Question 1

Normal profit is defined as _____

Accepted Answer

A) cost of production minus revenue from sales. 
B) economic profit plus accounting profit. 
C) the profit necessary to ensure that opportunity costs are covered. 
D) accounting profit minus economic profit. 
E) economic profit minus accounting profit. 
A) cost of production minus revenue from sales. 
B) economic profit plus accounting profit. 
C) the profit necessary to ensure that opportunity costs are covered. 
D) accounting profit minus economic profit. 
E) economic profit minus accounting profit.

Question 2

Which of the following is most likely to be a fixed resource for a word processing firm?

Accepted Answer

A) a laptop 
B) a worker 
C) the building 
D) a month's electricity bill 
E) a bundle of paper 
A) a laptop 
B) a worker 
C) the building 
D) a month's electricity bill 
E) a bundle of paper

Question 3

Economies of scale occur where _____

Accepted Answer

A) long-run average cost falls as new firms enter the industry. 
B) short-run average cost falls as new firms enter the industry. 
C) long-run average cost falls as one firm expands plant size. 
D) short-run average cost falls as one firm expands plant size. 
E) long-run average cost rises as one firm expands plant size. 
A) long-run average cost falls as new firms enter the industry. 
B) short-run average cost falls as new firms enter the industry. 
C) long-run average cost falls as one firm expands plant size. 
D) short-run average cost falls as one firm expands plant size. 
E) long-run average cost rises as one firm expands plant size.

Question 4

In the range of increasing marginal returns,total product is _____

Accepted Answer

A) increasing at a constant rate. 
B) increasing at an increasing rate. 
C) increasing at a decreasing rate. 
D) decreasing at an increasing rate. 
E) decreasing at a decreasing rate. 
A) increasing at a constant rate. 
B) increasing at an increasing rate. 
C) increasing at a decreasing rate. 
D) decreasing at an increasing rate. 
E) decreasing at a decreasing rate.

Question 5

Exhibit 7.4
  
-Refer to Exhibit 7.4,which shows short-run average cost curves.For output more than qb,when is average cost the lowest?

Accepted Answer

A) when the plant is large 
B) when the plant is medium-size 
C) when the plant is small 
D) at an output level less than q 
E) at an output level more than qb 
A) when the plant is large 
B) when the plant is medium-size 
C) when the plant is small 
D) at an output level less than q 
E) at an output level more than qb

Question 6

If all the savings of an owner are invested in his consulting company,an increase in the interest rate increases his implicit costs.

Accepted Answer

A) True 
 B)False

Question 7

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year.He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year.If downloads generate $50,000 in revenue during the first year,then his business _____

Accepted Answer

A) has an accounting profit but an economic loss. 
B) has an accounting loss and an economic profit. 
C) has both accounting and economic profits. 
D) has both an accounting and an economic loss. 
E) has a normal profit. 
A) has an accounting profit but an economic loss. 
B) has an accounting loss and an economic profit. 
C) has both accounting and economic profits. 
D) has both an accounting and an economic loss. 
E) has a normal profit.

Question 8

As output increases,diseconomies of scale _____

Accepted Answer

A) lead to rising long-run average costs. 
B) lead to declining long-run average costs. 
C) lead to rising short-run average total costs. 
D) lead to declining short-run total costs. 
E) mean that the law of diminishing marginal returns is affecting production. 
A) lead to rising long-run average costs. 
B) lead to declining long-run average costs. 
C) lead to rising short-run average total costs. 
D) lead to declining short-run total costs. 
E) mean that the law of diminishing marginal returns is affecting production.

Question 9

If a pizza joint earns only a normal profit this year,its _____

Accepted Answer

A) economic profit is equal to its accounting profit. 
B) economic profit is zero. 
C) economic profit is equal to the average accounting profit in other industries. 
D) accounting profit is zero. 
E) accounting profit is less than its economic profit. 
A) economic profit is equal to its accounting profit. 
B) economic profit is zero. 
C) economic profit is equal to the average accounting profit in other industries. 
D) accounting profit is zero. 
E) accounting profit is less than its economic profit.

