Question 1

Unlike implicit costs,explicit costs _____

Accepted Answer

A) reflect opportunity costs. 
B) include the value of the owner's time. 
C) are not included in a firm's accounting statements. 
D) are actual cash payments. 
E) do not change as a firm's output changes. 
A) reflect opportunity costs. 
B) include the value of the owner's time. 
C) are not included in a firm's accounting statements. 
D) are actual cash payments. 
E) do not change as a firm's output changes.

Question 2

Table 7.3
 $$\begin{array} { c c } 
\begin{array} { c } 
\text { Number } \
\text { of Workers }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Output }
\end{array} \
\hline 0 & 0 \
1 & 10 \
2 & 40 \
3 & 100 \
4 & 140 \
5 & 160 \
6 & 170 \
7 & 150
\end{array}$$
-Refer to Table 7.3,which shows the number of workers and total output produced in a firm.Diminishing marginal returns set in with the addition of the _____

Accepted Answer

A) first worker. 
B) third worker. 
C) fourth worker. 
D) fifth worker. 
E) seventh worker. 
A) first worker. 
B) third worker. 
C) fourth worker. 
D) fifth worker. 
E) seventh worker.

Question 3

Which of the following is true in the short run at the output level where average total cost is at its minimum?

Accepted Answer

A) Marginal cost equals average total cost. 
B) Average variable cost equals fixed cost. 
C) Marginal cost equals average variable cost. 
D) Average total cost equals average fixed cost. 
E) Average total cost equals average variable cost. 
A) Marginal cost equals average total cost. 
B) Average variable cost equals fixed cost. 
C) Marginal cost equals average variable cost. 
D) Average total cost equals average fixed cost. 
E) Average total cost equals average variable cost.

Question 4

For each size of the plant a manufacturer could build,there is a different _____

Accepted Answer

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

Question 5

Exhibit 7.4
  
-Refer to Exhibit 7.4,which shows short-run average cost curves.Which curve shows the average cost curve for a medium size 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'

Question 6

Exhibit 7.4
  
-Refer to Exhibit 7.4,which shows short-run average cost curves.The curves represent different _____

Accepted Answer

A) technology. 
B) plant sizes. 
C) products. 
D) nations. 
E) skill levels. 
A) technology. 
B) plant sizes. 
C) products. 
D) nations. 
E) skill levels.

Question 7

The shape of the long-run average cost (LRAC)curve reflects _____

Accepted Answer

A) market demand. 
B) economies and diseconomies of scale. 
C) increasing and diminishing marginal returns. 
D) the productivity of fixed inputs. 
E) the law of diminishing returns. 
A) market demand. 
B) economies and diseconomies of scale. 
C) increasing and diminishing marginal returns. 
D) the productivity of fixed inputs. 
E) the law of diminishing returns.

Question 8

Empirical studies of production suggest that the long-run average cost curve _____

Accepted Answer

A) is U-shaped. 
B) has an inverted L shape. 
C) is L-shaped. 
D) is horizontal. 
E) shows diminishing marginal returns. 
A) is U-shaped. 
B) has an inverted L shape. 
C) is L-shaped. 
D) is horizontal. 
E) shows diminishing marginal returns.

Question 9

The reason economists assume that firms try to maximize economic profit is that _____

Accepted Answer

A) firms that don't earn profits will, over time, have difficulty securing financing to survive. 
B) firms in the real world always maximize profit. 
C) profit is easier to calculate than revenue. 
D) if a firm fails to earn a profit in its first year, it will go out of business. 
E) profit maximization is easier for firms than revenue maximization. 
A) firms that don't earn profits will, over time, have difficulty securing financing to survive. 
B) firms in the real world always maximize profit. 
C) profit is easier to calculate than revenue. 
D) if a firm fails to earn a profit in its first year, it will go out of business. 
E) profit maximization is easier for firms than revenue maximization.

Question 10

At the point where diminishing marginal returns set in,the slope of the total product curve is _____

Accepted Answer

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

Question 11

If a firm's accounting profit is positive,its economic profit must also be positive.

Accepted Answer

A) True 
 B)False

Question 12

Table 7.3
 $$\begin{array} { c c } 
\begin{array} { c } 
\text { Number } \
\text { of Workers }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Output }
\end{array} \
\hline 0 & 0 \
1 & 10 \
2 & 40 \
3 & 100 \
4 & 140 \
5 & 160 \
6 & 170 \
7 & 150
\end{array}$$
-Refer to Table 7.3,which the number of workers and total output produced in a firm.The marginal product of the third worker is _____

Accepted Answer

A) 20. 
B) 100/3. 
C) 60. 
D) 50. 
E) 140. 
A) 20. 
B) 100/3. 
C) 60. 
D) 50. 
E) 140.

