Question 1

_____ costs do not involve the payment of money.

Accepted Answer

A)  Implicit 
B)  Explicit 
C)  Accounting 
D)  Economic 
A)  Implicit 
B)  Explicit 
C)  Accounting 
D)  Economic

Question 2

Average total cost is _____ whenever marginal cost is greater than average total cost.

Accepted Answer

A)  at its minimum 
B)  at its maximum 
C)  decreasing 
D)  increasing 
A)  at its minimum 
B)  at its maximum 
C)  decreasing 
D)  increasing

Question 3

Wayne, a small business owner, had production expenses last year of $40,000. Revenues were $100,000. Wayne gave up a job that paid $60,000 to open his business. Wayne's economic profit last year was:

Accepted Answer

A)  zero. 
B)  $40,000. 
C)  $60,000. 
D)  $100,000. 
A)  zero. 
B)  $40,000. 
C)  $60,000. 
D)  $100,000.

Question 4

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's accounting profit or loss?

Accepted Answer

A)  $40,000 
B)  $60,000 
C)  $70,000 
D)  -$10,000 
A)  $40,000 
B)  $60,000 
C)  $70,000 
D)  -$10,000

Question 5

_____ is a source of diseconomies of scale.

Accepted Answer

A)  Marginal cost 
B)  Decreasing production cost 
C)  Economies of scope 
D)  The principal-agent problem 
A)  Marginal cost 
B)  Decreasing production cost 
C)  Economies of scope 
D)  The principal-agent problem

Question 6

The additional costs that a business incurs from one additional unit of output is the _____ cost.

Accepted Answer

A)  marginal 
B)  total 
C)  variable 
D)  fixed 
A)  marginal 
B)  total 
C)  variable 
D)  fixed

Question 7

(Figure: Short-Run Cost Schedule)
Compute the missing values.
 $\begin{array}{|c|c|c|c|c|c|c|c|}
\hline \text { Quantity } & \text { Fixed Cost } & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \text { Total Cost } & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Fixed Cost }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Total Cost }
\end{array} \
\hline 0 & \$ 11 & \$ 0 & \$ 11 & - & - & - & - \
\hline 1 & 11 & 3 & 14 & \$ 3 & ? & ? & ? \
\hline 2 & 11 & 8 & 19 & 5 & ? & ? & ? \
\hline 3 & 11 & 14 & 25 & 6 & ? & ? & ? \
\hline 4 & 11 & 23 & 34 & 9 & ? & ? & ? \
\hline 5 & 11 & 36 & 47 & 13 & ? & ? & ? \
\hline
\end{array}$

Accepted Answer

None

Question 8

The short run is defined as:

Accepted Answer

A)  zero to 12 months. 
B)  one to five years. 
C)  the time period during which at least one variable cannot be changed. 
D)  the time period during which all variables can be changed. 
A)  zero to 12 months. 
B)  one to five years. 
C)  the time period during which at least one variable cannot be changed. 
D)  the time period during which all variables can be changed.

Question 9

(Figure: Costs) In the figure, what is average fixed cost at 40 units?

Accepted Answer

A)  $6 
B)  $8 
C)  $14 
D)  $240 
A)  $6 
B)  $8 
C)  $14 
D)  $240

Question 10

(Figure: Production Function Data 0) In the table, what is the MPP of the first unit of labor?
 $\begin{array}{|l|l|}
\hline \text { Labor (L) } & \text { Total Product (TP) } \
\hline 0 & 0 \
\hline 1 & 85 \
\hline 2 & 150 \
\hline 3 & 200 \
\hline 4 & 240 \
\hline
\end{array}$

Accepted Answer

A)  0 
B)  42.5 
C)  65 
D)  85 
A)  0 
B)  42.5 
C)  65 
D)  85

Question 11

Marginal cost equals average total cost at the _____ of the average total cost curve.

Accepted Answer

A)  minimum 
B)  maximum 
C)  left 
D)  right 
A)  minimum 
B)  maximum 
C)  left 
D)  right

Question 12

Compare the long-run average total cost in an industry that is dominated by small firms to that of an industry that is dominated by large firms.

Accepted Answer

In an industry that is dominated by smal

Question 13

An increase in production results in an increase in marginal cost due to:

Accepted Answer

A)  the labor theory. 
B)  marginal physical product. 
C)  the law of increasing returns. 
D)  the law of diminishing returns. 
A)  the labor theory. 
B)  marginal physical product. 
C)  the law of increasing returns. 
D)  the law of diminishing returns.

Question 14

(Figure: MPP L) In the figure, what is the marginal physical product (MPP) of the fourth unit of labor?

Accepted Answer

A)  45 
B)  60 
C)  200 
D)  280 
A)  45 
B)  60 
C)  200 
D)  280

Question 15

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's implicit cost of opening his business?

Accepted Answer

A)  $40,000 
B)  $60,000 
C)  $70,000 
D)  $110,000 
A)  $40,000 
B)  $60,000 
C)  $70,000 
D)  $110,000

Question 16

Because of diseconomies of scale, a firm may downsize in an effort to reduce _____ cost.

