Question 1

The table below provides the total revenues and costs for a small landscaping company in a recent year. $$\begin{array} { | l | l | } 
\hline \text { Total Revenues }(\$) & 250000 \
\hline & \
\hline \text { Total Costs }(\$) & \
\hline \text { wages and salaries } & 150000 \
\hline \text { risk-free return of } 2 \% \text { on owner's capital of } \$ 20000 & 400 \
\hline \text { interest on bank loan } & 1500 \
\hline \text { cost of supplies } & 27000 \
\hline \text { depreciation of capital equipment } & 8000 \
\hline \text { additional wages the owner could have earned in next } & 30000 \
\text { best alternative } & \
\hline \text { risk premium of } 4 \% \text { on owner's capital of } \$ 20000 & 800 \
\hline
\end{array}$$ TABLE 7- 2
-Refer to Table 7- 2.The implicit costs for this firm are

Accepted Answer

A) $400. 
B) $31 200. 
C) $30 400. 
D) $30 800. 
E) $800.

Question 2

In the short run time horizon for a firm,total fixed costs

Accepted Answer

A) decrease as output increases. 
B) are equal to total variable costs. 
C) decrease and then increase as output increases. 
D) do not vary with output. 
E) increase and then decrease as output increases.

Question 3

Suppose Jodi's widget business is using two inputs,labour and capital.If the price of labour increases,which of the following will happen?

Accepted Answer

A) The firm's marginal cost curve will remain unchanged. 
B) The firm's average total cost curve will shift upward. 
C) Jodi will shut down her business. 
D) Jodi will hire more labour. 
E) The firm's average fixed cost curve will shift upward.

Question 4

We can predict that resources will move into an industry whenever

Accepted Answer

A) economic profits for firms in that industry are greater than zero. 
B) economic losses for firms in that industry are minimized. 
C) economic profits for firms in that industry are zero. 
D) accounting profits for firms in that industry are zero. 
E) accounting profits for firms in that industry are greater than zero.

Question 5

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month
2.raw material costs of $5000 per month
3.a one- year lease on a building of $12 000

Accepted Answer

A) 1 only 
B) 2 only 
C) 3 only 
D) 1 and 2 
E) 2 and 3

Question 6

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars. $$\begin{array} { | c | c | c | } 
\hline \text { Output } & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable Cost }
\end{array} \
\hline 50 & 60 & 140 \
\hline 70 & 45 & 115 \
\hline 90 & 35 & 95 \
\hline 110 & 30 & 80 \
\hline 130 & 35 & 65 \
\hline 150 & 60 & 60 \
\hline 170 & 105 & 65 \
\hline 190 & 180 & 75 \
\hline 210 & 230 & 90 \
\hline 230 & 290 & 110 \
\hline
\end{array}$$ TABLE 7- 6
-Refer to Table 7- 6.If the firm produces 130 pairs of shoes,and the fixed cost is $550,then the firm's total cost is

Accepted Answer

A) $12 000. 
B) $7000. 
C) $8000. 
D) $10 000. 
E) $9000.

Question 7

An example of "real" capital is

Accepted Answer

A) shares in a corporation. 
B) a firm's balance in a bank account. 
C) a firm's computer systems. 
D) corporate bonds. 
E) a firm's retained earnings.

Question 8

Which of the following is most likely a long- run decision for a firm?

Accepted Answer

A) The number of workers to hire. 
B) The hours a store should stay open. 
C) How many warehouses to build. 
D) The price at which to sell the product. 
E) The amount of inventory to stock.

Question 9

A limited partnership differs from an ordinary partnership by

Accepted Answer

A) including some partners whose liability is restricted to the amount that they invested in the firm. 
B) having a limited number of partners,each with limited liability. 
C) having limited liability of all partners. 
D) having a limited number of partners. 
E) having unlimited liability for all partners.

Question 10

The diagram below shows some short- run cost curves for a firm.
  FIGURE 7- 2
-Refer to Figure 7- 2.Which of the following choices correctly identifies the cost curves in part (ii)of the figure?

Accepted Answer

A) Curve 4 is the marginal cost curve.Curve 5 is the average fixed cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average total cost curve. 
B) Curve 4 is the average fixed cost curve.Curve 5 is the average total cost curve.Curve 6 is the marginal cost curve. Curve 7 is the average variable cost curve. 
C) Curve 4 is the marginal cost curve. Curve 5 is the average variable cost curve.Curve 6 is the average fixed cost curve.
Curve 7 is the average total cost curve. 
D) Curve 4 is the marginal cost curve.Curve 5 is the average total cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average fixed cost curve. 
E) Curve 4 is the average total cost curve.Curve 5 is the marginal cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average fixed cost curve.

Question 11

Suppose a production function for a firm takes the following algebraic form: Q = (0.5)KL - 40L,where Q is the output of paintbrushes per week.Now suppose the firm is operating with 100 units of capital (K = 100)and 30 000 units of labour (L = 30 000).What is the output of paintbrushes per week?

Accepted Answer

A) 30 000 
B) 3 000 000 
C) 300 000 
D) 1 500 000 
E) 1 200 000

Question 12

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100. $$\begin{array} { | c | c | } 
\hline \text { Labour per unit of time } & \text { Total output } \
\hline 0 & 0 \
\hline 1 & 25 \
\hline 2 & 75 \
\hline 3 & 175 \
\hline 4 & 250 \
\hline 5 & 305 \
\hline
\end{array}$$ TABLE 7- 4
-Refer to Table 7- 4.The average product of labour is highest when the firm hires units of labour.