Question 13

Suppose Ripco owns the building from which it operates.If _____

Accepted Answer

A) the firm pays no rent, there is no opportunity cost. 
B) the firm does not rent the building to anyone else, there is no opportunity cost. 
C) the firm pays rent, there is an opportunity cost. 
D) its usage of the building precludes it from renting to anyone else, there is an opportunity cost. 
E) the firm can use the building for other things, there is no opportunity cost. 
A) the firm pays no rent, there is no opportunity cost. 
B) the firm does not rent the building to anyone else, there is no opportunity cost. 
C) the firm pays rent, there is an opportunity cost. 
D) its usage of the building precludes it from renting to anyone else, there is an opportunity cost. 
E) the firm can use the building for other things, there is no opportunity cost.

Question 14

Total cost is calculated as _____

Accepted Answer

A) FC + MC. 
B) FC/MC. 
C) (VC + F
C) /MC. 
D) FC + VC. 
E) VC + output. 
A) FC + MC. 
B) FC/MC. 
C) (VC + F
C) /MC. 
D) FC + VC. 
E) VC + output.

Question 15

Exhibit 7.5
  
-Refer to Exhibit 7.5,which shows four short-run average cost curves for different possible plant sizes.If the firm represented in the figure above wants to produce output level q,then,in the long run,it should build a plant size with an average total cost curve of _____

Accepted Answer

A) 1. 
B) 2. 
C) 3. 
D) 4. 
E) either 1 or 3. 
A) 1. 
B) 2. 
C) 3. 
D) 4. 
E) either 1 or 3.

Question 16

Exhibit 7.2
  
-Refer to Exhibit 7.2,which shows different cost curves.What does the difference between curve A and curve B at a total cost of $500 and an output of 9 represent?

Accepted Answer

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

Question 17

Total cost is calculated as _____

Accepted Answer

A) average fixed cost plus average variable cost. 
B) fixed cost plus variable cost. 
C) the additional cost of the last unit produced. 
D) marginal cost plus variable cost. 
E) marginal cost plus fixed cost. 
A) average fixed cost plus average variable cost. 
B) fixed cost plus variable cost. 
C) the additional cost of the last unit produced. 
D) marginal cost plus variable cost. 
E) marginal cost plus fixed cost.

Question 18

Exhibit 7.3
  
-Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.Curve B 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 19

Exhibit 7.1
  
-Refer to Exhibit 7.1 which shows the total product and marginal product produced by a firm.After 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 20

Doubling the circumference of an oil pipeline more than doubles the volume of oil that can be pumped through.This strategy is chosen only by large firms because it results in _____

Accepted Answer

A) production inefficiency. 
B) diminishing marginal returns. 
C) diseconomies of scale. 
D) constant returns to scale. 
E) economies of scale. 
A) production inefficiency. 
B) diminishing marginal returns. 
C) diseconomies of scale. 
D) constant returns to scale. 
E) economies of scale.

Exam 7: Production and Cost in the Firm

Unlike implicit costs,explicit costs _____

Table 7.3 Number of Workers Total Output 0 0 1 10 2 40 3 100 4 140 5 160 6 170 7 150 -Refer to Table 7.3,which shows the number of workers and total output produced in a firm.Diminishing marginal returns set in with the addition of the _____

Which of the following is true in the short run at the output level where average total cost is at its minimum?

For each size of the plant a manufacturer could build,there is a different _____

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

Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.The curves represent different _____

The shape of the long-run average cost (LRAC)curve reflects _____

Empirical studies of production suggest that the long-run average cost curve _____

The reason economists assume that firms try to maximize economic profit is that _____

At the point where diminishing marginal returns set in,the slope of the total product curve is _____

If a firm's accounting profit is positive,its economic profit must also be positive.

Table 7.3 Number of Workers Total Output 0 0 1 10 2 40 3 100 4 140 5 160 6 170 7 150 -Refer to Table 7.3,which the number of workers and total output produced in a firm.The marginal product of the third worker is _____

Suppose Ripco owns the building from which it operates.If _____

Total cost is calculated as _____

Exhibit 7.5 -Refer to Exhibit 7.5,which shows four short-run average cost curves for different possible plant sizes.If the firm represented in the figure above wants to produce output level q,then,in the long run,it should build a plant size with an average total cost curve of _____

Exhibit 7.2 -Refer to Exhibit 7.2,which shows different cost curves.What does the difference between curve A and curve B at a total cost of $500 and an output of 9 represent?

Total cost is calculated as _____

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

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

Doubling the circumference of an oil pipeline more than doubles the volume of oil that can be pumped through.This strategy is chosen only by large firms because it results in _____

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