Question 1

When diminishing marginal returns set in,marginal product is _____

Accepted Answer

A) positive and increasing. 
B) positive and decreasing. 
C) negative and increasing. 
D) negative and decreasing. 
E) zero. 
A) positive and increasing. 
B) positive and decreasing. 
C) negative and increasing. 
D) negative and decreasing. 
E) zero.

Question 2

The average total cost curve and the average variable cost curve _____

Accepted Answer

A) are closer together as output increases, with average variable cost reaching its minimum level first. 
B) are closer together as output increases, with average total cost reaching its minimum level first. 
C) are farther apart as output increases, with average variable cost reaching its minimum level first. 
D) are farther apart as output increases, with average total cost reaching its minimum level first. 
E) are parallel to each other and reach their minimum levels at the same level of output. 
A) are closer together as output increases, with average variable cost reaching its minimum level first. 
B) are closer together as output increases, with average total cost reaching its minimum level first. 
C) are farther apart as output increases, with average variable cost reaching its minimum level first. 
D) are farther apart as output increases, with average total cost reaching its minimum level first. 
E) are parallel to each other and reach their minimum levels at the same level of output.

Question 3

Economic profit is defined as _____

Accepted Answer

A) total revenue minus implicit costs. 
B) total revenue plus explicit costs. 
C) total revenue plus implicit costs. 
D) wages plus interest minus rent. 
E) total revenue minus implicit and explicit costs. 
A) total revenue minus implicit costs. 
B) total revenue plus explicit costs. 
C) total revenue plus implicit costs. 
D) wages plus interest minus rent. 
E) total revenue minus implicit and explicit costs.

Question 4

A firm produces 5000 waterproof cellphone cases,which they sell for $30 each.They have $35,000 in fixed costs and $85,000 in total costs every year.What is the average fixed cost?

Accepted Answer

A) $7 
B) $10 
C) $17 
D) $24 
E) $27 
A) $7 
B) $10 
C) $17 
D) $24 
E) $27

Question 5

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).When output is 10,then _____

Accepted Answer

A) total cost equals $80. 
B) fixed cost equals $10. 
C) variable cost equals $70. 
D) marginal cost equals $10. 
E) fixed cost equals $7. 
A) total cost equals $80. 
B) fixed cost equals $10. 
C) variable cost equals $70. 
D) marginal cost equals $10. 
E) fixed cost equals $7.

Question 6

Suppose Ernie gives up his job as a financial advisor to P.E.T.S.,where he earned $30,000 per year,to open up a store selling pet-care products.He invested $10,000 in the store,which was originally savings that earned 5 percent interest.This year,the revenue from the new business was $50,000,and the explicit costs were $10,000.The accounting profit earned by Ernie was _____

Accepted Answer

A) $10,000. 
B) $50,000. 
C) $20,000. 
D) $40,000. 
E) $9,500. 
A) $10,000. 
B) $50,000. 
C) $20,000. 
D) $40,000. 
E) $9,500.

Question 7

The marginal cost curve intersects the average total cost (ATC)curve _____

Accepted Answer

A) at the ATC curve's minimum point. 
B) only when the ATC curve is sloping upward. 
C) at the ATC curve's maximum point. 
D) only when the ATC curve is sloping downward. 
E) when the ATC curve intersects the fixed cost curve. 
A) at the ATC curve's minimum point. 
B) only when the ATC curve is sloping upward. 
C) at the ATC curve's maximum point. 
D) only when the ATC curve is sloping downward. 
E) when the ATC curve intersects the fixed cost curve.

Question 8

Opportunity cost usually _____

Accepted Answer

A) cannot be measured. 
B) applies to labor but not to capital. 
C) is involved in calculating economic profit. 
D) is greater than the cash payment made to a resource. 
E) is less than the cash payment made to a resource. 
A) cannot be measured. 
B) applies to labor but not to capital. 
C) is involved in calculating economic profit. 
D) is greater than the cash payment made to a resource. 
E) is less than the cash payment made to a resource.

Question 9

Exhibit 7.4
  
-Refer to Exhibit 7.4,which shows short-run average cost curves.Average cost is lowest for a small 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

An implicit cost is _____

Accepted Answer

A) any cost a firm cannot avoid in the short run. 
B) any expenditure a firm makes. 
C) an opportunity cost. 
D) accurately measured in accounting statements. 
E) ignored by economists. 
A) any cost a firm cannot avoid in the short run. 
B) any expenditure a firm makes. 
C) an opportunity cost. 
D) accurately measured in accounting statements. 
E) ignored by economists.

Question 11

Which of the following is also known as the firm's planning curve?

Accepted Answer

A) the average total cost curve 
B) the total cost curve 
C) the long-run average cost curve 
D) the long-run marginal cost curve 
E) the fixed cost curve 
A) the average total cost curve 
B) the total cost curve 
C) the long-run average cost curve 
D) the long-run marginal cost curve 
E) the fixed cost curve

Question 12

Exhibit 7.1
  
-Refer to Exhibit 7.1,which shows the total product and marginal product produced by a firm.Between three and 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 13

If a firm is experiencing diminishing marginal returns to labor,then which of the following statements is true?

