Question 1

A firm's long- run cost is the cost of production when the firm

Accepted Answer

A)  uses the economically efficient quantities of all of its factors of production. 
B)  can vary the amount of output it produces. 
C)  calculates its cost at least one year into the future. 
D)  adds together all of its short- run costs. 
A)  uses the economically efficient quantities of all of its factors of production. 
B)  can vary the amount of output it produces. 
C)  calculates its cost at least one year into the future. 
D)  adds together all of its short- run costs. A

Question 2

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff?

Accepted Answer

A)  $9.55 
B)  $5 
C)  $35 
D)  $105 
A)  $9.55 
B)  $5 
C)  $35 
D)  $105 B

Question 3

-In the above figure, the long- run average cost curve exhibits diseconomies of scale

Accepted Answer

A)  between 5 and 10 units per hour. 
B)  between 10 and 20 units per hour. 
C)  along the entire curve. 
D)  between 20 and 25 units per hour. 
A)  between 5 and 10 units per hour. 
B)  between 10 and 20 units per hour. 
C)  along the entire curve. 
D)  between 20 and 25 units per hour. D

Question 4

If economic profit is equal to zero, then

Accepted Answer

A)  the entrepreneur is earning only a normal profit. 
B)  the entrepreneur's profit cannot be determined based on the information given. 
C)  the entrepreneur's profit as measured by accountants is also equal to zero. 
D)  the entrepreneur's profit as measured by accountants must be less than zero. 
A)  the entrepreneur is earning only a normal profit. 
B)  the entrepreneur's profit cannot be determined based on the information given. 
C)  the entrepreneur's profit as measured by accountants is also equal to zero. 
D)  the entrepreneur's profit as measured by accountants must be less than zero.

Question 5

Which of the following statements is true?

Accepted Answer

A)  The marginal and average product curves intersect at the maximum level of output. 
B)  The marginal product curve always has a positive slope. 
C)  At every output level the marginal product curve lies above the average product curve. 
D)  The marginal product and average product curves intersect when average product is at its maximum. 
A)  The marginal and average product curves intersect at the maximum level of output. 
B)  The marginal product curve always has a positive slope. 
C)  At every output level the marginal product curve lies above the average product curve. 
D)  The marginal product and average product curves intersect when average product is at its maximum.

Question 6

-The table above gives a firm's total product schedule. Suppose labour is the only variable factor of production. The price of labour is $500 per worker per week and total fixed costs are $600 per week. If 95 units are produced, the average total cost is

Accepted Answer

A)  $6.31. 
B)  $26.32. 
C)  $17.45. 
D)  $32.63. 
A)  $6.31. 
B)  $26.32. 
C)  $17.45. 
D)  $32.63.

Question 7

The law of diminishing marginal returns states that as the firm uses more of _______, with a given quantity of _______, the _______ product of the variable input eventually diminishes.

Accepted Answer

A)  all inputs; capital; average 
B)  a variable input; fixed inputs; average 
C)  a fixed input; variable inputs; marginal 
D)  a variable input; fixed inputs; marginal 
A)  all inputs; capital; average 
B)  a variable input; fixed inputs; average 
C)  a fixed input; variable inputs; marginal 
D)  a variable input; fixed inputs; marginal

Question 8

A firm's average total cost is $100, its average variable cost is $90, and its total fixed cost is $1,000. Its output is

Accepted Answer

A)  between 70 and 120 units. 
B)  between 120 and 170 units. 
C)  more than 170 units. 
D)  less than 70 units. 
A)  between 70 and 120 units. 
B)  between 120 and 170 units. 
C)  more than 170 units. 
D)  less than 70 units.

Question 9

A cost that has already been made and cannot be recovered is called a

Accepted Answer

A)  variable cost. 
B)  marginal cost. 
C)  fixed cost. 
D)  sunk cost. 
A)  variable cost. 
B)  marginal cost. 
C)  fixed cost. 
D)  sunk cost.

