Question 1

If General Motors is earning only a normal profit,

Accepted Answer

A)  it is making economic profit 
B)  it is breaking even 
C)  it is suffering an economic loss 
D)  it is covering only explicit costs 
E)  it is covering only implicit costs 
A)  it is making economic profit 
B)  it is breaking even 
C)  it is suffering an economic loss 
D)  it is covering only explicit costs 
E)  it is covering only implicit costs B

Question 2

Minimum efficient scale is the level of output at which

Accepted Answer

A)  short-run average total cost stops decreasing 
B)  short-run average total cost stops increasing 
C)  long-run average cost stops decreasing 
D)  long-run average cost stops increasing 
E)  profit stops increasing 
A)  short-run average total cost stops decreasing 
B)  short-run average total cost stops increasing 
C)  long-run average cost stops decreasing 
D)  long-run average cost stops increasing 
E)  profit stops increasing C

Question 3

Which of the following is not an explicit cost?

Accepted Answer

A)  salaries 
B)  sales taxes 
C)  the cost of utilities, such as gas and electricity 
D)  insurance premiums 
E)  the value of a firm owner's time 
A)  salaries 
B)  sales taxes 
C)  the cost of utilities, such as gas and electricity 
D)  insurance premiums 
E)  the value of a firm owner's time E

Question 4

Which of the following is not an effort by McDonald's to cope with diseconomies of scale?

Accepted Answer

A)  being exposed to country and regions risk, such as environmental protests 
B)  putting mini-restaurants in airports, gas stations, and Wal-Marts 
C)  allowing managers in each region of the U.S. more leeway in pricing and promotion 
D)  reducing product development time 
E)  closing unprofitable restaurants 
A)  being exposed to country and regions risk, such as environmental protests 
B)  putting mini-restaurants in airports, gas stations, and Wal-Marts 
C)  allowing managers in each region of the U.S. more leeway in pricing and promotion 
D)  reducing product development time 
E)  closing unprofitable restaurants

Question 5

Suppose Ernie gives up his job as financial advisor for P.E.T.S., at which he earned $30,000 per year, to open up a store selling spot remover to Dalmatians. He invested $10,000 in the store, which had been in savings earning 5 percent interest. This year's revenues in the new business were $50,000, and explicit costs were $10,000. Calculate Ernie's economic profit.

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 6

For a person who owns and operates an automobile, insurance premiums are a __________ and maintenance and repairs are a __________.

Accepted Answer

A)  revenue; cost 
B)  fixed cost; fixed cost 
C)  variable cost; variable cost 
D)  variable cost; fixed cost 
E)  fixed cost; variable cost 
A)  revenue; cost 
B)  fixed cost; fixed cost 
C)  variable cost; variable cost 
D)  variable cost; fixed cost 
E)  fixed cost; variable cost

Question 7

Which of the following are implicit costs for a typical firm?

Accepted Answer

A)  insurance costs 
B)  electricity costs 
C)  opportunity costs of capital owned and used by the firm 
D)  cost of labor hired by the firm 
E)  the cost of raw materials 
A)  insurance costs 
B)  electricity costs 
C)  opportunity costs of capital owned and used by the firm 
D)  cost of labor hired by the firm 
E)  the cost of raw materials

Question 8

For building contractors, doubling the size of an office building does not require double the inputs because there are common walls. This is an example of

Accepted Answer

A)  increasing marginal product 
B)  diminishing marginal returns 
C)  economies of scale 
D)  diseconomies of scale 
E)  constant returns to scale 
A)  increasing marginal product 
B)  diminishing marginal returns 
C)  economies of scale 
D)  diseconomies of scale 
E)  constant returns to scale

Question 9

Inputs that can be increased or decreased in the short run are called

Accepted Answer

A)  fixed inputs 
B)  variable inputs 
C)  economic inputs 
D)  accounting inputs 
E)  normal inputs 
A)  fixed inputs 
B)  variable inputs 
C)  economic inputs 
D)  accounting inputs 
E)  normal inputs

Question 10

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 11

Which of the following statements is true? If the marginal product of labor diminishes,

Accepted Answer

A)  average fixed cost rises 
B)  average variable cost is constant 
C)  marginal cost rises 
D)  average total cost must rise 
E)  total cost rises at a diminishing rate 
A)  average fixed cost rises 
B)  average variable cost is constant 
C)  marginal cost rises 
D)  average total cost must rise 
E)  total cost rises at a diminishing rate

