Question 1

Economies and diseconomies of scale explain

Accepted Answer

A)  the profit-maximizing level of production.
B)  why the firm's long-run average total cost curve is U-shaped.
C)  why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point.
D)  the distinction between fixed and variable costs.E) A) and D)
F) All of the above

Question 2

The basic characteristic of the short run is that

Accepted Answer

A)  barriers to entry prevent new firms from entering the industry.
B)  the firm does not have sufficient time to change the size of its plant.
C)  the firm does not have sufficient time to cut its rate of output to zero.
D)  a firm does not have sufficient time to change the amounts of any of the resources it employs.E) C) and D)
F) B) and D)

Question 3

The range over which average variable cost is increasing is the same as the range over which

Accepted Answer

A)  marginal cost is decreasing.
B)  average fixed cost is increasing.
C)  average product is increasing.
D)  average product is decreasing.E) None of the above
F) A) and B)

Question 4

Variable costs are

Accepted Answer

A)  costs that remain to be paid even if the firm shuts down temporarily.
B)  costs that change every day or every month.
C)  costs that change with the level of production.
D)  changes in total cost due to the production of an additional unit of output.E) All of the above
F) B) and C)

Question 5

As output increases, average fixed costs

Accepted Answer

A)  increase.
B)  decrease.
C)  remain constant.
D)  first increase and then decrease.E) A) and C)
F) None of the above

Question 6

Economic costs are equal to

Accepted Answer

A)  the opportunity costs of all resources owned by the firm.
B)  actual expenses paid by the firm for all of its inputs.
C)  the sum of all explicit costs and implicit costs.
D)  accounting costs.E) A) and B)
F) A) and C)

Question 7

If all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  constant returns to scale.
D)  decreasing average total costs.E) All of the above
F) None of the above

Question 8

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours.You value your time at $11.00 an hour; the tax specialist will charge you $55 an hour.The opportunity cost of preparing your own tax return is

Accepted Answer

A)  $275.
B)  $55.
C)  $110.
D)  $165.E) None of the above
F) B) and C)

Question 9

If a firm produces zero output in the short run, then its profits will also be zero.

Accepted Answer

A) True 
 B)False

Question 10

The short run is a period of time during which all costs are fixed costs.Topic: Short-Run Production Costs

Accepted Answer

A) True 
 B)False

Question 11

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

Accepted Answer

A)  the ability or quality of the variable inputs hired decreases as more of them are hired.
B)  the firm must lower the price of its product when it produces more units of output.
C)  the per unit cost it must pay for variable inputs increases as more inputs are hired.
D)  as more variable inputs are hired, the amount of the fixed input per unit of variable input decreases.E) A) and D)
F) All of the above

Question 12

When a firm is experiencing economies of scale,

Accepted Answer

A)  long-run total cost is decreasing.
B)  long-run average (per-unit)  total cost is decreasing.
C)  an increase in output is accompanied by a more-than-proportionate increase in long-run total cost.
D)  a given percentage increase in output requires a more-than-proportionate increase in resources.E) B) and C)
F) C) and D)

Question 13

(Consider This)  Past costs that are not affected by new decisions are known as

Accepted Answer

A)  variable costs.
B)  fixed costs.
C)  marginal costs.
D)  sunk costs.E) B) and C)
F) A) and D)

Question 14

The long run is characterized by

Accepted Answer

A)  the relevance of the law of diminishing returns.
B)  at least one fixed input.
C)  insufficient time for firms to enter or leave the industry.
D)  the ability of the firm to change its plant size.E) A) and B)
F) A) and C)

Question 15

Harvey quit his job at State University, where he earned $45,000 a year.He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year.To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming.In the first year, the firm sold 11,000 units of software at $75 for each unit.Of the $75 per unit,
$55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The normal profits for Harvey in the first year were

Accepted Answer

A)  $5,000.
B)  $160,000.
C)  $220,000.
D)  $150,000.E) A) and B)
F) None of the above

Question 16

If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  constant returns to scale.
D)  increasing average total costs.E) All of the above
F) B) and C)

Question 17

Which of the following types of firms are least likely to have their MC, AVC, and ATC curves affected by fluctuations in gasoline prices?

