Question 1

Which of the following factors of production is most likely to be variable in the short run?

Accepted Answer

A) capital equipment 
B) land 
C) labour 
D) entrepreneurship 
E) technology 
A) capital equipment 
B) land 
C) labour 
D) entrepreneurship 
E) technology

Question 2

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
   TABLE 7-4
-Refer to Table 7-4.Average fixed costs for 305 units of output is approximately

Accepted Answer

A) 33 cents. 
B) 41 cents. 
C) 45 cents. 
D) 74 cents. 
E) $3.05. 
A) 33 cents. 
B) 41 cents. 
C) 45 cents. 
D) 74 cents. 
E) $3.05.

Question 3

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
   TABLE 7-4
-Refer to Table 7-4.The average total cost for 250 units of output is approximately

Accepted Answer

A) 33 cents. 
B) 40 cents. 
C) 63 cents. 
D) 80 cents. 
E) $1.00. 
A) 33 cents. 
B) 40 cents. 
C) 63 cents. 
D) 80 cents. 
E) $1.00.

Question 4

An example of "real" capital is

Accepted Answer

A) shares in a corporation. 
B) corporate bonds. 
C) a firm's balance in a bank account. 
D) a firm's computer systems. 
E) a firm's retained earnings. 
A) shares in a corporation. 
B) corporate bonds. 
C) a firm's balance in a bank account. 
D) a firm's computer systems. 
E) a firm's retained earnings.

Question 5

The table below provides information on output per month and short-run costs for a firm producing outdoor wooden lounge chairs.All costs are in dollars.
   TABLE 7-5
-Refer to Table 7-5.Given the information in the table about short-run costs,this firm would minimize the average variable cost of production when producing

Accepted Answer

A) 10 chairs. 
B) 15 chairs. 
C) 20 chairs. 
D) 25 chairs. 
E) 30 chairs. 
A) 10 chairs. 
B) 15 chairs. 
C) 20 chairs. 
D) 25 chairs. 
E) 30 chairs.

Question 6

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
   TABLE 7-4
-Refer to Table 7-4.The total variable cost of producing 305 units of output is

Accepted Answer

A) $100. 
B) $125. 
C) $225. 
D) $305. 
E) $325. 
A) $100. 
B) $125. 
C) $225. 
D) $305. 
E) $325.

Question 7

Consider a firm's short-run cost curves.Which one of the following types of cost declines over the whole range of output?

Accepted Answer

A) average fixed cost 
B) marginal cost 
C) total fixed cost 
D) average variable cost 
E) total variable cost 
A) average fixed cost 
B) marginal cost 
C) total fixed cost 
D) average variable cost 
E) total variable cost

Question 8

Real capital includes

Accepted Answer

A) a firm's physical assets. 
B) corporate bonds. 
C) corporate stock. 
D) a firm's balance in its bank account. 
E) owner's equity. 
A) a firm's physical assets. 
B) corporate bonds. 
C) corporate stock. 
D) a firm's balance in its bank account. 
E) owner's equity.

Question 9

The theory of the firm is based on the following two key assumptions:

Accepted Answer

A) Firms seek to become as large as possible,and they seek to maximize total revenue. 
B) Each firm has a highly diversified product,and this leads to profit maximization. 
C) Firms seek to maximize profit,and to distribute the maximum value in dividends. 
D) Firms seek to maximize profits,and the firm is a single,consistent decision-making unit. 
E) Firms seek to maximize revenues,and to maximize undistributed profits. 
A) Firms seek to become as large as possible,and they seek to maximize total revenue. 
B) Each firm has a highly diversified product,and this leads to profit maximization. 
C) Firms seek to maximize profit,and to distribute the maximum value in dividends. 
D) Firms seek to maximize profits,and the firm is a single,consistent decision-making unit. 
E) Firms seek to maximize revenues,and to maximize undistributed profits.

Question 10

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
   TABLE 7-3
-Refer to Table 7-3.At what level of output does average variable cost reach a minimum?

Accepted Answer

A) 30 
B) 90 
C) 132 
D) 150 
E) AVC declines continuously over the range of output shown. 
A) 30 
B) 90 
C) 132 
D) 150 
E) AVC declines continuously over the range of output shown.

Question 11

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
   TABLE 7-3
-Refer to Table 7-3.The average variable cost when this firm is producing 90 units of output is

Accepted Answer

A) 17 cents. 
B) 33 cents. 
C) 68 cents. 
D) 89 cents. 
E) 98 cents. 
A) 17 cents. 
B) 33 cents. 
C) 68 cents. 
D) 89 cents. 
E) 98 cents.

Question 12

The table below provides the annual revenues and costs for a family-owned firm producing catered meals.
   TABLE 7-1
-Refer to Table 7-1.The economic profits for this family-owned firm are

Accepted Answer

A) $115 000. 
B) $10 000. 
C) $0. 
D) -$10 000. 
E) -$105 000. 
A) $115 000. 
B) $10 000. 
C) $0. 
D) -$10 000. 
E) -$105 000.

Question 13

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
   TABLE 7-3
-Refer to Table 7-3.The average total cost when producing 150 units of output is approximately

Accepted Answer

A) 33 cents. 
B) 40 cents. 
C) 67 cents. 
D) 80 cents. 
E) $1.50. 
A) 33 cents. 
B) 40 cents. 
C) 67 cents. 
D) 80 cents. 
E) $1.50.

