Question 1

Assets are valued:

Accepted Answer

A) in different ways, depending on the state of inflation or deflation. 
B) at their purchase prices minus accumulated depreciation. 
C) at the amount for which they could be sold. 
D) by accountants, using any careful or arbitrary assumptions they choose. 
E) in general by rule-of-thumb, so that mistakes are not uncommon. 
A) in different ways, depending on the state of inflation or deflation. 
B) at their purchase prices minus accumulated depreciation. 
C) at the amount for which they could be sold. 
D) by accountants, using any careful or arbitrary assumptions they choose. 
E) in general by rule-of-thumb, so that mistakes are not uncommon. B

Question 2

If the total cost of producing 6 units is $48 and the marginal cost of the seventh unit is $15, then:

Accepted Answer

A) the average total cost of 7 units is $9. 
B) the average variable cost of 7 units is $9. 
C) fixed costs are $8. 
D) fixed costs are $33. 
E) none of the above are true. 
A) the average total cost of 7 units is $9. 
B) the average variable cost of 7 units is $9. 
C) fixed costs are $8. 
D) fixed costs are $33. 
E) none of the above are true. A

Question 3

A driver wishes to buy gasoline and have her car washed.She finds that the wash costs $3.00 when she buys 19 gallons at $1.00 each, but that if she buys 20 gallons, the car wash is free.Thus the marginal cost of the twentieth gallon of gas is:

Accepted Answer

A) -$2.00. 
B) $0.00. 
C) $1.00. 
D) $2.00. 
E) none of the above. 
A) -$2.00. 
B) $0.00. 
C) $1.00. 
D) $2.00. 
E) none of the above. A

Question 4

If MC is less than AC, AC must be falling.

Accepted Answer

A) True 
 B)False

Question 5

If it is true that handling the mail does not get cheaper as the volume of mail increases, which of the following best explains this fact?

Accepted Answer

A) The Post Office is run by the government and therefore is inefficient. 
B) The rule "the bigger the volume, the lower the cost" is true only if other things remain the same; since technological knowledge changes constantly, the cost of handling mail need not fall. 
C) Although the rule "the bigger the volume, the lower the cost" is true of most industries, it is not true of all of them. 
D) The rule "the bigger the volume, the lower the cost" is true only up to a point, beyond which costs rise. 
E) The rule "the bigger the volume, the lower the cost" generally applies only to private industry. 
A) The Post Office is run by the government and therefore is inefficient. 
B) The rule "the bigger the volume, the lower the cost" is true only if other things remain the same; since technological knowledge changes constantly, the cost of handling mail need not fall. 
C) Although the rule "the bigger the volume, the lower the cost" is true of most industries, it is not true of all of them. 
D) The rule "the bigger the volume, the lower the cost" is true only up to a point, beyond which costs rise. 
E) The rule "the bigger the volume, the lower the cost" generally applies only to private industry.

Question 6

Use the following to answer questions :
Table 7-2  
-If $40,000 worth of inventory were destroyed in an accident, what would the company in Table 7-2's new net worth be?

Accepted Answer

A) $50,000 
B) $60,000 
C) $90,000 
D) $175,000 
E) None of the above. 
A) $50,000 
B) $60,000 
C) $90,000 
D) $175,000 
E) None of the above.

Question 7

After-tax earnings are the total of dividends and retained earnings.

Accepted Answer

A) True 
 B)False

Question 8

If a firm produces more goods than it sells and buys more raw materials than it uses up during the year, an inventory adjustment must be made so as not to:

Accepted Answer

A) overstate earnings for the year. 
B) understate earnings for the year. 
C) overstate liabilities at the end of the year. 
D) understate liabilities at the end of the year. 
E) overstate assets at the end of the year. 
A) overstate earnings for the year. 
B) understate earnings for the year. 
C) overstate liabilities at the end of the year. 
D) understate liabilities at the end of the year. 
E) overstate assets at the end of the year.

Question 9

Use the following to answer questions :
Table 7-2  
-In Table 7-2, what are total assets?

