Question 1

If a firm is producing toasters using two inputs, and the MP1/P1=MP2 /P2, then the firm is minimizing costs.

Accepted Answer

A) True 
 B)False

Question 2

If you know fixed cost and the marginal cost of producing 10 units of output, then you can always compute the average cost of producing 10 units of output.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions :
Figure 7-1  
-Given the curves shown in Figure 7-1, the average fixed cost of 3 units of output is:

Accepted Answer

A) $3.00. 
B) $6.00. 
C) $8.33. 
D) $25.00. 
E) none of the above. 
A) $3.00. 
B) $6.00. 
C) $8.33. 
D) $25.00. 
E) none of the above.

Question 4

If marginal cost is falling, then total cost is falling at an increasing rate.

Accepted Answer

A) True 
 B)False

Question 5

Opportunity cost would still exist if I mow the lawn instead of planting the garden.

Accepted Answer

A) True 
 B)False

Question 6

Microsoft lets you have their software, Internet Explorer.By what you know about marginal cost how can they do this and stay in business?

Accepted Answer

A) They went out of business because of this. 
B) The marginal cost of distributing an extra unit of software is very close to zero. 
C) The marginal cost is high but they do it anyway. 
D) They are covering their fixed costs. 
E) They now charge for Internet Explorer. 
A) They went out of business because of this. 
B) The marginal cost of distributing an extra unit of software is very close to zero. 
C) The marginal cost is high but they do it anyway. 
D) They are covering their fixed costs. 
E) They now charge for Internet Explorer.

Question 7

The substitution rule requires firms to substitute into the use of new technology whenever possible.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions :
Table 7-1  
-What is MC between Q = 3 and Q = 4 in Table 7-1?

Accepted Answer

A) 10 
B) 15 
C) 20 
D) 25 
E) None of the above. 
A) 10 
B) 15 
C) 20 
D) 25 
E) None of the above.

Question 9

Dividends are not an expense on a company's income statement.

Accepted Answer

A) True 
 B)False

Question 10

The intersection of the marginal cost curve and the average cost curve characterizes the point of:

Accepted Answer

A) maximum profit. 
B) minimum average cost. 
C) minimum marginal cost. 
D) minimum opportunity cost. 
E) minimum profit. 
A) maximum profit. 
B) minimum average cost. 
C) minimum marginal cost. 
D) minimum opportunity cost. 
E) minimum profit.

Question 11

The retained earnings item on the balance sheet is:

Accepted Answer

A) equal to net profit for the period in question. 
B) equal to the total of plowed-back earnings shown on previous income statements. 
C) equal to the total of all earnings-after-taxes figures shown on previous income statements. 
D) offset by an intangible asset account, such as goodwill. 
E) equal to total assets minus total liabilities. 
A) equal to net profit for the period in question. 
B) equal to the total of plowed-back earnings shown on previous income statements. 
C) equal to the total of all earnings-after-taxes figures shown on previous income statements. 
D) offset by an intangible asset account, such as goodwill. 
E) equal to total assets minus total liabilities.

Question 12

Use the following to answer questions :
Table 7-1  
-In Table 7-1, where is the minimum of the AC curve?

Accepted Answer

A) Between Q = 3 and Q = 4 
B) Between Q = 4 and Q = 5 
C) Between Q = 5 and Q = 6 
D) Between Q = 6 and Q = 7 
E) Impossible to tell from the information given. 
A) Between Q = 3 and Q = 4 
B) Between Q = 4 and Q = 5 
C) Between Q = 5 and Q = 6 
D) Between Q = 6 and Q = 7 
E) Impossible to tell from the information given.

Question 13

There are many interconnections between a company's balance sheet and its income statement.

Accepted Answer

A) True 
 B)False

Question 14

If 25 units of a good are produced at a fixed cost of $50 and a total cost of $550, then the average variable cost of producing the good is:

Accepted Answer

A) $15. 
B) $20. 
C) $25. 
D) $30. 
E) none of the above. 
A) $15. 
B) $20. 
C) $25. 
D) $30. 
E) none of the above.

Question 15

Unlike fixed costs, variable costs are zero if output is zero.

Accepted Answer

A) True 
 B)False

Question 16

If it costs $30 to produce the first unit of a good and $28, $27, $25, $23,$24, and $25 to produce the next six units, respectively, then the minimum of the average cost curve could occur at:

Accepted Answer

A) 1 unit. 
B) 2 units. 
C) 3 units. 
D) 5 units. 
E) none of the above. 
A) 1 unit. 
B) 2 units. 
C) 3 units. 
D) 5 units. 
E) none of the above.

Question 17

Because opportunity costs always equal market price, opportunity costs also includes accounting costs.