Accepted Answer

A)  total 
B)  marginal 
C)  average 
D)  incremental 
A)  total 
B)  marginal 
C)  average 
D)  incremental

Question 17

(Figure: Cost Schedule) In the figure, the average variable cost to produce two units is:
 $\begin{array}{|c|c|c|c|}
\hline \text { Quantity } & \text { Fixed Cost } & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ 11 & \$ 0 & - \
\hline 1 & 11 & 3 & \$ 3 \
\hline 2 & 11 & 8 & 5 \
\hline 3 & 11 & 14 & 6 \
\hline 4 & 11 & 23 & 9 \
\hline 5 & 11 & 36 & 13 \
\hline
\end{array}$

Accepted Answer

A)  $2.78. 
B)  $4. 
C)  $4.67. 
D)  $7.20. 
A)  $2.78. 
B)  $4. 
C)  $4.67. 
D)  $7.20.

Question 18

The _____ theory states that, in the short run, the marginal physical product of labor declines as more labor is employed.

Accepted Answer

A)  labor 
B)  marginal physical product 
C)  law of increasing returns 
D)  law of diminishing returns 
A)  labor 
B)  marginal physical product 
C)  law of increasing returns 
D)  law of diminishing returns

Question 19

Doreen's expenses for her landscaping business included rent of $1,000, payroll of $3,000, utilities of $600, and gas for the lawnmowers of $500. What are her monthly fixed costs?

Accepted Answer

A)  $500 
B)  $1,300 
C)  $1,600 
D)  $2,400 
A)  $500 
B)  $1,300 
C)  $1,600 
D)  $2,400

Question 20

(Figure: Cost Schedule) In the figure, the average fixed cost to produce five units is:
 $\begin{array}{|c|c|c|c|}
\hline \text { Quantity } & \text { Fixed Cost } & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ 11 & \$ 0 & - \
\hline 1 & 11 & 3 & \$ 3 \
\hline 2 & 11 & 8 & 5 \
\hline 3 & 11 & 14 & 6 \
\hline 4 & 11 & 23 & 9 \
\hline 5 & 11 & 36 & 13 \
\hline
\end{array}$

Accepted Answer

A)  $11. 
B)  $2.75. 
C)  $3.67. 
D)  $2.20. 
A)  $11. 
B)  $2.75. 
C)  $3.67. 
D)  $2.20.

Exam 11: The Cost of Doing Business

_____ costs do not involve the payment of money.

Average total cost is _____ whenever marginal cost is greater than average total cost.

Wayne, a small business owner, had production expenses last year of $40,000. Revenues were $100,000. Wayne gave up a job that paid $60,000 to open his business. Wayne's economic profit last year was:

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's accounting profit or loss?

_____ is a source of diseconomies of scale.

The additional costs that a business incurs from one additional unit of output is the _____ cost.

The short run is defined as:

(Figure: Costs) In the figure, what is average fixed cost at 40 units?

(Figure: Production Function Data 0) In the table, what is the MPP of the first unit of labor? Labor (L) Total Product (TP) 0 0 1 85 2 150 3 200 4 240

Marginal cost equals average total cost at the _____ of the average total cost curve.

Compare the long-run average total cost in an industry that is dominated by small firms to that of an industry that is dominated by large firms.

An increase in production results in an increase in marginal cost due to:

(Figure: MPP L) In the figure, what is the marginal physical product (MPP) of the fourth unit of labor?

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's implicit cost of opening his business?

Because of diseconomies of scale, a firm may downsize in an effort to reduce _____ cost.

(Figure: Cost Schedule) In the figure, the average variable cost to produce two units is: Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

The _____ theory states that, in the short run, the marginal physical product of labor declines as more labor is employed.

Doreen's expenses for her landscaping business included rent of $1,000, payroll of $3,000, utilities of $600, and gas for the lawnmowers of $500. What are her monthly fixed costs?

(Figure: Cost Schedule) In the figure, the average fixed cost to produce five units is: Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

The Basics of Economics

Why We Trade

The Supply and Demand Model

Elasticity

Consumer Choice

The Economic Efficiency of Markets

Taxation: An Economic Analysis

Externalities, the Environment, and Public Goods

Organizing a Business

Stocks and Bonds

Perfect Competition

Monopoly and Antitrust Laws

Monopolistic Competition and Price Discrimination

Oligopoly

Behavioral Economics and Strategy

Labor and Other Resources

The Distribution of Income

Information and Health Economics

GDP and the Price Level

Unemployment and the Business Cycle

Long Run Economic Growth

Saving, Investment, and the Federal Budget Deficit

The Monetary System

Money and the Price Level in the Long Run

Aggregate Supply and Aggregate Demand

Monetary Policy and Interest Rates

Fiscal Policy and the Business Cycle

The Aggregate Expenditure Model

Inflation Expectations and Stabilization Policies

International Trade

Foreign Exchange Markets

International Finance

Filters