Question 1

Explicit costs involve direct cash payments for the use of a resource.

Accepted Answer

A) True 
 B)False

Question 2

If variable cost rises from $60 to $100 as output increases from 15 to 20 units,the marginal cost of the twentieth unit is _____

Accepted Answer

A) $100. 
B) $5. 
C) $40. 
D) $8. 
E) $58. 
A) $100. 
B) $5. 
C) $40. 
D) $8. 
E) $58.

Question 3

Amanda,aged 6,opens a lemonade stand.She makes all the lemonade from a mix she found in her parents' pantry.Her stand is an old box she found in the garage.The pitcher and paper cups were taken from the kitchen.Which of the following is true?

Accepted Answer

A) The opportunity cost of the lemonade is zero. 
B) The only opportunity cost of the lemonade is Amanda's time. 
C) Amanda's explicit costs are zero. 
D) The implicit costs of Amanda's lemonade are zero. 
E) Whatever revenue Amanda gets will be pure economic profit. 
A) The opportunity cost of the lemonade is zero. 
B) The only opportunity cost of the lemonade is Amanda's time. 
C) Amanda's explicit costs are zero. 
D) The implicit costs of Amanda's lemonade are zero. 
E) Whatever revenue Amanda gets will be pure economic profit.

Question 4

Exhibit 7.3
  
-Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.Curve A represents _____

Accepted Answer

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

Question 5

A young chef is considering opening his own sushi bar.To do so,he would have to quit his current job,which pays $20,000 a year,and take over a storage building he owns and currently rents for $6,000 a year.His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity._____ is the minimum revenue he must earn per year in order for it to be worth his while to open his sushi bar.

Accepted Answer

A) $26,000 
B) $66,000 
C) $78,000 
D) $52,000 
E) $72,000 
A) $26,000 
B) $66,000 
C) $78,000 
D) $52,000 
E) $72,000

Question 6

If a firm is producing at its minimum efficient scale,increasing its output slightly will always lead to diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 7

Suppose Bob leaves his $50,000-a-year job as a financial advisor to P.E.T.S.and starts his own business selling pet-care products.In the first year,his accounting profit is $70,000.Based on this level of success,Bob should _____

Accepted Answer

A) return to his old job because his economic profit is negative. 
B) return to his old job because his economic profit is smaller than his accounting profit. 
C) return to his old job because his economic profit is less than his old salary. 
D) stay with his new firm because his economic profit is positive. 
E) stay with his new firm because accounting profit is positive. 
A) return to his old job because his economic profit is negative. 
B) return to his old job because his economic profit is smaller than his accounting profit. 
C) return to his old job because his economic profit is less than his old salary. 
D) stay with his new firm because his economic profit is positive. 
E) stay with his new firm because accounting profit is positive.

Question 8

When marginal cost is decreasing,total cost is rising.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 7.4
  
-Refer to Exhibit 7.4,which shows short-run average cost curves.Average cost is lowest for a large plant when output is _____

Accepted Answer

A) at q. 
B) less than qa. 
C) between qa and qb. 
D) more than qb. 
E) more than q' 
A) at q. 
B) less than qa. 
C) between qa and qb. 
D) more than qb. 
E) more than q'

Question 10

If Domino's Pizza pays $3 per pound for cheese,then the $3 represents the producer's _____

Accepted Answer

A) substitutes. 
B) explicit costs only. 
C) implicit costs only. 
D) opportunity cost. 
E) competitive cost. 
A) substitutes. 
B) explicit costs only. 
C) implicit costs only. 
D) opportunity cost. 
E) competitive cost.

Question 11

To a firm facing constant input prices,increasing marginal returns _____

Accepted Answer

A) mean that each additional unit of output costs more to produce than the previous unit. 
B) mean that the marginal product of the variable input decreases as more of the input is used. 
C) can occur due to the specialization and division of labor. 
D) usually occur at very high rates of output. 
E) can never occur. 
A) mean that each additional unit of output costs more to produce than the previous unit. 
B) mean that the marginal product of the variable input decreases as more of the input is used. 
C) can occur due to the specialization and division of labor. 
D) usually occur at very high rates of output. 
E) can never occur.