Question 14

When a corporation issues a bond

Accepted Answer

A) the purchaser of the bond assumes ownership rights in the corporation. 
B) it is making a promise to pay interest each year and to repay the principal at a stated time in the future. 
C) it is called equity capital. 
D) it is called financing through the stock market. 
E) it is making a promise to pay interest each year but not repay the principal. 
A) the purchaser of the bond assumes ownership rights in the corporation. 
B) it is making a promise to pay interest each year and to repay the principal at a stated time in the future. 
C) it is called equity capital. 
D) it is called financing through the stock market. 
E) it is making a promise to pay interest each year but not repay the principal.

Question 15

Suppose Jodi's widget business is using two inputs,labour and capital.If the price of labour increases,which of the following will happen?

Accepted Answer

A) Jodi will shut down her business. 
B) The firm's average total cost curve will shift upward. 
C) The firm's marginal cost curve will remain unchanged. 
D) Jodi will hire more labour. 
E) The firm's average fixed cost curve will shift upward. 
A) Jodi will shut down her business. 
B) The firm's average total cost curve will shift upward. 
C) The firm's marginal cost curve will remain unchanged. 
D) Jodi will hire more labour. 
E) The firm's average fixed cost curve will shift upward.

Question 16

Suppose NHL hockey player Jarome Iginla is averaging three points per game going into the last game of the season in which he collects four points,thereby changing his average for the season.To use an analogy in economics,it could be said that average product increases

Accepted Answer

A) when total product increases. 
B) when marginal product exceeds average product. 
C) when average product exceeds marginal product. 
D) when marginal product increases. 
E) whenever marginal product is positive. 
A) when total product increases. 
B) when marginal product exceeds average product. 
C) when average product exceeds marginal product. 
D) when marginal product increases. 
E) whenever marginal product is positive.

Question 17

FIGURE 7-1
-Refer to Figure 7-1.Total product is increasing at a decreasing rate

Accepted Answer

A) from 0 to 20 units of output. 
B) from 0 to 32 units of output. 
C) between 140 to 200 units of output. 
D) between 140 to 250 units of output. 
E) over the whole production range. 
A) from 0 to 20 units of output. 
B) from 0 to 32 units of output. 
C) between 140 to 200 units of output. 
D) between 140 to 250 units of output. 
E) over the whole production range.

Question 18

The period of time over which all factors of production and technology are variable is known as the

Accepted Answer

A) very-short run. 
B) short run. 
C) long run. 
D) very-long run. 
A) very-short run. 
B) short run. 
C) long run. 
D) very-long run.

Question 19

"An objective of firms is to maximize profits." This statement

Accepted Answer

A) has been proven by empirical testing to be always true. 
B) is an assumption used by economists to predict the behaviour of firms. 
C) is a normative statement and thus cannot be tested. 
D) applies only to corporations. 
E) is an unrealistic assumption,and therefore of little use to economists. 
A) has been proven by empirical testing to be always true. 
B) is an assumption used by economists to predict the behaviour of firms. 
C) is a normative statement and thus cannot be tested. 
D) applies only to corporations. 
E) is an unrealistic assumption,and therefore of little use to economists.

Question 20

The diagram below shows some short-run cost curves for a firm.   FIGURE 7-2
-Refer to Figure 7-2.Which of the following choices correctly identifies the cost curves in part (i)of the figure?

Accepted Answer

A) Curve 1 is the total cost curve. Curve 2 is the total variable cost curve.
Curve 3 is the total fixed cost curve. 
B) Curve 1 is the total fixed cost curve. Curve 2 is the total variable cost curve.
Curve 3 is the total cost curve. 
C) Curve 1 is the total variable cost curve. Curve 2 is the total cost curve.
Curve 3 is the total fixed cost curve. 
D) Curve 1 is the total marginal cost curve. Curve 2 is the total average cost curve.
Curve 3 is the total average fixed cost curve. 
E) Curve 1 is the total cost curve. Curve 2 is the total variable cost curve.
Curve 3 is the average fixed cost curve. 
A) Curve 1 is the total cost curve. Curve 2 is the total variable cost curve.
Curve 3 is the total fixed cost curve. 
B) Curve 1 is the total fixed cost curve. Curve 2 is the total variable cost curve.
Curve 3 is the total cost curve. 
C) Curve 1 is the total variable cost curve. Curve 2 is the total cost curve.
Curve 3 is the total fixed cost curve. 
D) Curve 1 is the total marginal cost curve. Curve 2 is the total average cost curve.
Curve 3 is the total average fixed cost curve. 
E) Curve 1 is the total cost curve. Curve 2 is the total variable cost curve.
Curve 3 is the average fixed cost curve.

Exam 7: Producers in the Short Run

Which of the following factors of production is most likely to be variable in the short run?

An example of "real" capital is

Consider a firm's short-run cost curves.Which one of the following types of cost declines over the whole range of output?

Real capital includes

The theory of the firm is based on the following two key assumptions:

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1.The economic profits for this family-owned firm are

When a corporation issues a bond

Suppose Jodi's widget business is using two inputs,labour and capital.If the price of labour increases,which of the following will happen?

Suppose NHL hockey player Jarome Iginla is averaging three points per game going into the last game of the season in which he collects four points,thereby changing his average for the season.To use an analogy in economics,it could be said that average product increases

FIGURE 7-1 -Refer to Figure 7-1.Total product is increasing at a decreasing rate

The period of time over which all factors of production and technology are variable is known as the

"An objective of firms is to maximize profits." This statement

The diagram below shows some short-run cost curves for a firm. FIGURE 7-2 -Refer to Figure 7-2.Which of the following choices correctly identifies the cost curves in part (i)of the figure?

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