Question 1

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

Accepted Answer

A) Average fixed cost 
B) Average variable cost 
C) Average total cost 
D) Marginal cost 
A) Average fixed cost 
B) Average variable cost 
C) Average total cost 
D) Marginal cost C

Question 2

Variable costs usually change as the firm alters the quantity of output produced.

Accepted Answer

A) True 
 B)False  True

Question 3

Table 13-5
  
-Refer to Table 13-5.What is the variable cost of producing five widgets?

Accepted Answer

A) $13.00 
B) $14.00 
C) $15.00 
D) It can't be determined from the information given. 
A) $13.00 
B) $14.00 
C) $15.00 
D) It can't be determined from the information given. C

Question 4

The amount of money that a firm receives from the sale of its output is called

Accepted Answer

A) total gross profit. 
B) total net profit. 
C) total revenue. 
D) net revenue. 
A) total gross profit. 
B) total net profit. 
C) total revenue. 
D) net revenue.

Question 5

An example of an explicit cost of production would be

Accepted Answer

A) the cost of forgone labor earnings for an entrepreneur. 
B) the lost opportunity to invest in capital markets when the money is invested in one's business. 
C) lease payments for the land on which a firm's factory stands. 
D) Both a and c are correct. 
A) the cost of forgone labor earnings for an entrepreneur. 
B) the lost opportunity to invest in capital markets when the money is invested in one's business. 
C) lease payments for the land on which a firm's factory stands. 
D) Both a and c are correct.

Question 6

Table 13-10
Consider the following table of long-run total cost for four different firms
  
-Refer to Table 13-10.Which firm has diseconomies of scale over the entire range of output?

Accepted Answer

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

Question 7

Suppose that for a particular business there are no implicit opportunity costs.Then

Accepted Answer

A) accounting profit will be greater than economic profit. 
B) accounting profit will be the same as economic profit. 
C) accounting profit will be less than economic profit. 
D) the relationship between accounting profit and economic profit cannot be determined since the amount of explicit opportunity costs is not given. 
A) accounting profit will be greater than economic profit. 
B) accounting profit will be the same as economic profit. 
C) accounting profit will be less than economic profit. 
D) the relationship between accounting profit and economic profit cannot be determined since the amount of explicit opportunity costs is not given.

Question 8

Explicit costs

Accepted Answer

A) require an outlay of money by the firm. 
B) include all of the firm's opportunity costs. 
C) include income that is forgone by the firm's owners. 
D) Both b and c are correct. 
A) require an outlay of money by the firm. 
B) include all of the firm's opportunity costs. 
C) include income that is forgone by the firm's owners. 
D) Both b and c are correct.

Question 9

Smith Tire Company has total fixed costs of $300,000 per year.The firm's average variable cost is $80 for 10,000 tires.At that level of output,the firm's average total costs equal

Accepted Answer

A) $80 
B) $90 
C) $100 
D) $110 
A) $80 
B) $90 
C) $100 
D) $110

Question 10

When average cost is greater than marginal cost,marginal cost must be

Accepted Answer

A) rising. 
B) falling. 
C) constant. 
D) The direction of change in marginal cost cannot be determined from this information. 
A) rising. 
B) falling. 
C) constant. 
D) The direction of change in marginal cost cannot be determined from this information.

Question 11

Figure 13-6
The curves below reflect information about the cost structure of a firm.
  
-Refer to Figure 13-6.Which of the curves is most likely to represent average total cost?

Accepted Answer

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

Question 12

According to the law of supply,

Accepted Answer

A) firms' production levels are not correlated with the price of a good. 
B) the supply curve will slope downward when demand decreases. 
C) firms are willing to produce a greater quantity of a good when the price of the good is higher. 
D) the supply curve identifies the points where the firm minimizes its marginal costs. 
A) firms' production levels are not correlated with the price of a good. 
B) the supply curve will slope downward when demand decreases. 
C) firms are willing to produce a greater quantity of a good when the price of the good is higher. 
D) the supply curve identifies the points where the firm minimizes its marginal costs.