Question 12

Economic profit is defined as _____

Accepted Answer

A) total fixed cost plus total variable cost. 
B) total revenue minus marginal costs. 
C) average revenue minus average variable cost. 
D) total revenue minus total costs. 
E) marginal revenue minus opportunity costs. 
A) total fixed cost plus total variable cost. 
B) total revenue minus marginal costs. 
C) average revenue minus average variable cost. 
D) total revenue minus total costs. 
E) marginal revenue minus opportunity costs.

Question 13

What is true of marginal cost when marginal returns are decreasing?

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 14

At a given rate of output,marginal cost equals the slope of the _____

Accepted Answer

A) long-run average cost curve. 
B) short-run average total cost curve. 
C) planning curve. 
D) total cost curve. 
E) average variable cost curve. 
A) long-run average cost curve. 
B) short-run average total cost curve. 
C) planning curve. 
D) total cost curve. 
E) average variable cost curve.

Question 15

A firm's long-run average cost curve is also called its _____

Accepted Answer

A) profit curve. 
B) explicit cost curve. 
C) opportunity cost curve. 
D) production curve. 
E) planning curve. 
A) profit curve. 
B) explicit cost curve. 
C) opportunity cost curve. 
D) production curve. 
E) planning curve.

Question 16

Table 7.5
​
 $$\begin{array} { | c | c | c | } 
\hline \text { Labor } & \text { Total Froduct } & \text { Marginal Product } \
\hline 1 & 2 & 2 \
\hline 2 & 6 & \mathrm {~A} \
\hline 3 & \mathrm {~B} & 6 \
\hline 4 & 16 & 4 \
\hline 5 & 18 & \mathrm { C } \
\hline 6 & \mathrm { D } & 0 \
\hline
\end{array}$$
-Refer to Table 7.5,which shows labor,total product,and marginal product produced by a firm.What is the marginal product at Point A?

Accepted Answer

A) 4 
B) 2 
C) 12 
D) 18 
E) 24 
A) 4 
B) 2 
C) 12 
D) 18 
E) 24

Question 17

A young chef is considering opening his own sushi bar.To do so,he would have to quit his current job,which pays $20,000 a year,and move into a building that he owns and currently rents to his brother for $6,000 a year.His estimated expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity.The chef's explicit costs are equal to _____

Accepted Answer

A) $26,000. 
B) $66,000. 
C) $78,000. 
D) $52,000. 
E) $72,000. 
A) $26,000. 
B) $66,000. 
C) $78,000. 
D) $52,000. 
E) $72,000.

Question 18

Exhibit 7.1
  
-Refer to Exhibit 7.1,which shows the total product and marginal product produced by a firm.At seven workers,_____

Accepted Answer

A) marginal product is rising and total product increases by increasing amounts. 
B) marginal product is falling but still positive, and total product increases by decreasing amounts. 
C) marginal product equals zero and total product is at a maximum. 
D) marginal product is negative and total product is falling. 
E) marginal product is negative and total product is rising. 
A) marginal product is rising and total product increases by increasing amounts. 
B) marginal product is falling but still positive, and total product increases by decreasing amounts. 
C) marginal product equals zero and total product is at a maximum. 
D) marginal product is negative and total product is falling. 
E) marginal product is negative and total product is rising.

Question 19

A firm's accounting profit is equal to _____

Accepted Answer

A) total revenue minus opportunity costs. 
B) total revenue plus opportunity costs. 
C) total revenue minus imputed costs. 
D) total revenue minus explicit costs. 
E) total revenue minus explicit and implicit costs. 
A) total revenue minus opportunity costs. 
B) total revenue plus opportunity costs. 
C) total revenue minus imputed costs. 
D) total revenue minus explicit costs. 
E) total revenue minus explicit and implicit costs.