Accepted Answer

A) The first workers the firm hired were better than the workers hired later on. 
B) The firm is experiencing decreasing returns to scale. 
C) The positive effect of specialization in production is being offset by the negative effect of crowding of inputs. 
D) Output is decreasing with decreasing inputs. 
E) The firm should buy more non-labor inputs. 
A) The first workers the firm hired were better than the workers hired later on. 
B) The firm is experiencing decreasing returns to scale. 
C) The positive effect of specialization in production is being offset by the negative effect of crowding of inputs. 
D) Output is decreasing with decreasing inputs. 
E) The firm should buy more non-labor inputs.

Question 14

The opportunity cost of a resource _____

Accepted Answer

A) includes both explicit and implicit costs. 
B) includes explicit cost only. 
C) includes implicit cost only. 
D) is equal to the market price of the resource. 
E) is not related to the market price of the resource. 
A) includes both explicit and implicit costs. 
B) includes explicit cost only. 
C) includes implicit cost only. 
D) is equal to the market price of the resource. 
E) is not related to the market price of the resource.

Question 15

The additional output obtained by adding another unit of labor to the production process is called _____

Accepted Answer

A) the marginal cost of labor. 
B) the average output of labor. 
C) a variable cost. 
D) the marginal product of labor. 
E) the marginal utility of labor. 
A) the marginal cost of labor. 
B) the average output of labor. 
C) a variable cost. 
D) the marginal product of labor. 
E) the marginal utility of labor.

Question 16

The marginal cost curve intersects the minimum point of the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 17

Economies of scale can be caused by _____

Accepted Answer

A) a decrease in plant size. 
B) short-run increases in marginal productivity. 
C) the use of larger, more specialized machines. 
D) higher information costs as a firm expands. 
E) bureaucratic red tape as a firm expands. 
A) a decrease in plant size. 
B) short-run increases in marginal productivity. 
C) the use of larger, more specialized machines. 
D) higher information costs as a firm expands. 
E) bureaucratic red tape as a firm expands.

Question 18

Suppose Ernie gives up his job as a financial advisor to P.E.T.S.,where he earned $30,000 per year,to open up a store selling pet-care products.He invested $10,000 in the store,which was originally savings that earned 5 percent interest.This year,the revenue from the new business was $50,000 and the explicit costs were $10,000.The economic profit earned by Ernie was _____

Accepted Answer

A) $10,000. 
B) $50,000. 
C) $20,000. 
D) $40,000. 
E) $9,500. 
A) $10,000. 
B) $50,000. 
C) $20,000. 
D) $40,000. 
E) $9,500.

Question 19

Which of the following is true of the relationship between marginal cost and marginal product?

Accepted Answer

A) Marginal product and marginal cost are not related to each other. 
B) When marginal product increases, marginal cost increases. 
C) When marginal product increases, marginal cost falls. 
D) When marginal product is negative, marginal cost is negative. 
E) When diminishing marginal returns set in, marginal cost falls. 
A) Marginal product and marginal cost are not related to each other. 
B) When marginal product increases, marginal cost increases. 
C) When marginal product increases, marginal cost falls. 
D) When marginal product is negative, marginal cost is negative. 
E) When diminishing marginal returns set in, marginal cost falls.

Question 20

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.At which point do diminishing marginal returns set in?

Accepted Answer

A) before the first unit of labor 
B) between the first and second units of labor 
C) between the second and third units of labor 
D) between the third and fourth units of labor 
E) between the fourth and fifth units of labor 
A) before the first unit of labor 
B) between the first and second units of labor 
C) between the second and third units of labor 
D) between the third and fourth units of labor 
E) between the fourth and fifth units of labor

When diminishing marginal returns set in,marginal product is _____

The average total cost curve and the average variable cost curve _____

Economic profit is defined as _____

A firm produces 5000 waterproof cellphone cases,which they sell for $30 each.They have $35,000 in fixed costs and $85,000 in total costs every year.What is the average fixed cost?

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).When output is 10,then _____

The marginal cost curve intersects the average total cost (ATC)curve _____

Opportunity cost usually _____

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

An implicit cost is _____

Which of the following is also known as the firm's planning curve?

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

If a firm is experiencing diminishing marginal returns to labor,then which of the following statements is true?

The opportunity cost of a resource _____

The additional output obtained by adding another unit of labor to the production process is called _____

The marginal cost curve intersects the minimum point of the average variable cost curve.

Economies of scale can be caused by _____

Which of the following is true of the relationship between marginal cost and marginal product?

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.At which point do diminishing marginal returns set in?

The Art and Science of Economic Analysis

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Elasticity of Demand and Supply

Consumer Choice and Demand

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

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Capital, interest, entrepreneurship, and Corporate Finance

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Exam 7: Production and Cost in the Firm

When diminishing marginal returns set in,marginal product is _____

The average total cost curve and the average variable cost curve _____

Economic profit is defined as _____

A firm produces 5000 waterproof cellphone cases,which they sell for $30 each.They have $35,000 in fixed costs and $85,000 in total costs every year.What is the average fixed cost?

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).When output is 10,then _____

The marginal cost curve intersects the average total cost (ATC)curve _____

Opportunity cost usually _____

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

An implicit cost is _____

Which of the following is also known as the firm's planning curve?

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

If a firm is experiencing diminishing marginal returns to labor,then which of the following statements is true?

The opportunity cost of a resource _____

The additional output obtained by adding another unit of labor to the production process is called _____

The marginal cost curve intersects the minimum point of the average variable cost curve.

Economies of scale can be caused by _____

Which of the following is true of the relationship between marginal cost and marginal product?

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.At which point do diminishing marginal returns set in?

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