Accepted Answer

A)  firms like UPS that use a fleet of gasoline-powered vehicles
B)  taxi cab companies and Uber drivers
C)  companies that operate bus tours to popular vacation destinations
D)  firms like iTunes that distribute their products over the InternetE) A) and B)
F) A) and C)

Question 18

Assume a firm closes down in the short run and produces no output.Under these conditions,

Accepted Answer

A)  TVC is positive, but TFC and TC are zero.
B)  TFC is positive, but TVC and TC are zero.
C)  TFC and TC are positive, but TVC is zero.
D)  TFC, TVC, and TC will all be positive.E) A) and B)
F) A) and C)

Question 19

Economies of scale are indicated by

Accepted Answer

A)  the rising segment of the average variable cost curve.
B)  the declining segment of the long-run average total cost curve.
C)  the difference between total revenue and total cost.
D)  a rising marginal cost curve.E) All of the above
F) B) and D)

Question 20

When a bakery manager reports that at her bakery, productivity of her 15 workers last month was 1,800 loaves per worker, she is referring to the

Accepted Answer

A)  total product of labor.
B)  average product of labor.
C)  marginal product of labor.
D)  total product of capital.E) B) and C)
F) A) and B)

Exam 9: Businesses and the Costs of Production

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

Correct Answer
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Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours.You value your time at $11.00 an hour; the tax specialist will charge you $55 an hour.The opportunity cost of preparing your own tax return is

Correct Answer
verified

The basic characteristic of the short run is that

Correct Answer
verified

When a bakery manager reports that at her bakery, productivity of her 15 workers last month was 1,800 loaves per worker, she is referring to the

Correct Answer
verified

As output increases, average fixed costs

Correct Answer
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Economic costs are equal to

Correct Answer
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If a firm produces zero output in the short run, then its profits will also be zero.

Correct Answer
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If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be

Correct Answer
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Correct Answer
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Economies of scale are indicated by

Correct Answer
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When a firm is experiencing economies of scale,

Correct Answer
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Variable costs are

Correct Answer
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The short run is a period of time during which all costs are fixed costs.Topic: Short-Run Production Costs

Correct Answer
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Assume a firm closes down in the short run and produces no output.Under these conditions,

Correct Answer
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If all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing

Correct Answer
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The long run is characterized by

Correct Answer
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(Consider This) Past costs that are not affected by new decisions are known as

Correct Answer
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Which of the following types of firms are least likely to have their MC, AVC, and ATC curves affected by fluctuations in gasoline prices?

Correct Answer
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Economies and diseconomies of scale explain

Correct Answer
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The range over which average variable cost is increasing is the same as the range over which

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

Correct AnswerverifiedShow Answer

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours.You value your time at $11.00 an hour; the tax specialist will charge you $55 an hour.The opportunity cost of preparing your own tax return is

Correct AnswerverifiedShow Answer

The basic characteristic of the short run is that

Correct AnswerverifiedShow Answer

When a bakery manager reports that at her bakery, productivity of her 15 workers last month was 1,800 loaves per worker, she is referring to the

Correct AnswerverifiedShow Answer

As output increases, average fixed costs

Correct AnswerverifiedShow Answer

Economic costs are equal to

Correct AnswerverifiedShow Answer

If a firm produces zero output in the short run, then its profits will also be zero.

Correct AnswerverifiedShow Answer

If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economies of scale are indicated by

Correct AnswerverifiedShow Answer

When a firm is experiencing economies of scale,

Correct AnswerverifiedShow Answer

Variable costs are

Correct AnswerverifiedShow Answer

The short run is a period of time during which all costs are fixed costs.Topic: Short-Run Production Costs

Correct AnswerverifiedShow Answer

Assume a firm closes down in the short run and produces no output.Under these conditions,

Correct AnswerverifiedShow Answer

If all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing

Correct AnswerverifiedShow Answer

The long run is characterized by

Correct AnswerverifiedShow Answer

(Consider This) Past costs that are not affected by new decisions are known as

Correct AnswerverifiedShow Answer

Which of the following types of firms are least likely to have their MC, AVC, and ATC curves affected by fluctuations in gasoline prices?

Correct AnswerverifiedShow Answer

Economies and diseconomies of scale explain

Correct AnswerverifiedShow Answer

The range over which average variable cost is increasing is the same as the range over which

Correct AnswerverifiedShow Answer

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