Accepted Answer

A) $190,000 
B) $200,000 
C) $205,000 
D) $215,000 
E) None of the above. 
A) $190,000 
B) $200,000 
C) $205,000 
D) $215,000 
E) None of the above.

Question 10

Costs that change as output changes:

Accepted Answer

A) fixed cost 
B) variable cost. 
C) sunk cost. 
D) overhead cost. 
E) is defined by none of the above. 
A) fixed cost 
B) variable cost. 
C) sunk cost. 
D) overhead cost. 
E) is defined by none of the above.

Question 11

An accountant who forgets about depreciation charges for the year in drawing up the profit and loss statement and balance sheet will:

Accepted Answer

A) overstate the profits for the year. 
B) understate the profits for the year. 
C) overstate the liabilities of the firm. 
D) understate the liabilities of the firm. 
E) understate the net worth of the firm. 
A) overstate the profits for the year. 
B) understate the profits for the year. 
C) overstate the liabilities of the firm. 
D) understate the liabilities of the firm. 
E) understate the net worth of the firm.

Question 12

If output rises and total costs remain fixed, then:

Accepted Answer

A) average cost will fall. 
B) average cost will rise. 
C) average cost will eventually increase. 
D) fixed cost will eventually rise. 
E) variable cost will eventually become fixed at some maximum level. 
A) average cost will fall. 
B) average cost will rise. 
C) average cost will eventually increase. 
D) fixed cost will eventually rise. 
E) variable cost will eventually become fixed at some maximum level.

Question 13

In our analysis, a firm answering the "how" question in choosing inputs is assumed to:

Accepted Answer

A) minimize profits. 
B) minimize production costs. 
C) maximize profits. 
D) minimize average total costs. 
E) minimize fixed costs. 
A) minimize profits. 
B) minimize production costs. 
C) maximize profits. 
D) minimize average total costs. 
E) minimize fixed costs.

Question 14

Use the following to answer questions :
Figure 7-2  
-In Figure 7-2, what are total fixed costs at Q = 2?

Accepted Answer

A) 5 
B) 10 
C) 13.75 
D) 15 
E) None of the above. 
A) 5 
B) 10 
C) 13.75 
D) 15 
E) None of the above.

Question 15

Use the following to answer questions :
Table 7-2  
-What is the company's net worth in Table 7-2?

Accepted Answer

A) $60,000 
B) $80,000 
C) $90,000 
D) $100,000 
E) Impossible to tell from the information given. 
A) $60,000 
B) $80,000 
C) $90,000 
D) $100,000 
E) Impossible to tell from the information given.

Question 16

A company's depreciation charge on its income statement represents a writing down of the value of fixed assets to their current market value.

Accepted Answer

A) True 
 B)False

Question 17

Marginal cost is equal to the per unit change in variable cost.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following are rules about the relation between average cost and marginal cost:

Accepted Answer

A) When marginal cost is below average cost, it is pulling average cost down. 
B) When MC is above AC, it is pulling up AC. 
C) When MC just equals AC, AC is constant. 
D) All of the above. 
E) None of the above. 
A) When marginal cost is below average cost, it is pulling average cost down. 
B) When MC is above AC, it is pulling up AC. 
C) When MC just equals AC, AC is constant. 
D) All of the above. 
E) None of the above.

Question 19

The marginal cost curve can cut the average variable cost curve from below only at its minimum.

Accepted Answer

A) True 
 B)False

Question 20

In the short run, plant capacity but not output can be altered.

Accepted Answer

A) True 
 B)False

Assets are valued:

If the total cost of producing 6 units is $48 and the marginal cost of the seventh unit is $15, then:

A driver wishes to buy gasoline and have her car washed.She finds that the wash costs $3.00 when she buys 19 gallons at $1.00 each, but that if she buys 20 gallons, the car wash is free.Thus the marginal cost of the twentieth gallon of gas is:

If MC is less than AC, AC must be falling.

If it is true that handling the mail does not get cheaper as the volume of mail increases, which of the following best explains this fact?

Use the following to answer questions : Table 7-2 -If $40,000 worth of inventory were destroyed in an accident, what would the company in Table 7-2's new net worth be?

After-tax earnings are the total of dividends and retained earnings.