Question 12

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 13

Economies of scale can be caused by

Accepted Answer

A)  all of the following 
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)  all of the following 
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 14

NARRBEGIN: Exhibit 7-8
Exhibit 7-8
  
-In Exhibit 7-8, when output is 10,

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 15

Suppose a soccer coach has been making $25,000 per year but gives up his coaching job in order to make lace doilies. If his revenue from the sale of these doilies is $50,000 and his materials cost $20,000, then his economic profit is

Accepted Answer

A)  $5,000 
B)  $25,000 
C)  $30,000 
D)  $50,000 
E)  $80,000 
A)  $5,000 
B)  $25,000 
C)  $30,000 
D)  $50,000 
E)  $80,000

Question 16

If marginal cost exceeds average variable cost,

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

Accounting profit equals

Accepted Answer

A)  explicit costs minus implicit costs 
B)  economic profit minus implicit costs 
C)  economic profit minus explicit costs 
D)  economic profit minus explicit costs and implicit costs 
E)  economic profit plus implicit costs 
A)  explicit costs minus implicit costs 
B)  economic profit minus implicit costs 
C)  economic profit minus explicit costs 
D)  economic profit minus explicit costs and implicit costs 
E)  economic profit plus implicit costs

Question 18

Which of the following indicates that economies of scale have been overridden by other factors?

Accepted Answer

A)  A company seeking to save on architect's fees during its move to Maryland copies the same building it used in San Francisco, so now it occupies the only office in Baltimore built to withstand earthquakes. 
B)  The workers on the night shift at the Roadkill Diner, having no customers of their own, peel 400 potatoes, fill 300 catsup bottles, fry 100 pounds of bacon, and brew 80 quarts of coffee for the morning shift. 
C)  Denny's Restaurant serves potatoes with its breakfasts nationwide, but in the South you can get grits instead. 
D)  The Creepy Critters Summer Camp decides not to give campers a choice between hamburgers and hot dogs but makes creamed chipped beef on toast for everybody. 
E)  Henry Ford said that his customers could have any color car they wanted, as long as they wanted black. 
A)  A company seeking to save on architect's fees during its move to Maryland copies the same building it used in San Francisco, so now it occupies the only office in Baltimore built to withstand earthquakes. 
B)  The workers on the night shift at the Roadkill Diner, having no customers of their own, peel 400 potatoes, fill 300 catsup bottles, fry 100 pounds of bacon, and brew 80 quarts of coffee for the morning shift. 
C)  Denny's Restaurant serves potatoes with its breakfasts nationwide, but in the South you can get grits instead. 
D)  The Creepy Critters Summer Camp decides not to give campers a choice between hamburgers and hot dogs but makes creamed chipped beef on toast for everybody. 
E)  Henry Ford said that his customers could have any color car they wanted, as long as they wanted black.

Question 19

If marginal product is negative, total product must be negative.

Accepted Answer

A) True 
 B)False

Question 20

The opportunity cost of a resource

Accepted Answer

A)  includes both explicit and implicit cost 
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 cost 
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

Exam 7: Production and Cost in the Firm

If General Motors is earning only a normal profit,

Minimum efficient scale is the level of output at which

Which of the following is not an explicit cost?

Which of the following is not an effort by McDonald's to cope with diseconomies of scale?

For a person who owns and operates an automobile, insurance premiums are a __________ and maintenance and repairs are a __________.

Which of the following are implicit costs for a typical firm?

For building contractors, doubling the size of an office building does not require double the inputs because there are common walls. This is an example of

Inputs that can be increased or decreased in the short run are called

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

Which of the following statements is true? If the marginal product of labor diminishes,

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

Economies of scale can be caused by

NARRBEGIN: Exhibit 7-8 Exhibit 7-8 -In Exhibit 7-8, when output is 10,

Suppose a soccer coach has been making $25,000 per year but gives up his coaching job in order to make lace doilies. If his revenue from the sale of these doilies is $50,000 and his materials cost $20,000, then his economic profit is

If marginal cost exceeds average variable cost,

Accounting profit equals

Which of the following indicates that economies of scale have been overridden by other factors?

If marginal product is negative, total product must be negative.

The opportunity cost of a resource

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters

For a person who owns and operates an automobile, insurance premiums are a and maintenance and repairs are a .