Question 1

In the long run, a firm will choose a plant size that has the

Accepted Answer

A)  minimum of average fixed costs.
B)  capacity to produce the largest quantity of the product.
C)  minimum average total cost of producing the target level of output.
D)  maximum level of resource use per unit of the total product of output.E) B) and C)
F) A) and B) C

Question 2

Fixed costs are associated with

Accepted Answer

A)  highly adjustable inputs such as labor.
B)  both the short run and the long run.
C)  the short run only.
D)  the long run only.E) A) and B)
F) B) and D)

Question 3

Which of the following statements is not correct?

Accepted Answer

A)  The real cost of producing X is the quantity of products, R, S, or T etc., which could have been produced with the resources devoted to X.
B)  Diseconomies of scale arise primarily from the difficulties in managing and coordinating a large-scale business enterprise.
C)  The law of diminishing returns explains the fact that the long-run average total cost curve is U-shaped.
D)  Average fixed costs diminish so long as output increases.E) C) and D)
F) None of the above

Question 4

The law of diminishing returns explains diseconomies of scale.Topic: Short-Run Production Relationships

Accepted Answer

A) True 
 B)False

Question 5

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles.This is an example of one reason for

Accepted Answer

A)  economies of scale.
B)  diminishing returns to scale.
C)  diminishing marginal returns.
D)  increasing marginal cost.E) A) and B)
F) A) and D)

Question 6

If in the short run a firm's total product is increasing, then its

Accepted Answer

A)  marginal product must also be increasing.
B)  marginal product must be decreasing.
C)  marginal product could be either increasing or decreasing.
D)  average product must also be increasing.E) B) and C)
F) None of the above

Question 7

The short-run average total cost curve is U-shaped because

Accepted Answer

A)  average fixed costs decline continuously as output increases.
B)  of increasing and diminishing returns.
C)  of economies and diseconomies of scale.
D)  minimum efficient scale is encountered.Topic: Short-Run Production RelationshipsE) None of the above
F) A) and C)

Question 8

If a firm's revenues just cover all its implicit costs, then

Accepted Answer

A)  normal profit is zero.
B)  economic profit is zero.
C)  total revenues equal its explicit costs.
D)  total revenues equal its implicit costs.E) A) and B)
F) C) and D)

Question 9

Marginal cost can be defined as the

Accepted Answer

A)  change in total fixed cost resulting from one more unit of production.
B)  change in total cost resulting from one more unit of production.
C)  change in average total cost resulting from one more unit of production.
D)  change in average variable cost resulting from one more unit of production.E) All of the above
F) B) and D)

Question 10

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs

Accepted Answer

A)  are $2.50.
B)  are $1,250.
C)  are $750.
D)  are $1,100.E) A) and D)
F) A) and C)

Question 11

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Accepted Answer

A)  None, because fixed costs do not affect marginal cost.
B)  Marginal cost would increase by 50 percent.
C)  Marginal cost would increase by less than 50 percent.
D)  Marginal cost would increase by more than 50 percent.E) A) and B)
F) A) and C)

Question 12

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

Accepted Answer

A)  no generalization about the changes in TC and TVC can be made.
B)  the changes in TC and TVC are equal.
C)  the change in TC is greater than the change in TVC.
D)  the change in TVC is greater than the change in TC.E) A) and C)
F) A) and B)

Question 13

Total fixed cost (TFC)

Accepted Answer

A)  falls as the firm expands output from zero, but eventually rises.
B)  falls continuously as total output expands.
C)  varies directly with total output.
D)  does not change as total output increases or decreases.E) B) and C)
F) B) and D)

Question 14

At any level of output.

Accepted Answer

A)  average variable cost will exceed average total cost in the short run.
B)  marginal cost will exceed average variable cost by the level of average fixed cost.
C)  average variable cost will exceed average fixed cost by the level of average total cost.
D)  average total cost will exceed average variable cost by the level of average fixed cost.E) None of the above
F) B) and C)

Question 15

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal)  costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's economic profit is

Accepted Answer

A)  $150,000.
B)  $80,000.
C)  $230,000.
D)  $94,000.E) A) and D)
F) A) and C) D

Question 16

Economic profits are usually larger than accounting profits.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is most likely to be a fixed cost?