Question 10

Exhibit 7.2
  
-Refer to Exhibit 7.2,which shows different cost curves.Which of the curves represents variable cost?

Accepted Answer

A) A 
B) B 
C) C 
D) both A and B 
E) both A and C 
A) A 
B) B 
C) C 
D) both A and B 
E) both A and C

Question 11

Table 7.2
 $$\begin{array} { c c } 
\text { Labor } & \begin{array} { c } 
\text { Total Froduct } \
\text { (pairs of shoes) }
\end{array} \
\hline 0 & 0 \
1 & 20 \
2 & 50 \
3 & 75 \
4 & 80 \
5 & 75
\end{array}$$
-Refer to Table 7.2,which shows labor and the quantity of shoes produced by a firm.What is the marginal product of the third unit of labor?

Accepted Answer

A) 45 pairs of shoes 
B) 25 pairs of shoes 
C) 15 pairs of shoes 
D) 75 pairs of shoes 
E) 50 pairs of shoes 
A) 45 pairs of shoes 
B) 25 pairs of shoes 
C) 15 pairs of shoes 
D) 75 pairs of shoes 
E) 50 pairs of shoes

Question 12

A firm earns normal profit _____

Accepted Answer

A) when economic profit equals implicit costs. 
B) when accounting profit is less than implicit costs. 
C) when accounting profit equals explicit costs. 
D) when economic profit equals explicit costs. 
E) when explicit costs equal implicit costs. 
A) when economic profit equals implicit costs. 
B) when accounting profit is less than implicit costs. 
C) when accounting profit equals explicit costs. 
D) when economic profit equals explicit costs. 
E) when explicit costs equal implicit costs.

Question 13

In recent years,the number of farms in the U.S.has fallen while the average farm size has increased.Which of the following concepts may explain this phenomenon?

Accepted Answer

A) diminishing marginal returns 
B) declining productivity 
C) diseconomies of scale 
D) economies of scale 
E) poor economic reforms 
A) diminishing marginal returns 
B) declining productivity 
C) diseconomies of scale 
D) economies of scale 
E) poor economic reforms

Question 14

Maryann and Don want to open their own deli.To do so,Maryann must give up her job,where she earns $20,000 per year,and Don must give up his part-time job,where he earns $10,000 per year.They must liquidate their money market fund,which earns $1,000 interest annually.The rent on the building is $10,000 per year,and the expenses of such necessities as utilities,corned beef,and pickles are $35,000 annually.The minimum amount of revenue per year that would make it worthwhile,financially,for Maryann and Don to run the deli is _____

Accepted Answer

A) $10,000. 
B) $35,000. 
C) $45,000. 
D) $31,000. 
E) $76,000. 
A) $10,000. 
B) $35,000. 
C) $45,000. 
D) $31,000. 
E) $76,000.

Question 15

A firm's opportunity costs of using resources provided by the firm's owners are called _____

Accepted Answer

A) sunk costs. 
B) fixed costs. 
C) explicit costs. 
D) implicit costs. 
E) entrepreneurial costs. 
A) sunk costs. 
B) fixed costs. 
C) explicit costs. 
D) implicit costs. 
E) entrepreneurial costs.

Question 16

Which of the following is true of marginal product?

Accepted Answer

A) When marginal product is negative, total product is increasing. 
B) When marginal product is increasing, total product is decreasing. 
C) When marginal product is positive and decreasing, total product is decreasing. 
D) When marginal product is positive and decreasing, total product is increasing by increasing amounts. 
E) When marginal product is increasing, total product is increasing by increasing amounts. 
A) When marginal product is negative, total product is increasing. 
B) When marginal product is increasing, total product is decreasing. 
C) When marginal product is positive and decreasing, total product is decreasing. 
D) When marginal product is positive and decreasing, total product is increasing by increasing amounts. 
E) When marginal product is increasing, total product is increasing by increasing amounts.

Question 17

If the marginal product of an input is negative,the total product must also be negative.