Question 20

Exhibit 7.4
  
-Refer to Exhibit 7.4,which shows short-run average cost curves.Which curve shows the short-run average total costs for a small plant?

Accepted Answer

A) A to A' 
B) B to A' 
C) B to B' 
D) C to B' 
E) C to C' 
A) A to A' 
B) B to A' 
C) B to B' 
D) C to B' 
E) C to C'

Explicit costs involve direct cash payments for the use of a resource.

If variable cost rises from $60 to $100 as output increases from 15 to 20 units,the marginal cost of the twentieth unit is _____

Amanda,aged 6,opens a lemonade stand.She makes all the lemonade from a mix she found in her parents' pantry.Her stand is an old box she found in the garage.The pitcher and paper cups were taken from the kitchen.Which of the following is true?

Exhibit 7.3 -Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.Curve A represents _____

If a firm is producing at its minimum efficient scale,increasing its output slightly will always lead to diseconomies of scale.

Suppose Bob leaves his $50,000-a-year job as a financial advisor to P.E.T.S.and starts his own business selling pet-care products.In the first year,his accounting profit is $70,000.Based on this level of success,Bob should _____

When marginal cost is decreasing,total cost is rising.

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.Average cost is lowest for a large plant when output is _____

If Domino's Pizza pays $3 per pound for cheese,then the $3 represents the producer's _____

To a firm facing constant input prices,increasing marginal returns _____

Economic profit is defined as _____

What is true of marginal cost when marginal returns are decreasing?

At a given rate of output,marginal cost equals the slope of the _____

A firm's long-run average cost curve is also called its _____

Table 7.5 Labor Total Froduct Marginal Product 1 2 2 2 6 3 6 4 16 4 5 18 6 0 -Refer to Table 7.5,which shows labor,total product,and marginal product produced by a firm.What is the marginal product at Point A?

Exhibit 7.1 -Refer to Exhibit 7.1,which shows the total product and marginal product produced by a firm.At seven workers,_____

A firm's accounting profit is equal to _____

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.Which curve shows the short-run average total costs for a small plant?

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

Explicit costs involve direct cash payments for the use of a resource.

If variable cost rises from $60 to $100 as output increases from 15 to 20 units,the marginal cost of the twentieth unit is _____

Amanda,aged 6,opens a lemonade stand.She makes all the lemonade from a mix she found in her parents' pantry.Her stand is an old box she found in the garage.The pitcher and paper cups were taken from the kitchen.Which of the following is true?

Exhibit 7.3 -Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.Curve A represents _____

If a firm is producing at its minimum efficient scale,increasing its output slightly will always lead to diseconomies of scale.

Suppose Bob leaves his $50,000-a-year job as a financial advisor to P.E.T.S.and starts his own business selling pet-care products.In the first year,his accounting profit is $70,000.Based on this level of success,Bob should _____

When marginal cost is decreasing,total cost is rising.

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.Average cost is lowest for a large plant when output is _____

If Domino's Pizza pays $3 per pound for cheese,then the $3 represents the producer's _____

To a firm facing constant input prices,increasing marginal returns _____

Economic profit is defined as _____

What is true of marginal cost when marginal returns are decreasing?

At a given rate of output,marginal cost equals the slope of the _____

A firm's long-run average cost curve is also called its _____

Table 7.5 ​ Labor Total Froduct Marginal Product 1 2 2 2 6 3 6 4 16 4 5 18 6 0 -Refer to Table 7.5,which shows labor,total product,and marginal product produced by a firm.What is the marginal product at Point A?

Exhibit 7.1 -Refer to Exhibit 7.1,which shows the total product and marginal product produced by a firm.At seven workers,_____

A firm's accounting profit is equal to _____

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.Which curve shows the short-run average total costs for a small plant?

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

Table 7.5 Labor Total Froduct Marginal Product 1 2 2 2 6 3 6 4 16 4 5 18 6 0 -Refer to Table 7.5,which shows labor,total product,and marginal product produced by a firm.What is the marginal product at Point A?