Accepted Answer

A)  shipping charges
B)  property insurance premiums
C)  wages for unskilled labor
D)  expenditures for raw materialsE) B) and D)
F) A) and D)

Question 18

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50.Its output quantity must be

Accepted Answer

A)  200 units.
B)  400 units.
C)  800 units.
D)  1,600 units.E) A) and D)
F) A) and B) C

Question 19

When total product is increasing at a decreasing rate, marginal product is

Accepted Answer

A)  positive and increasing.
B)  positive and decreasing.
C)  constant.
D)  negative.E) B) and C)
F) All of the above

Question 20

(Last Word)  Which of the following is a predicted result of the increased use of additive manufacturing (using 3-D printers) ?

Accepted Answer

A)  Economies of scale in manufacturing will be eliminated, driving up production costs and prices.
B)  lower prices of manufactured goods through the elimination of large fixed costs and transportation costs
C)  monopolization of manufactured goods industries, as few individuals can afford additive manufacturing technology
D)  significant increases in the fixed costs of producing manufactured goodsE) B) and C)
F) A) and B)

Exam 9: Businesses and the Costs of Production

In the long run, a firm will choose a plant size that has the

Correct Answer
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C

Fixed costs are associated with

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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The law of diminishing returns explains diseconomies of scale.Topic: Short-Run Production Relationships

Correct Answer
verified

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles.This is an example of one reason for

Correct Answer
verified

If in the short run a firm's total product is increasing, then its

Correct Answer
verified

The short-run average total cost curve is U-shaped because

Correct Answer
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If a firm's revenues just cover all its implicit costs, then

Correct Answer
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Marginal cost can be defined as the

Correct Answer
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In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs

Correct Answer
verified

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Correct Answer
verified

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

Correct Answer
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Total fixed cost (TFC)

Correct Answer
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At any level of output.

Correct Answer
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Correct Answer
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D

Economic profits are usually larger than accounting profits.

Correct Answer
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Which of the following is most likely to be a fixed cost?

Correct Answer
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With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50.Its output quantity must be

Correct Answer
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C

When total product is increasing at a decreasing rate, marginal product is

Correct Answer
verified

(Last Word) Which of the following is a predicted result of the increased use of additive manufacturing (using 3-D printers) ?

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

In the long run, a firm will choose a plant size that has the

Correct AnswerverifiedC

Fixed costs are associated with

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

The law of diminishing returns explains diseconomies of scale.Topic: Short-Run Production Relationships

Correct AnswerverifiedShow Answer

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles.This is an example of one reason for

Correct AnswerverifiedShow Answer

If in the short run a firm's total product is increasing, then its

Correct AnswerverifiedShow Answer

The short-run average total cost curve is U-shaped because

Correct AnswerverifiedShow Answer

If a firm's revenues just cover all its implicit costs, then

Correct AnswerverifiedShow Answer

Marginal cost can be defined as the

Correct AnswerverifiedShow Answer

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs

Correct AnswerverifiedShow Answer

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Correct AnswerverifiedShow Answer

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

Correct AnswerverifiedShow Answer

Total fixed cost (TFC)

Correct AnswerverifiedShow Answer

At any level of output.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

Economic profits are usually larger than accounting profits.

Correct AnswerverifiedShow Answer

Which of the following is most likely to be a fixed cost?

Correct AnswerverifiedShow Answer

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50.Its output quantity must be

Correct AnswerverifiedC

When total product is increasing at a decreasing rate, marginal product is

Correct AnswerverifiedShow Answer

(Last Word) Which of the following is a predicted result of the increased use of additive manufacturing (using 3-D printers) ?

Correct AnswerverifiedShow Answer

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C

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D

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C

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