If a firm produces more goods than it sells and buys more raw materials than it uses up during the year, an inventory adjustment must be made so as not to:

Use the following to answer questions : Table 7-2 -In Table 7-2, what are total assets?

Costs that change as output changes:

An accountant who forgets about depreciation charges for the year in drawing up the profit and loss statement and balance sheet will:

If output rises and total costs remain fixed, then:

In our analysis, a firm answering the "how" question in choosing inputs is assumed to:

Use the following to answer questions : Figure 7-2 -In Figure 7-2, what are total fixed costs at Q = 2?

Use the following to answer questions : Table 7-2 -What is the company's net worth in Table 7-2?

A company's depreciation charge on its income statement represents a writing down of the value of fixed assets to their current market value.

Marginal cost is equal to the per unit change in variable cost.

Which of the following are rules about the relation between average cost and marginal cost:

The marginal cost curve can cut the average variable cost curve from below only at its minimum.

In the short run, plant capacity but not output can be altered.

The Central Concepts of Economics

The Modern Mixed Economy

Basic Elements of Supply and Demand Part

Supply and Demand: Elasticity and Applications

Demand and Consumer Behavior

Production and Business Organization

Analysis of Perfectly Competitive Markets

Imperfect Competition and Monopoly

Competition Among the Few

Economics of Uncertainty

The Labor Market

Land, Natural Resources, and the Environment

Capital, Interest, and Profits Part Four: Applications of Economic Principles

Government Taxation and Expenditure

Efficiency Vsequality: The Big Trade-Off

International Trade

Overview of Macroeconomics

Geometrical Analysis of Consumer Equilibrium

Production Cost Theory and Decisions of the Firm

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Exam 7: Analysis of Costs

Assets are valued:

If the total cost of producing 6 units is $48 and the marginal cost of the seventh unit is $15, then:

A driver wishes to buy gasoline and have her car washed.She finds that the wash costs $3.00 when she buys 19 gallons at $1.00 each, but that if she buys 20 gallons, the car wash is free.Thus the marginal cost of the twentieth gallon of gas is:

If MC is less than AC, AC must be falling.

If it is true that handling the mail does not get cheaper as the volume of mail increases, which of the following best explains this fact?

Use the following to answer questions : Table 7-2 -If $40,000 worth of inventory were destroyed in an accident, what would the company in Table 7-2's new net worth be?

After-tax earnings are the total of dividends and retained earnings.

If a firm produces more goods than it sells and buys more raw materials than it uses up during the year, an inventory adjustment must be made so as not to:

Use the following to answer questions : Table 7-2 -In Table 7-2, what are total assets?

Costs that change as output changes:

An accountant who forgets about depreciation charges for the year in drawing up the profit and loss statement and balance sheet will:

If output rises and total costs remain fixed, then:

In our analysis, a firm answering the "how" question in choosing inputs is assumed to:

Use the following to answer questions : Figure 7-2 -In Figure 7-2, what are total fixed costs at Q = 2?

Use the following to answer questions : Table 7-2 -What is the company's net worth in Table 7-2?

A company's depreciation charge on its income statement represents a writing down of the value of fixed assets to their current market value.

Marginal cost is equal to the per unit change in variable cost.

Which of the following are rules about the relation between average cost and marginal cost:

The marginal cost curve can cut the average variable cost curve from below only at its minimum.

In the short run, plant capacity but not output can be altered.

The Central Concepts of Economics

The Modern Mixed Economy

Basic Elements of Supply and Demand Part

Supply and Demand: Elasticity and Applications

Demand and Consumer Behavior

Production and Business Organization

Analysis of Perfectly Competitive Markets

Imperfect Competition and Monopoly

Competition Among the Few

Economics of Uncertainty

The Labor Market

Land, Natural Resources, and the Environment

Capital, Interest, and Profits Part Four: Applications of Economic Principles

Government Taxation and Expenditure

Efficiency Vsequality: The Big Trade-Off

International Trade

Overview of Macroeconomics

Geometrical Analysis of Consumer Equilibrium

Production Cost Theory and Decisions of the Firm

Filters