Accepted Answer

A) True 
 B)False

Question 18

As production increases, average fixed costs always decline (if they are non-zero).

Accepted Answer

A) True 
 B)False

Question 19

If 25 units of a good are produced at a fixed cost of $50 and a total cost of $550, then the average total cost of producing the good is:

Accepted Answer

A) $15. 
B) $20. 
C) $25. 
D) $30. 
E) none of the above. 
A) $15. 
B) $20. 
C) $25. 
D) $30. 
E) none of the above.

Question 20

Knowledge of total variable costs and fixed costs for various outputs enables one to determine which of the following?

Accepted Answer

A) Average cost. 
B) Average fixed cost. 
C) Average variable cost. 
D) Marginal cost. 
E) All the above. 
A) Average cost. 
B) Average fixed cost. 
C) Average variable cost. 
D) Marginal cost. 
E) All the above.

If a firm is producing toasters using two inputs, and the MP₁/P₁=MP₂/P₂, then the firm is minimizing costs.

If you know fixed cost and the marginal cost of producing 10 units of output, then you can always compute the average cost of producing 10 units of output.

Use the following to answer questions : Figure 7-1 -Given the curves shown in Figure 7-1, the average fixed cost of 3 units of output is:

If marginal cost is falling, then total cost is falling at an increasing rate.

Opportunity cost would still exist if I mow the lawn instead of planting the garden.

Microsoft lets you have their software, Internet Explorer.By what you know about marginal cost how can they do this and stay in business?

The substitution rule requires firms to substitute into the use of new technology whenever possible.

Use the following to answer questions : Table 7-1 -What is MC between Q = 3 and Q = 4 in Table 7-1?

Dividends are not an expense on a company's income statement.

The intersection of the marginal cost curve and the average cost curve characterizes the point of:

The retained earnings item on the balance sheet is:

Use the following to answer questions : Table 7-1 -In Table 7-1, where is the minimum of the AC curve?

There are many interconnections between a company's balance sheet and its income statement.

If 25 units of a good are produced at a fixed cost of $50 and a total cost of $550, then the average variable cost of producing the good is:

Unlike fixed costs, variable costs are zero if output is zero.

If it costs $30 to produce the first unit of a good and $28, $27, $25, $23,$24, and $25 to produce the next six units, respectively, then the minimum of the average cost curve could occur at:

Because opportunity costs always equal market price, opportunity costs also includes accounting costs.

As production increases, average fixed costs always decline (if they are non-zero).

If 25 units of a good are produced at a fixed cost of $50 and a total cost of $550, then the average total cost of producing the good is:

Knowledge of total variable costs and fixed costs for various outputs enables one to determine which of the following?

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

Exam 7: Analysis of Costs

If a firm is producing toasters using two inputs, and the MP1/P1=MP2 /P2, then the firm is minimizing costs.

If you know fixed cost and the marginal cost of producing 10 units of output, then you can always compute the average cost of producing 10 units of output.

Use the following to answer questions : Figure 7-1 -Given the curves shown in Figure 7-1, the average fixed cost of 3 units of output is:

If marginal cost is falling, then total cost is falling at an increasing rate.

Opportunity cost would still exist if I mow the lawn instead of planting the garden.

Microsoft lets you have their software, Internet Explorer.By what you know about marginal cost how can they do this and stay in business?

The substitution rule requires firms to substitute into the use of new technology whenever possible.

Use the following to answer questions : Table 7-1 -What is MC between Q = 3 and Q = 4 in Table 7-1?

Dividends are not an expense on a company's income statement.

The intersection of the marginal cost curve and the average cost curve characterizes the point of:

The retained earnings item on the balance sheet is:

Use the following to answer questions : Table 7-1 -In Table 7-1, where is the minimum of the AC curve?

There are many interconnections between a company's balance sheet and its income statement.

If 25 units of a good are produced at a fixed cost of $50 and a total cost of $550, then the average variable cost of producing the good is:

Unlike fixed costs, variable costs are zero if output is zero.

If it costs $30 to produce the first unit of a good and $28, $27, $25, $23,$24, and $25 to produce the next six units, respectively, then the minimum of the average cost curve could occur at:

Because opportunity costs always equal market price, opportunity costs also includes accounting costs.

As production increases, average fixed costs always decline (if they are non-zero).

If 25 units of a good are produced at a fixed cost of $50 and a total cost of $550, then the average total cost of producing the good is:

Knowledge of total variable costs and fixed costs for various outputs enables one to determine which of the following?

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

If a firm is producing toasters using two inputs, and the MP₁/P₁=MP₂/P₂, then the firm is minimizing costs.