Question 10

A decrease in the price of a fixed factor of production decreases total cost and

Accepted Answer

A)  leaves marginal cost unchanged. 
B)  increases marginal cost. 
C)  increases variable cost. 
D)  decreases marginal cost. 
A)  leaves marginal cost unchanged. 
B)  increases marginal cost. 
C)  increases variable cost. 
D)  decreases marginal cost.

Question 11

-Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4). Dustin's minimum efficient scale is

Accepted Answer

A)  4,000 copies per day. 
B)  6,000 copies per day. 
C)  2,650 copies per day. 
D)  More information is needed to determine the minimum efficient scale. 
A)  4,000 copies per day. 
B)  6,000 copies per day. 
C)  2,650 copies per day. 
D)  More information is needed to determine the minimum efficient scale.

Question 12

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's average total cost?

Accepted Answer

A)  $2 
B)  $10 
C)  $12 
D)  $8 
A)  $2 
B)  $10 
C)  $12 
D)  $8

Question 13

In the short run,

Accepted Answer

A)  at least one factor of production is fixed. 
B)  all factors of production are fixed. 
C)  all factors of production are variable. 
D)  there are no variable costs. 
A)  at least one factor of production is fixed. 
B)  all factors of production are fixed. 
C)  all factors of production are variable. 
D)  there are no variable costs.

Question 14

Bud opened a flower shop. He rented a building for $9,000 a year. To buy equipment for the store, he withdrew $10,000 from his savings account, which earned an annual interest rate of 3 per cent. During the first year of operation, Bud paid $4,000 for utilities and $12,000 to his suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for $30,000 a year. During the first year of operation, Bud

Accepted Answer

A)  received an economic profit of $20,000. 
B)  incurred an economic loss of $2,300. 
C)  received an economic profit of $30,000. 
D)  incurred an economic loss of $12,300. 
A)  received an economic profit of $20,000. 
B)  incurred an economic loss of $2,300. 
C)  received an economic profit of $30,000. 
D)  incurred an economic loss of $12,300.

Question 15

-In the above figure, the average fixed cost curve is curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 16

Average total costs are

Accepted Answer

A)  the change in output divided by the change in total costs. 
B)  total costs divided by total output. 
C)  total output divided by total costs. 
D)  the change in total costs divided by the change in output. 
A)  the change in output divided by the change in total costs. 
B)  total costs divided by total output. 
C)  total output divided by total costs. 
D)  the change in total costs divided by the change in output.

Question 17

Sue owns a baking company. The company's total revenue for a month is $4,000. The monthly costs of resources bought in the market and of resources owned by the firm are $2,000 and the monthly costs of resources supplied by the owner are $1,000. Sue's economic profit for the month is equal to

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $1,000. 
D)  $4,000. 
A)  $2,000. 
B)  $3,000. 
C)  $1,000. 
D)  $4,000.

Question 18

-The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is BEST to use to produce 80 units per day?

Accepted Answer

A)  Plant A 
B)  Plant B 
C)  Plant C 
D)  Plant D 
A)  Plant A 
B)  Plant B 
C)  Plant C 
D)  Plant D

Question 19

Joe quits his job as an insurance agent and opens his own sporting goods store. If his profits as measured by his accountant are greater than zero, then

Accepted Answer

A)  his economic profit must be greater than zero. 
B)  his opportunity costs must be zero. 
C)  he made a good move because he is earning above normal profits. 
D)  There is not enough information to determine his economic profit, if any. 
A)  his economic profit must be greater than zero. 
B)  his opportunity costs must be zero. 
C)  he made a good move because he is earning above normal profits. 
D)  There is not enough information to determine his economic profit, if any.