Accepted Answer

A) True 
 B)False

Question 18

If a firm is experiencing diminishing marginal returns,its marginal product is declining.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 7.3
  
-Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.A is the marginal cost curve (MC),B is the average variable cost curve (AVC),and C is the average total cost curve (ATC).At an output of 10,the _____

Accepted Answer

A) total cost equals $10. 
B) fixed cost equals $1. 
C) variable cost equals $10. 
D) marginal cost equals $10. 
E) fixed cost equals $10. 
A) total cost equals $10. 
B) fixed cost equals $1. 
C) variable cost equals $10. 
D) marginal cost equals $10. 
E) fixed cost equals $10.

Question 20

If a firm is experiencing diseconomies of scale,its long-run average cost curve is upward sloping.

Accepted Answer

A) True 
 B)False

Normal profit is defined as _____

Which of the following is most likely to be a fixed resource for a word processing firm?

Economies of scale occur where _____

In the range of increasing marginal returns,total product is _____

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.For output more than q_b,when is average cost the lowest?

If all the savings of an owner are invested in his consulting company,an increase in the interest rate increases his implicit costs.

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year.He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year.If downloads generate $50,000 in revenue during the first year,then his business _____

As output increases,diseconomies of scale _____

If a pizza joint earns only a normal profit this year,its _____

Exhibit 7.2 -Refer to Exhibit 7.2,which shows different cost curves.Which of the curves represents variable cost?

Table 7.2 Labor Total Froduct (pairs of shoes) 0 0 1 20 2 50 3 75 4 80 5 75 -Refer to Table 7.2,which shows labor and the quantity of shoes produced by a firm.What is the marginal product of the third unit of labor?

A firm earns normal profit _____

In recent years,the number of farms in the U.S.has fallen while the average farm size has increased.Which of the following concepts may explain this phenomenon?

A firm's opportunity costs of using resources provided by the firm's owners are called _____

Which of the following is true of marginal product?

If the marginal product of an input is negative,the total product must also be negative.

If a firm is experiencing diminishing marginal returns,its marginal product is declining.

Exhibit 7.3 -Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.A is the marginal cost curve (MC),B is the average variable cost curve (AVC),and C is the average total cost curve (ATC).At an output of 10,the _____

If a firm is experiencing diseconomies of scale,its long-run average cost curve is upward sloping.

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, interest, entrepreneurship, and Corporate Finance

Transaction Costs, asymmetric Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Poverty and Redistribution

International Trade

International Finance

Economic Development

Filters

Exam 7: Production and Cost in the Firm

Normal profit is defined as _____

Which of the following is most likely to be a fixed resource for a word processing firm?

Economies of scale occur where _____

In the range of increasing marginal returns,total product is _____

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.For output more than qb,when is average cost the lowest?

If all the savings of an owner are invested in his consulting company,an increase in the interest rate increases his implicit costs.

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year.He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year.If downloads generate $50,000 in revenue during the first year,then his business _____

As output increases,diseconomies of scale _____

If a pizza joint earns only a normal profit this year,its _____

Exhibit 7.2 -Refer to Exhibit 7.2,which shows different cost curves.Which of the curves represents variable cost?

Table 7.2 Labor Total Froduct (pairs of shoes) 0 0 1 20 2 50 3 75 4 80 5 75 -Refer to Table 7.2,which shows labor and the quantity of shoes produced by a firm.What is the marginal product of the third unit of labor?

A firm earns normal profit _____

In recent years,the number of farms in the U.S.has fallen while the average farm size has increased.Which of the following concepts may explain this phenomenon?

A firm's opportunity costs of using resources provided by the firm's owners are called _____

Which of the following is true of marginal product?

If the marginal product of an input is negative,the total product must also be negative.

If a firm is experiencing diminishing marginal returns,its marginal product is declining.

Exhibit 7.3 -Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.A is the marginal cost curve (MC),B is the average variable cost curve (AVC),and C is the average total cost curve (ATC).At an output of 10,the _____

If a firm is experiencing diseconomies of scale,its long-run average cost curve is upward sloping.

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, interest, entrepreneurship, and Corporate Finance

Transaction Costs, asymmetric Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Poverty and Redistribution

International Trade

International Finance

Economic Development

Filters

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.For output more than q_b,when is average cost the lowest?