Question 13

Figure 13-2
The figure below depicts a total cost function for a firm that produces cookies.
  
-Refer to Figure 13-2.Which of the statements below is most consistent with the shape of the total cost curve?

Accepted Answer

A) Producing an additional cookie is always more costly than producing the previous cookie. 
B) Total production of cookies decreases with additional units of input. 
C) Producing additional cookies is equally costly, regardless of how many cookies are already being produced. 
D) Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large. 
A) Producing an additional cookie is always more costly than producing the previous cookie. 
B) Total production of cookies decreases with additional units of input. 
C) Producing additional cookies is equally costly, regardless of how many cookies are already being produced. 
D) Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large.

Question 14

Table 13-7
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.
  
-Refer to Table 13-7.One month,Teacher's Helper produced 18 instructional modules.What was the average fixed cost for that month?

Accepted Answer

A) $60 
B) $108 
C) $811 
D) It can't be determined from the information given. 
A) $60 
B) $108 
C) $811 
D) It can't be determined from the information given.

Question 15

Table 13-8
  
-Refer to Table 13-8.What is the marginal cost of the 8th gigaplot at Jimmy's Gigaplot factory?

Accepted Answer

A) $20 
B) $27 
C) $160 
D) $185 
A) $20 
B) $27 
C) $160 
D) $185

Question 16

Figure 13-6
The curves below reflect information about the cost structure of a firm.
  
-Refer to Figure 13-6.Which of the curves is most likely to represent marginal cost?

Accepted Answer

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

Question 17

The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 18

Scenario 13-1
Joe wants to start his own business. The business he wants to start will require that he purchase a factory that costs $400,000. Joe currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1.Suppose Joe purchases the factory using $200,000 of his own money and $200,000 borrowed from a bank at an interest rate of 6 percent.What is Joe'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 19

Table 13-10
Consider the following table of long-run total cost for four different firms
  
-Refer to Table 13-10.Which firm's long-run marginal cost decreases as output increases?

Accepted Answer

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

Question 20

If marginal cost is rising,

Accepted Answer

A) average variable cost must be falling. 
B) average fixed cost must be rising. 
C) marginal product must be falling. 
D) marginal product must be rising. 
A) average variable cost must be falling. 
B) average fixed cost must be rising. 
C) marginal product must be falling. 
D) marginal product must be rising.

Exam 13: The Costs of Production

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

Variable costs usually change as the firm alters the quantity of output produced.

Table 13-5 -Refer to Table 13-5.What is the variable cost of producing five widgets?

The amount of money that a firm receives from the sale of its output is called

An example of an explicit cost of production would be

Table 13-10 Consider the following table of long-run total cost for four different firms -Refer to Table 13-10.Which firm has diseconomies of scale over the entire range of output?

Suppose that for a particular business there are no implicit opportunity costs.Then

Explicit costs

Smith Tire Company has total fixed costs of $300,000 per year.The firm's average variable cost is $80 for 10,000 tires.At that level of output,the firm's average total costs equal

When average cost is greater than marginal cost,marginal cost must be

Figure 13-6 The curves below reflect information about the cost structure of a firm. -Refer to Figure 13-6.Which of the curves is most likely to represent average total cost?

According to the law of supply,

Figure 13-2 The figure below depicts a total cost function for a firm that produces cookies. -Refer to Figure 13-2.Which of the statements below is most consistent with the shape of the total cost curve?

Table 13-8 -Refer to Table 13-8.What is the marginal cost of the 8th gigaplot at Jimmy's Gigaplot factory?

Figure 13-6 The curves below reflect information about the cost structure of a firm. -Refer to Figure 13-6.Which of the curves is most likely to represent marginal cost?

The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve.

Table 13-10 Consider the following table of long-run total cost for four different firms -Refer to Table 13-10.Which firm's long-run marginal cost decreases as output increases?

If marginal cost is rising,

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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