Question 20

Sheila's Sports Shop is a very popular sporting goods store, which has yearly revenue of $600,000. Sheila runs the business herself. Her alternative employment options are to be a university swimming coach for $50,000 per year or a construction worker for $40,000 per year. Sheila spends
$230,000 purchasing goods for resale to her customers. She also has four employees, who each earn
$25,000 per year. Sheila owns the building that her Sports Shop is housed in and she could have rented it out for $20,000 per year. Sheila's economic profit is equal to

Accepted Answer

A)  $250,000 per year. 
B)  $160,000 per year. 
C)  $270,000 per year. 
D)  $200,000 per year. 
A)  $250,000 per year. 
B)  $160,000 per year. 
C)  $270,000 per year. 
D)  $200,000 per year.

A firm's long- run cost is the cost of production when the firm

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff?

-In the above figure, the long- run average cost curve exhibits diseconomies of scale

If economic profit is equal to zero, then

Which of the following statements is true?

-The table above gives a firm's total product schedule. Suppose labour is the only variable factor of production. The price of labour is $500 per worker per week and total fixed costs are $600 per week. If 95 units are produced, the average total cost is

The law of diminishing marginal returns states that as the firm uses more of ___, with a given quantity of _, the _____ product of the variable input eventually diminishes.

A firm's average total cost is $100, its average variable cost is $90, and its total fixed cost is $1,000. Its output is

A cost that has already been made and cannot be recovered is called a

A decrease in the price of a fixed factor of production decreases total cost and

-Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4). Dustin's minimum efficient scale is

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's average total cost?

In the short run,

-In the above figure, the average fixed cost curve is curve

Average total costs are

Sue owns a baking company. The company's total revenue for a month is $4,000. The monthly costs of resources bought in the market and of resources owned by the firm are $2,000 and the monthly costs of resources supplied by the owner are $1,000. Sue's economic profit for the month is equal to

-The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is BEST to use to produce 80 units per day?

Joe quits his job as an insurance agent and opens his own sporting goods store. If his profits as measured by his accountant are greater than zero, then

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Public Choices and Public Goods

Economics of the Environment

Monopoly and Its Regulation

Economic Inequality

Consumer Choices and Constraints

Perfect Competition

Monopolistic Competition

Oligopoly Games and Strategy

Decisions in Factor Markets

Filters

Exam 13: Producer Choices and Constraints

A firm's long- run cost is the cost of production when the firm

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff?

-In the above figure, the long- run average cost curve exhibits diseconomies of scale

If economic profit is equal to zero, then

Which of the following statements is true?

-The table above gives a firm's total product schedule. Suppose labour is the only variable factor of production. The price of labour is $500 per worker per week and total fixed costs are $600 per week. If 95 units are produced, the average total cost is

The law of diminishing marginal returns states that as the firm uses more of _______, with a given quantity of _______, the _______ product of the variable input eventually diminishes.

A firm's average total cost is $100, its average variable cost is $90, and its total fixed cost is $1,000. Its output is

A cost that has already been made and cannot be recovered is called a

A decrease in the price of a fixed factor of production decreases total cost and

-Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4). Dustin's minimum efficient scale is

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's average total cost?

In the short run,

-In the above figure, the average fixed cost curve is curve

Average total costs are

Sue owns a baking company. The company's total revenue for a month is $4,000. The monthly costs of resources bought in the market and of resources owned by the firm are $2,000 and the monthly costs of resources supplied by the owner are $1,000. Sue's economic profit for the month is equal to

-The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is BEST to use to produce 80 units per day?

Joe quits his job as an insurance agent and opens his own sporting goods store. If his profits as measured by his accountant are greater than zero, then

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Public Choices and Public Goods

Economics of the Environment

Monopoly and Its Regulation

Economic Inequality

Consumer Choices and Constraints

Perfect Competition

Monopolistic Competition

Oligopoly Games and Strategy

Decisions in Factor Markets

Filters

The law of diminishing marginal returns states that as the firm uses more of ___, with a given quantity of _, the _____ product of the variable input eventually diminishes.