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 13

Consider a firm in the short run.If total product is at its maximum,then

Accepted Answer

A) average product must equal marginal product. 
B) average product must be falling and be equal to zero. 
C) average product must be rising and must lie above marginal product. 
D) marginal product must be greater than zero and must be falling. 
E) marginal product must be falling and be equal to zero.

Question 14

In the short run,the firm's product curves show

Accepted Answer

A) AP is at its minimum when MP = AP. 
B) when MP < AP,AP is increasing. 
C) TP is at its maximum when MP is at its maximum. 
D) TP begins to decrease when AP begins to decrease. 
E) when the MP curve cuts the AP curve from above,the AP curve begins to fall.

Question 15

Suppose a firm with the usual U- shaped cost curves is producing a level of output such that its short- run costs are as follows: ATC = $0.37 per unit AVC = $0.32 per unit AFC = $0.05 per unit MC = $0.43 per unit
Given these short- run costs,as the firm increases its output,which of the following statements is true?

Accepted Answer

A) Average product of the variable factor must be increasing. 
B) Marginal product of the variable factor is at its minimum point. 
C) Marginal product of the variable factor must be increasing. 
D) Marginal product of the variable factor must be decreasing. 
E) The point of diminishing average product of the variable factor has not yet been reached.

Question 16

In the short run,the firm's product curves show

Accepted Answer

A) TP is at its maximum when MP = O. 
B) AP is at its minimum when MP = AP. 
C) when MP > AP,AP is decreasing. 
D) TP begins to decrease when AP begins to decrease. 
E) when the MP curve cuts the AP curve from below,the AP curve begins to fall.

Question 17

The table below provides the annual revenues and costs for a family- owned firm producing catered meals. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 500000 \
\hline & \
\hline \text { Total Costs }(\$) & \
\hline \text { wages and salaries } & 200000 \
\hline \text { risk- free return of } 6 \% \text { on owners' capital of } 250000 & 15000 \
\hline \text { rent } & 105000 \
\hline \text { depreciation of capital equipment } & 25000 \
\hline \text {-risk premium of } 8 \% \text { on owners' capital of } 250000 & 20000 \
\hline \text { - intermediate inputs } & 150000 \
\hline \text { forgone wages of owners in alternative employment } & 80000 \
\hline \text { - interest on bank loan } & 10000 \
\hline
\end{array}$ TABLE 7- 1
-Refer to Table 7- 1.The economic profits for this family- owned firm are

Accepted Answer

A) $0. 
B) $10 000. 
C) $115 000. 
D) - $105 000. 
E) - $10 000.

Question 18

The table below provides the annual revenues and costs for a family- owned firm producing catered meals. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 500000 \
\hline & \
\hline \text { Total Costs }(\$) & \
\hline \text { wages and salaries } & 200000 \
\hline \text { risk-free return of } 6 \% \text { on owners' capital of } 250000 & 15000 \
\hline \text { rent } & 105000 \
\hline \text { depreciation of capital equipment } & 25000 \
\hline \text { risk premium of } 8 \% \text { on owners' capital of } 250000 & 20000 \
\hline \text { - intermediate inputs } & 150000 \
\hline \text { forgone wages of owners in alternative employment } & 80000 \
\hline \text { - interest on bank loan } & 10000 \
\hline
\end{array}$ TABLE 7- 1
-Refer to Table 7- 1.The explicit costs for this family- owned firm are

Accepted Answer

A) $605 000. 
B) $115 000. 
C) $490 000. 
D) $500 000. 
E) $505 000.

Question 19

Consider a basket- producing firm with fixed capital.If the firm can produce 36 baskets per day with 3 workers and then increases production to 44 baskets per day with 4 workers,then which of the following statements is true?

Accepted Answer

A) With 4 workers,the firm's average product of labour is 8. 
B) The marginal product of the fourth worker is 11. 
C) With 4 workers,the marginal product is above the average product. 
D) The firm has passed the point of diminishing marginal productivity. 
E) The firm has not yet reached the point of diminishing marginal productivity.

Question 20

Sport- fishermen on the Campbell River in British Columbia are catching fewer fish and are having to fish many more hours to catch them.However,the total number of fish caught on the river continues to increase.The river is experiencing

Accepted Answer

A) diminishing total returns. 
B) diminishing marginal returns. 
C) increasing marginal returns. 
D) constant marginal returns. 
E) increasing average returns.

Exam 7: Producers in the Short Run

In the short run time horizon for a firm,total fixed costs

Suppose Jodi's widget business is using two inputs,labour and capital.If the price of labour increases,which of the following will happen?

We can predict that resources will move into an industry whenever

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month 2.raw material costs of $5000 per month 3.a one- year lease on a building of $12 000

An example of "real" capital is

Which of the following is most likely a long- run decision for a firm?

A limited partnership differs from an ordinary partnership by

The diagram below shows some short- run cost curves for a firm. FIGURE 7- 2 -Refer to Figure 7- 2.Which of the following choices correctly identifies the cost curves in part (ii) of the figure?

Suppose a production function for a firm takes the following algebraic form: Q = (0.5) KL - 40L,where Q is the output of paintbrushes per week.Now suppose the firm is operating with 100 units of capital (K = 100) and 30 000 units of labour (L = 30 000) .What is the output of paintbrushes per week?

Consider a firm in the short run.If total product is at its maximum,then

In the short run,the firm's product curves show

In the short run,the firm's product curves show

Consider a basket- producing firm with fixed capital.If the firm can produce 36 baskets per day with 3 workers and then increases production to 44 baskets per day with 4 workers,then which of the following statements is true?

Sport- fishermen on the Campbell River in British Columbia are catching fewer fish and are having to fish many more hours to catch them.However,the total number of fish caught on the river continues to increase.The river is experiencing