Question 1

A residential cleaning company has total costs of $45,000 and total variable costs of $25,000.The cleaning company has total fixed costs that equal

Accepted Answer

A)  $20,000. 
B)  $45,000. 
C)  $70,000. 
D)  indeterminate because the firm's output level is not known 
A)  $20,000. 
B)  $45,000. 
C)  $70,000. 
D)  indeterminate because the firm's output level is not known A

Question 2

Scenario 8.1: Ana used to work for an advertising agency where she earned a yearly salary of $60,000. She got tired of working for another company and therefore opened her own advertising company. Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities. She earns $120,000 in annual revenue.
-Refer to Scenario 8.1.What is Ana's explicit cost?

Accepted Answer

A)  $65,000 
B)  $55,000 
C)  $45,000 
D)  $35,000 
A)  $65,000 
B)  $55,000 
C)  $45,000 
D)  $35,000 A

Question 3

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

Accepted Answer

Initially,there are economies of scale.When long-run average cost is minimized,there are constant returns to scale.Beyond that point,there are diseconomies of scale.

Question 4

Which of the following is true for all units of output produced?

Accepted Answer

A)  Marginal cost is less than average total cost. 
B)  Marginal cost is greater than average total cost. 
C)  Average variable cost is less than average total cost. 
D)  Average fixed cost is less than average variable cost. 
A)  Marginal cost is less than average total cost. 
B)  Marginal cost is greater than average total cost. 
C)  Average variable cost is less than average total cost. 
D)  Average fixed cost is less than average variable cost.

Question 5

-Refer to Figure 8.4.The marginal cost of the 10th basketball is

Accepted Answer

A)  $1. 
B)  $2. 
C)  $28. 
D)  $30. 
A)  $1. 
B)  $2. 
C)  $28. 
D)  $30.

Question 6

The law of diminishing returns applies in

Accepted Answer

A)  the short run and the long run. 
B)  the long run only. 
C)  the short run only. 
D)  neither the short run nor the long run. 
A)  the short run and the long run. 
B)  the long run only. 
C)  the short run only. 
D)  neither the short run nor the long run.

Question 7

Table 8.4
-Refer to Table 8.4.Three workers can produce 90 cakes per day at a total cost of

Accepted Answer

A)  $50. 
B)  $350. 
C)  $550. 
D)  $750. 
A)  $50. 
B)  $350. 
C)  $550. 
D)  $750.

Question 8

Tom's Landscaping Service has only one variable input,which is labor.Tom's Landscaping Service's labor costs are $300 a day and Tom's Landscaping Service works on 9 yards per day.To work on 10 yards per day,Tom's Landscaping Service's labor costs increase to $325 a day.The marginal cost of working on the 10th yard is

Accepted Answer

A)  $25.00. 
B)  $32.50. 
C)  $45.00. 
D)  indeterminate from the information given. 
A)  $25.00. 
B)  $32.50. 
C)  $45.00. 
D)  indeterminate from the information given.

Question 9

Decreasing marginal product implies decreasing marginal costs.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of economies of scale?

Accepted Answer

A)  As the computer industry has expanded, the number of professionally trained computer programmers has also increased, which has caused the salaries of computer programmers to increase. 
B)  To attract firms to locate in its state, the state government reduced the tax rate that businesses must pay on its profits, thus lowering the costs to firms who locate in the state. 
C)  A firm increases in size and is therefore able to lower its health insurance costs because as the size of the insured group increases, the premium per person decreases substantially. 
D)  As the demand for calculators increased, the price of calculators actually fell. 
A)  As the computer industry has expanded, the number of professionally trained computer programmers has also increased, which has caused the salaries of computer programmers to increase. 
B)  To attract firms to locate in its state, the state government reduced the tax rate that businesses must pay on its profits, thus lowering the costs to firms who locate in the state. 
C)  A firm increases in size and is therefore able to lower its health insurance costs because as the size of the insured group increases, the premium per person decreases substantially. 
D)  As the demand for calculators increased, the price of calculators actually fell.

Question 11

Table 8.6
-Refer to Table 8.6.For each level of output,compute average variable cost,marginal cost,average fixed cost,and average total cost.

Accepted Answer

The answer of   
Table 8.6
-Refer to Table 8.6.For...

Question 12

As output increases,total cost also increases.Therefore,

Accepted Answer

A)  marginal cost is increasing. 
B)  marginal cost is positive. 
C)  average fixed costs are increasing. 
D)  all of the above 
A)  marginal cost is increasing. 
B)  marginal cost is positive. 
C)  average fixed costs are increasing. 
D)  all of the above

Question 13

Explain the difference between accounting costs and economic costs.

