Question 1

Figure 12-1 
-Refer to Figure 12-1.Which of the following could explain why the total product curve would shift from TP2 to TP1?

Accepted Answer

A)   There is additional capital equipment available to the firm.
B)   Labor skills have become rusty and outdated in the firm.
C)   The firm has developed improved production technology.
D)   The firm is now receiving a higher price for its product.E) A) and C)
F) B) and D)

Question 2

When a firm experiences diseconomies of scale,

Accepted Answer

A)   short-run average total cost is minimized.
B)   long-run average total cost is minimized.
C)   long-run average total cost increases as output increases.
D)   long-run average total cost decreases as output increases.E) C) and D)
F) B) and C)

Question 3

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Accepted Answer

A)   the $20 million payment that the firm pays each year for accounting services
B)   the cost of the steel that is used in producing automobiles
C)   the rent that the firm pays for office space in a suburb of St.Louis
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 4

Let L represent the number of workers hired by a firm,and let Q represent that firm's quantity of output.Assume two points on the firm's production function are (L = 5,Q = 125) and (L = 6,Q = 162) .Then the marginal product of the 6th worker is

Accepted Answer

A)   25 units of output.
B)   27 units of output.
C)   37 units of output.
D)   162 units of output.E) A) and B)
F) A) and C)

Question 5

If the total cost curve gets steeper as output increases,the firm is experiencing

Accepted Answer

A)   diseconomies of scale.
B)   economies of scale.
C)   diminishing marginal product.
D)   increasing marginal product.E) B) and D)
F) A) and D)

Question 6

Diminishing marginal product suggests that

Accepted Answer

A)   additional units of output become less costly as more output is produced.
B)   marginal cost is upward sloping.
C)   the firm is at full capacity.
D)   adding additional workers will lower total cost.E) B) and D)
F) B) and C)

Question 7

Constant returns to scale occur when a firm's

Accepted Answer

A)   marginal costs are constant as output increases.
B)   long-run average total costs are decreasing as output increases.
C)   long-run average total costs are increasing as output increases.
D)   long-run average total costs do not vary as output increases.E) B) and D)
F) A) and B)

Question 8

When average total cost rises if a producer either increases or decreases production,then the firm is said to be operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 9

When marginal cost exceeds average total cost,

Accepted Answer

A)   average fixed cost must be rising.
B)   average total cost must be rising.
C)   average total cost must be falling.
D)   marginal cost must be falling.E) A) and D)
F) All of the above

Question 10

Economists assume that the typical person who starts her own business does so with the intention of

Accepted Answer

A)   donating the profits from her business to charity.
B)   capturing the highest number of sales in her industry.
C)   maximizing profits.
D)   minimizing costs.E) A) and D)
F) C) and D)

Question 11

If Tanya sells 200 glasses of fruit punch at $0.50 each,her total revenues are

Accepted Answer

A)   $100.
B)   $199.50.
C)   $200.
D)   $400.E) None of the above
F) A) and B)

Question 12

Implicit costs are costs that do not require an outlay of money by the firm.

Accepted Answer

A) True 
 B)False

Question 13

If marginal cost is rising,

Accepted Answer

A)   average variable cost must be falling.
B)   average fixed cost must be rising.
C)   marginal product must be falling.
D)   marginal product must be rising.E) B) and D)
F) None of the above

Question 14

A firm has a fixed cost of $700 in its first year of operation.When the firm produces 99 units of output,its total costs are $4,000.The marginal cost of producing the 100th unit of output is $200.What is the total cost of producing 100 units?

Accepted Answer

A)   $42
B)   $900
C)   $4,200
D)   $4,900E) B) and D)
F) B) and C)

Question 15

When calculating a firm's profit,an economist will subtract only

Accepted Answer

A)   explicit costs from total revenue because these are the only costs that can be measured explicitly.
B)   implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured.
C)   the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.
D)   the marginal cost because the cost of the next unit is the only relevant cost.E) A) and B)
F) All of the above

Question 16

Table 12-6
Wooden Chair Factory
 
-Refer to Table 12-6.Each worker at the Wooden Chair Factory costs $12 per hour.The cost of each machine is $20 per day regardless of the number of chairs produced.What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day?

Accepted Answer

A)   $480
B)   $576
C)   $520
D)   $616E) None of the above
F) A) and C)

Question 17

Which of the following must always be true as the quantity of output increases?

Accepted Answer

A)   Marginal cost must rise.
B)   Average total cost must rise.
C)   Average variable cost must rise.
D)   Average fixed cost must fall.E) B) and C)
F) C) and D)

Question 18

Scenario 12-10
Walter builds birdhouses.He spends $5 on the materials for each birdhouse.He can build one in 30 minutes.He is semi-retired but earns $8 per hour at the local hardware store.He can sell a birdhouse for $20 each.
-Refer to Scenario 12-10.The explicit cost for one birdhouse is

Accepted Answer

A)   $4.
B)   $5.
C)   $8.
D)   $9.E) A) and B)
F) None of the above

Question 19

Diminishing marginal productivity implies decreasing total product.

