 
D) whether resources are allocated fairly. 
A) what decisions lie behind the market supply curve. 
B) how consumers allocate their income to purchase scarce resources. 
C) how financial institutions set interest rates. 
D) whether resources are allocated fairly.

Question 15

Scenario 13-19
Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000.
-Refer to Scenario 13-19. In producing the 7,000 pounds of cheese, the firm's average fixed cost was

Accepted Answer

A) $0.29. 
B) $1.71. 
C) $2,00. 
D) $6.00. 
A) $0.29. 
B) $1.71. 
C) $2,00. 
D) $6.00.

Question 16

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Accepted Answer

A) competition. 
B) opportunity costs. 
C) specialization. 
D) incentives. 
A) competition. 
B) opportunity costs. 
C) specialization. 
D) incentives.

Question 17

Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each.
-Refer to Scenario 13-11. An accountant would calculate the total cost for one birdhouse to be

Accepted Answer

A) $5. 
B) $8. 
C) $9. 
D) $13. 
A) $5. 
B) $8. 
C) $9. 
D) $13.

Question 18

Figure 13-3  
-Refer to Figure 13-3. The graph illustrates a typical

Accepted Answer

A) total-cost curve. 
B) production function. 
C) production possibilities frontier. 
D) fixed-cost curve. 
A) total-cost curve. 
B) production function. 
C) production possibilities frontier. 
D) fixed-cost curve.

Question 19

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) coordination problems arising from the large size of the firm. 
D) fixed costs greatly exceeding variable costs. 
A) economies of scale. 
B) diseconomies of scale. 
C) coordination problems arising from the large size of the firm. 
D) fixed costs greatly exceeding variable costs.

Question 20

Economists normally assume that the goal of a firm is to

Accepted Answer

A) maximize its total revenue. 
B) maximize its profit. 
C) minimize its explicit costs. 
D) minimize its total cost. 
A) maximize its total revenue. 
B) maximize its profit. 
C) minimize its explicit costs. 
D) minimize its total cost.

Exam 13: The Costs of Production

The cost of producing an additional unit of a good is not the same as the average cost of the good.

The marginal cost curve crosses the average total cost curve at

​​​Table 13-7 -Refer to Table 13-7. At which number of workers does diminishing marginal product begin?

When calculating a firm's profit, an economist will subtract only

Marginal cost is equal to

Average variable cost is equal to total variable cost divided by quantity of output.

When a firm is operating at an efficient scale,

Which of the following expressions is correct?

Figure 13-5 -Refer to Figure 13-5. Curve D intersects curve C

Analyzing the behavior of the firm enhances our understanding of

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Economists normally assume that the goal of a firm is to

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Table 13-7 -Refer to Table 13-7. At which number of workers does diminishing marginal product begin?