Question 1

The opportunity cost of any factor of production is

Accepted Answer

A) its accounting cost. 
B) the money actually paid to the factors of production. 
C) the benefit forgone by not using it in its worst alternative. 
D) the benefit forgone by not using it in its best alternative. 
E) its explicit cost.

Question 2

The table below provides the annual revenues and costs for a family-owned firm producing catered meals.
  TABLE 7-1
-Refer to Table 7-1.The explicit costs for this family-owned firm are

Accepted Answer

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

Question 3

A firm that is maximizing its profits by producing a certain level of output must also be

Accepted Answer

A) minimizing its cost of producing that output. 
B) maximizing its sales. 
C) minimizing its variable costs. 
D) maximizing its output. 
E) maximizing its revenue.

Question 4

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2)L2,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K=8)and 10 units of labour (L=10).What is the output of sweaters?

Accepted Answer

A) 30 sweaters per day 
B) 60 sweaters per day 
C) 80 sweaters per day 
D) 140 sweaters per day 
E) 155 sweaters per day

Question 5

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

Accepted Answer

A) The marginal product of the fourth worker is 11. 
B) The firm has passed the point of diminishing average productivity. 
C) The marginal product is above the average product. 
D) The firm has not yet reached the point of diminishing marginal productivity. 
E) With 4 workers,the firm's average product of labour is 13.

Question 6

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
  TABLE 7-3
-Refer to Table 7-3.At what level of output does average total cost reach a minimum?

Accepted Answer

A) 30 
B) 90 
C) 132 
D) 150 
E) ATC declines continuously over the range of output shown.

Question 7

The table below provides the total revenues and costs for a small landscaping company in a recent year.
  TABLE 7-2
-Refer to Table 7-2.The accounting profits for this firm are

Accepted Answer

A) $32 300. 
B) $32 700. 
C) $63 100. 
D) $63 500. 
E) $71 500.

Question 8

If Michelle used $1000 from her savings account,which was paying 6% interest annually,to invest in her brother's new sporting-goods store,the opportunity cost of her investment on an annual basis would be

Accepted Answer

A) $60. 
B) $1000. 
C) $1060. 
D) her share of the store's profits. 
E) the dividend paid to her by her brother.

Question 9

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

Accepted Answer

A) Marginal product for this firm is rising. 
B) The marginal product of the fourth worker is 9. 
C) Average product for this firm is rising. 
D) The firm has passed the point of diminishing marginal productivity. 
E) With 4 workers,the average product is greater than the marginal product.

Question 10

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.
  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 11

Which of the following statements is NOT true of a corporation?

Accepted Answer

A) It can enter into contracts. 
B) It is an entity separate from the individuals who own it. 
C) It can incur debt that is an obligation of the corporation but not of its individual owners. 
D) It has the right to sue and be sued. 
E) It is legally obliged to distribute all profits to shareholders.

Question 12

Consider a firm in the short run.Average product is at its maximum when

Accepted Answer

A) total product is maximized. 
B) marginal product is maximized. 
C) the maximum quantity of the variable input is employed. 
D) diminishing returns cease to operate. 
E) average product equals marginal product and marginal product is falling.

Question 13

Suppose that when a firm hires one additional unit of labour,total product increases from 100 to 110 units of output per month.Marginal product must therefore be

Accepted Answer

A) increasing. 
B) positive. 
C) decreasing. 
D) constant. 
E) zero.

Question 14

FIGURE 7-1
-Refer to Figure 7-1.If the firm hires the 15th unit of labour,

Accepted Answer

A) the extra output will be zero. 
B) average product will rise. 
C) marginal product will be unchanged. 
D) the firm will reach its capacity. 
E) output will increase by 2 units of output.

Question 15

The opportunity cost to a firm of using an asset is zero if

Accepted Answer

A) the asset is already owned by the firm. 
B) no money was spent to acquire the asset. 
C) the asset has no alternative uses. 
D) the asset has zero sunk costs associated with it. 
E) the asset was given to the firm for free.

Question 16

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
  TABLE 7-3
-Refer to Table 7-3.The average total cost when this firm is producing 10 units of output is

Accepted Answer

A) 60 cents. 
B) $1. 
C) $6. 
D) $10. 
E) $60.

Question 17

The table below provides information on output per month and short-run costs for a firm producing outdoor wooden lounge chairs.All costs are in dollars.
  TABLE 7-5
-Refer to Table 7-5.Given the information in the table about short-run costs,this firm would minimize the average total cost of production when producing

Accepted Answer

A) 10 chairs. 
B) 15 chairs. 
C) 20 chairs. 
D) 25 chairs. 
E) 30 chairs.

Question 18

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.
  TABLE 7-4
-Refer to Table 7-4.The marginal product of labour curve intersects the average product of labour curve from above when the firm changes the amount of labour per unit of time from

Accepted Answer

A) 0 to 1 units. 
B) 1 to 2 units. 
C) 2 to 3 units. 
D) 3 to 4 units. 
E) 4 to 5 units.

Question 19

A firm's short-run marginal cost curve is decreasing when

Accepted Answer

A) average fixed cost is increasing. 
B) total fixed cost is decreasing. 
C) marginal product is decreasing. 
D) marginal product is increasing. 
E) capacity is reached.

Question 20

Economic profits are less than accounting profits because the calculation of economic profit

Accepted Answer

A) includes an amount for depreciation. 
B) includes an explicit charge for risk taking. 
C) includes the implicit charges for the use of capital owned by the firm and for risk taking. 
D) includes the implicit charges for the use of capital owned by the firm and for income taxes. 
E) is stipulated in regulations set forth by the Canada Revenue Agency.

Exam 7: Producers in the Short Run

The opportunity cost of any factor of production is

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1.The explicit costs for this family-owned firm are

A firm that is maximizing its profits by producing a certain level of output must also be

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2) L²,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K=8) and 10 units of labour (L=10) .What is the output of sweaters?

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

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -Refer to Table 7-2.The accounting profits for this firm are

If Michelle used $1000 from her savings account,which was paying 6% interest annually,to invest in her brother's new sporting-goods store,the opportunity cost of her investment on an annual basis would be

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

Which of the following statements is NOT true of a corporation?

Consider a firm in the short run.Average product is at its maximum when

Suppose that when a firm hires one additional unit of labour,total product increases from 100 to 110 units of output per month.Marginal product must therefore be

FIGURE 7-1 -Refer to Figure 7-1.If the firm hires the 15th unit of labour,

The opportunity cost to a firm of using an asset is zero if

A firm's short-run marginal cost curve is decreasing when

Economic profits are less than accounting profits because the calculation of economic profit

Exam 7: Producers in the Short Run

The opportunity cost of any factor of production is

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1.The explicit costs for this family-owned firm are

A firm that is maximizing its profits by producing a certain level of output must also be

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2) L2,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K=8) and 10 units of labour (L=10) .What is the output of sweaters?

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

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -Refer to Table 7-2.The accounting profits for this firm are

If Michelle used $1000 from her savings account,which was paying 6% interest annually,to invest in her brother's new sporting-goods store,the opportunity cost of her investment on an annual basis would be

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

Which of the following statements is NOT true of a corporation?

Consider a firm in the short run.Average product is at its maximum when

Suppose that when a firm hires one additional unit of labour,total product increases from 100 to 110 units of output per month.Marginal product must therefore be

FIGURE 7-1 -Refer to Figure 7-1.If the firm hires the 15th unit of labour,

The opportunity cost to a firm of using an asset is zero if

A firm's short-run marginal cost curve is decreasing when

Economic profits are less than accounting profits because the calculation of economic profit

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2) L²,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K=8) and 10 units of labour (L=10) .What is the output of sweaters?