Accepted Answer

A) True 
 B)False

Question 20

Table 12-16
Listed in the table are the long-run total costs for three different firms.
 
-Refer to Table 12-16.Firm A is experiencing constant returns to scale.

Accepted Answer

A) True 
 B)False

Exam 12: The Costs of Production

Constant returns to scale occur when a firm's

Correct Answer
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Table 12-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 12-16.Firm A is experiencing constant returns to scale.

Correct Answer
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A firm has a fixed cost of $700 in its first year of operation.When the firm produces 99 units of output,its total costs are $4,000.The marginal cost of producing the 100th unit of output is $200.What is the total cost of producing 100 units?

Correct Answer
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When a firm experiences diseconomies of scale,

Correct Answer
verified

When marginal cost exceeds average total cost,

Correct Answer
verified

Economists assume that the typical person who starts her own business does so with the intention of

Correct Answer
verified

When calculating a firm's profit,an economist will subtract only

Correct Answer
verified

Diminishing marginal productivity implies decreasing total product.

Correct Answer
verified

If Tanya sells 200 glasses of fruit punch at $0.50 each,her total revenues are

Correct Answer
verified

When average total cost rises if a producer either increases or decreases production,then the firm is said to be operating at efficient scale.

Correct Answer
verified

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Correct Answer
verified

Which of the following must always be true as the quantity of output increases?

Correct Answer
verified

Correct Answer
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Implicit costs are costs that do not require an outlay of money by the firm.

Correct Answer
verified

If the total cost curve gets steeper as output increases,the firm is experiencing

Correct Answer
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Scenario 12-10 Walter builds birdhouses.He spends $5 on the materials for each birdhouse.He can build one in 30 minutes.He is semi-retired but earns $8 per hour at the local hardware store.He can sell a birdhouse for $20 each. -Refer to Scenario 12-10.The explicit cost for one birdhouse is

Correct Answer
verified

Diminishing marginal product suggests that

Correct Answer
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Let L represent the number of workers hired by a firm,and let Q represent that firm's quantity of output.Assume two points on the firm's production function are (L = 5,Q = 125) and (L = 6,Q = 162) .Then the marginal product of the 6th worker is

Correct Answer
verified

Figure 12-1 -Refer to Figure 12-1.Which of the following could explain why the total product curve would shift from TP2 to TP1?

Correct Answer
verified

If marginal cost is rising,

Correct Answer
verified

Exam 12: The Costs of Production

Constant returns to scale occur when a firm's

Correct AnswerverifiedShow Answer

Table 12-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 12-16.Firm A is experiencing constant returns to scale.

Correct AnswerverifiedShow Answer

A firm has a fixed cost of $700 in its first year of operation.When the firm produces 99 units of output,its total costs are $4,000.The marginal cost of producing the 100th unit of output is $200.What is the total cost of producing 100 units?

Correct AnswerverifiedShow Answer

When a firm experiences diseconomies of scale,

Correct AnswerverifiedShow Answer

When marginal cost exceeds average total cost,

Correct AnswerverifiedShow Answer

Economists assume that the typical person who starts her own business does so with the intention of

Correct AnswerverifiedShow Answer

When calculating a firm's profit,an economist will subtract only

Correct AnswerverifiedShow Answer

Diminishing marginal productivity implies decreasing total product.

Correct AnswerverifiedShow Answer

If Tanya sells 200 glasses of fruit punch at $0.50 each,her total revenues are

Correct AnswerverifiedShow Answer

When average total cost rises if a producer either increases or decreases production,then the firm is said to be operating at efficient scale.

Correct AnswerverifiedShow Answer

For a large firm that produces and sells automobiles,which of the following costs would be a variable cost?

Correct AnswerverifiedShow Answer

Which of the following must always be true as the quantity of output increases?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Implicit costs are costs that do not require an outlay of money by the firm.

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If the total cost curve gets steeper as output increases,the firm is experiencing

Correct AnswerverifiedShow Answer

Scenario 12-10 Walter builds birdhouses.He spends $5 on the materials for each birdhouse.He can build one in 30 minutes.He is semi-retired but earns $8 per hour at the local hardware store.He can sell a birdhouse for $20 each. -Refer to Scenario 12-10.The explicit cost for one birdhouse is

Correct AnswerverifiedShow Answer

Diminishing marginal product suggests that

Correct AnswerverifiedShow Answer

Let L represent the number of workers hired by a firm,and let Q represent that firm's quantity of output.Assume two points on the firm's production function are (L = 5,Q = 125) and (L = 6,Q = 162) .Then the marginal product of the 6th worker is

Correct AnswerverifiedShow Answer

Figure 12-1 -Refer to Figure 12-1.Which of the following could explain why the total product curve would shift from TP2 to TP1?

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If marginal cost is rising,

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