Accepted Answer

Accounting costs are the firm's explicit

Question 14

-Refer to Figure 8.2.The marginal product of the fifth worker is

Accepted Answer

A)  1. 
B)  5. 
C)  8. 
D)  10. 
A)  1. 
B)  5. 
C)  8. 
D)  10.

Question 15

The firm's short-run cost curves shows how ________ with the quantity produced when at least one input is fixed.

Accepted Answer

A)  technology varies 
B)  production costs vary 
C)  economy of scales vary 
D)  none of the above 
A)  technology varies 
B)  production costs vary 
C)  economy of scales vary 
D)  none of the above

Question 16

Marginal cost equals average total cost

Accepted Answer

A)  when average total cost is at its minimum point. 
B)  when marginal cost is at its minimum point. 
C)  when average variable cost is at its minimum point. 
D)  when there are no fixed costs. 
A)  when average total cost is at its minimum point. 
B)  when marginal cost is at its minimum point. 
C)  when average variable cost is at its minimum point. 
D)  when there are no fixed costs.

Question 17

You own a building that has four possible uses: an Internet cafe,a coffee store,an ice cream store,and a bookstore.The value of the building in each use is $2,000; $3,000; $4,000; and $5,000,respectively.You decide to open an ice cream store.The opportunity cost of using this building for an ice cream store is

Accepted Answer

A)  $2,000, the value if the building is used as an Internet cafe. 
B)  $3,000, the value if the building is used as a coffee store. 
C)  $3,333, the average of the values if the building is used for either an Internet cafe, a coffee store, or a bookstore. 
D)  $5,000, the value if the building is used for a bookstore. 
A)  $2,000, the value if the building is used as an Internet cafe. 
B)  $3,000, the value if the building is used as a coffee store. 
C)  $3,333, the average of the values if the building is used for either an Internet cafe, a coffee store, or a bookstore. 
D)  $5,000, the value if the building is used for a bookstore.

Question 18

Which type of cost always increases immediately when output increases?

Accepted Answer

A)  fixed costs 
B)  overhead costs 
C)  total variable costs 
D)  sunk costs 
A)  fixed costs 
B)  overhead costs 
C)  total variable costs 
D)  sunk costs

Question 19

Average fixed costs rise continuously as the quantity of output rises.

Accepted Answer

A) True 
 B)False

Question 20

Table 8.1
-Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals

Accepted Answer

A)  $100,000. 
B)  $45,000. 
C)  $0. 
D)  -$45,000. 
A)  $100,000. 
B)  $45,000. 
C)  $0. 
D)  -$45,000.

A residential cleaning company has total costs of $45,000 and total variable costs of $25,000.The cleaning company has total fixed costs that equal

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

Which of the following is true for all units of output produced?

-Refer to Figure 8.4.The marginal cost of the 10th basketball is

The law of diminishing returns applies in

Table 8.4 -Refer to Table 8.4.Three workers can produce 90 cakes per day at a total cost of

Decreasing marginal product implies decreasing marginal costs.

Which of the following is an example of economies of scale?

Table 8.6 -Refer to Table 8.6.For each level of output,compute average variable cost,marginal cost,average fixed cost,and average total cost.

As output increases,total cost also increases.Therefore,

Explain the difference between accounting costs and economic costs.

-Refer to Figure 8.2.The marginal product of the fifth worker is

The firm's short-run cost curves shows how ________ with the quantity produced when at least one input is fixed.

Marginal cost equals average total cost

Which type of cost always increases immediately when output increases?

Average fixed costs rise continuously as the quantity of output rises.

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

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Exam 8: Production Technology and Cost

A residential cleaning company has total costs of $45,000 and total variable costs of $25,000.The cleaning company has total fixed costs that equal

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

Which of the following is true for all units of output produced?

-Refer to Figure 8.4.The marginal cost of the 10th basketball is

The law of diminishing returns applies in

Table 8.4 -Refer to Table 8.4.Three workers can produce 90 cakes per day at a total cost of

Decreasing marginal product implies decreasing marginal costs.

Which of the following is an example of economies of scale?

Table 8.6 -Refer to Table 8.6.For each level of output,compute average variable cost,marginal cost,average fixed cost,and average total cost.

As output increases,total cost also increases.Therefore,

Explain the difference between accounting costs and economic costs.

-Refer to Figure 8.2.The marginal product of the fifth worker is

The firm's short-run cost curves shows how ________ with the quantity produced when at least one input is fixed.

Marginal cost equals average total cost

Which type of cost always increases immediately when output increases?

Average fixed costs rise continuously as the quantity of output rises.

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters