Question 1

If marginal cost is less than average total cost,then _____

Accepted Answer

A) marginal cost must be falling. 
B) average total cost must be increasing. 
C) average variable cost must equal average total cost. 
D) average variable cost must be decreasing. 
E) average variable cost may be increasing or decreasing. 
A) marginal cost must be falling. 
B) average total cost must be increasing. 
C) average variable cost must equal average total cost. 
D) average variable cost must be decreasing. 
E) average variable cost may be increasing or decreasing.

Question 2

Cash payments for steel to be used in the production process would be an example of _____

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 3

Which of the following is true of marginal cost when marginal returns are increasing?

Accepted Answer

A) It is negative and increasing. 
B) It is negative and decreasing. 
C) It is positive and increasing. 
D) It is positive and decreasing. 
E) It is positive and has a constant slope. 
A) It is negative and increasing. 
B) It is negative and decreasing. 
C) It is positive and increasing. 
D) It is positive and decreasing. 
E) It is positive and has a constant slope.

Question 4

If General Electric finds that doubling both its plant size and the amount of associated inputs does not double its output level,then _____

Accepted Answer

A) the law of diminishing returns is in effect. 
B) long-run average costs must be decreasing. 
C) the firm is experiencing diseconomies of scale. 
D) the firm should increase production. 
E) the firm is experiencing constant returns to scale. 
A) the law of diminishing returns is in effect. 
B) long-run average costs must be decreasing. 
C) the firm is experiencing diseconomies of scale. 
D) the firm should increase production. 
E) the firm is experiencing constant returns to scale.

Question 5

The law of diminishing marginal returns states that _____

Accepted Answer

A) long-run average cost declines as output increases. 
B) if the marginal product is above the average product, the average will rise. 
C) as units of a variable input are added to a given amount of fixed inputs, the marginal product of the variable input eventually diminishes. 
D) as a person consumes more of a good, the marginal satisfaction from that good eventually diminishes. 
E) if marginal product is positive, total product rises. 
A) long-run average cost declines as output increases. 
B) if the marginal product is above the average product, the average will rise. 
C) as units of a variable input are added to a given amount of fixed inputs, the marginal product of the variable input eventually diminishes. 
D) as a person consumes more of a good, the marginal satisfaction from that good eventually diminishes. 
E) if marginal product is positive, total product rises.

Question 6

The length of time that represents the long run _____

Accepted Answer

A) is greater than one year. 
B) is greater than six months. 
C) is longer in service industries than in manufacturing. 
D) is the same for all industries. 
E) varies from industry to industry. 
A) is greater than one year. 
B) is greater than six months. 
C) is longer in service industries than in manufacturing. 
D) is the same for all industries. 
E) varies from industry to industry.

Question 7

The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called _____

Accepted Answer

A) total revenue. 
B) utility. 
C) economic profit. 
D) cost. 
E) production efficiency. 
A) total revenue. 
B) utility. 
C) economic profit. 
D) cost. 
E) production efficiency.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Criola Motors Company,a major player in the automotive industry,sets up new manufacturing units to expand its operations.The company has been incurring heavy losses due to higher costs since the expansion.This is an example of _____

Accepted Answer

A) diminishing marginal product. 
B) economies of scale. 
C) diseconomies of scale. 
D) diminishing marginal returns. 
E) diminishing marginal cost. 
A) diminishing marginal product. 
B) economies of scale. 
C) diseconomies of scale. 
D) diminishing marginal returns. 
E) diminishing marginal cost.

Question 10

Diseconomies of scale are depicted on a graph by the upward-sloping portion of the _____

Accepted Answer

A) marginal product curve. 
B) short-run marginal cost curve. 
C) long-run marginal cost curve. 
D) short-run average cost curve. 
E) long-run average cost curve. 
A) marginal product curve. 
B) short-run marginal cost curve. 
C) long-run marginal cost curve. 
D) short-run average cost curve. 
E) long-run average cost curve.

Question 11

A firm enters into a consent decree to avoid a major legal setback.If the terms of the consent decree effectively double the firm's fixed costs,then _____

Accepted Answer

A) marginal cost more than doubles. 
B) marginal cost doubles. 
C) marginal cost remains unchanged. 
D) average total cost remains unchanged. 
E) average variable cost doubles. 
A) marginal cost more than doubles. 
B) marginal cost doubles. 
C) marginal cost remains unchanged. 
D) average total cost remains unchanged. 
E) average variable cost doubles.

Question 12

To achieve the minimum efficient scale in the long run,a firm must _____

Accepted Answer

A) charge the highest price possible. 
B) produce where demand is unit elastic. 
C) sell the most output possible. 
D) maximize the cost of producing any given amount of output. 
E) produce at minimum long-run average cost. 
A) charge the highest price possible. 
B) produce where demand is unit elastic. 
C) sell the most output possible. 
D) maximize the cost of producing any given amount of output. 
E) produce at minimum long-run average cost.

Question 13

A firm's economic profit is equal to _____

Accepted Answer

A) total revenue minus accounting profit. 
B) total revenue minus explicit costs. 
C) total revenue plus accounting profit. 
D) total revenue plus opportunity costs. 
E) accounting profit minus implicit costs. 
A) total revenue minus accounting profit. 
B) total revenue minus explicit costs. 
C) total revenue plus accounting profit. 
D) total revenue plus opportunity costs. 
E) accounting profit minus implicit costs.

Question 14

If a firm shuts down in the short run and produces no output,its total cost will be _____

Accepted Answer

A) equal to zero. 
B) equal to the variable cost. 
C) equal to the fixed cost. 
D) equal to only explicit costs. 
E) equal to the sum of implicit and explicit costs. 
A) equal to zero. 
B) equal to the variable cost. 
C) equal to the fixed cost. 
D) equal to only explicit costs. 
E) equal to the sum of implicit and explicit costs.

Question 15

Which of the following would not appear on a firm's accounting statement?

Accepted Answer

A) sunk costs 
B) fixed costs 
C) explicit costs 
D) implicit costs 
E) insurance costs 
A) sunk costs 
B) fixed costs 
C) explicit costs 
D) implicit costs 
E) insurance costs

Question 16

If marginal cost exceeds average variable cost,then _____

Accepted Answer

A) average variable cost is negative. 
B) average variable cost is increasing. 
C) marginal cost is greater than average total cost. 
D) average variable cost is decreasing. 
E) average fixed cost is increasing. 
A) average variable cost is negative. 
B) average variable cost is increasing. 
C) marginal cost is greater than average total cost. 
D) average variable cost is decreasing. 
E) average fixed cost is increasing.

Question 17

Marginal product is defined as _____

Accepted Answer

A) the increase in revenue that occurs when an additional unit of a resource is added. 
B) the increase in output that occurs when all resources are increased by the same proportion. 
C) the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant. 
D) the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount. 
E) the amount of additional money needed to increase output by one unit when all resources are held constant. 
A) the increase in revenue that occurs when an additional unit of a resource is added. 
B) the increase in output that occurs when all resources are increased by the same proportion. 
C) the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant. 
D) the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount. 
E) the amount of additional money needed to increase output by one unit when all resources are held constant.

Question 18

Economic profit is defined as _____

Accepted Answer

A) total revenue minus the cost of the goods produced. 
B) the price of the goods sold minus the quantity of goods sold. 
C) total revenue minus what must be paid to resources to attract them from their best alternative use. 
D) total revenue divided by what must be paid to resources to attract them from their best alternative use. 
E) total revenue plus what must be paid to resources to attract them from their best alternative use. 
A) total revenue minus the cost of the goods produced. 
B) the price of the goods sold minus the quantity of goods sold. 
C) total revenue minus what must be paid to resources to attract them from their best alternative use. 
D) total revenue divided by what must be paid to resources to attract them from their best alternative use. 
E) total revenue plus what must be paid to resources to attract them from their best alternative use.

Question 19

Suppose a lawyer leaves his $50,000-a-year job and starts his own firm breeding pit bulls.In the first year,his accounting profit is $70,000.The lawyer finances his new business with $100,000 from his savings account,which had earned 10 percent interest.From his new business,the lawyer earns an economic profit of _____

Accepted Answer

A) $10,000. 
B) $60,000. 
C) $70,000. 
D) −$80,000. 
E) −$90,000. 
A) $10,000. 
B) $60,000. 
C) $70,000. 
D) −$80,000. 
E) −$90,000.

Question 20

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.Downloads generated $130,000 in revenue during the first year.What is his accounting profit?

Accepted Answer

A) $37,000 
B) $50,000 
C) $43,000 
D) $93,000 
E) $130,000 
A) $37,000 
B) $50,000 
C) $43,000 
D) $93,000 
E) $130,000

If marginal cost is less than average total cost,then _____

Cash payments for steel to be used in the production process would be an example of _____

Which of the following is true of marginal cost when marginal returns are increasing?

If General Electric finds that doubling both its plant size and the amount of associated inputs does not double its output level,then _____

The law of diminishing marginal returns states that _____

The length of time that represents the long run _____

The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called _____

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

Criola Motors Company,a major player in the automotive industry,sets up new manufacturing units to expand its operations.The company has been incurring heavy losses due to higher costs since the expansion.This is an example of _____

Diseconomies of scale are depicted on a graph by the upward-sloping portion of the _____

A firm enters into a consent decree to avoid a major legal setback.If the terms of the consent decree effectively double the firm's fixed costs,then _____

To achieve the minimum efficient scale in the long run,a firm must _____

A firm's economic profit is equal to _____

If a firm shuts down in the short run and produces no output,its total cost will be _____

Which of the following would not appear on a firm's accounting statement?

If marginal cost exceeds average variable cost,then _____

Marginal product is defined as _____

Economic profit is defined as _____

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

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Exam 7: Production and Cost in the Firm

If marginal cost is less than average total cost,then _____

Cash payments for steel to be used in the production process would be an example of _____

Which of the following is true of marginal cost when marginal returns are increasing?

If General Electric finds that doubling both its plant size and the amount of associated inputs does not double its output level,then _____

The law of diminishing marginal returns states that _____

The length of time that represents the long run _____

The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called _____

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

Criola Motors Company,a major player in the automotive industry,sets up new manufacturing units to expand its operations.The company has been incurring heavy losses due to higher costs since the expansion.This is an example of _____

Diseconomies of scale are depicted on a graph by the upward-sloping portion of the _____

A firm enters into a consent decree to avoid a major legal setback.If the terms of the consent decree effectively double the firm's fixed costs,then _____

To achieve the minimum efficient scale in the long run,a firm must _____

A firm's economic profit is equal to _____

If a firm shuts down in the short run and produces no output,its total cost will be _____

Which of the following would not appear on a firm's accounting statement?

If marginal cost exceeds average variable cost,then _____

Marginal product is defined as _____

Economic profit is defined as _____

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