Question 1

How long is the short run?

Accepted Answer

A)  It is typically defined by the process cycle of the particular firm.
B)  It is defined by the presence of a fixed cost for a firm.
C)  It is generally less than a year.
D)  All of these are correct.E) A) and C)
F) None of the above

Question 2

Imagine Tom's annual salary as an assistant store manager is $30,000. He also owns a building that he rents out, earning $10,000 annually, and he has financial assets that generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop in the building he owns. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. What is Tom's accounting profit?

Accepted Answer

A)  $50,000
B)  $24,000
C)  $35,000
D)  −$6,000E) None of the above
F) B) and D)

Question 3

Total revenue is:

Accepted Answer

A)  the amount that a firm spends on all inputs that go into producing a good or service.
B)  the quantity sold multiplied by the price paid for each unit.
C)  the quantity produced multiplied by the cost of producing each unit.
D)  the amount that an individual gets paid over a specified period of time, typically annually.E) A) and C)
F) B) and D)

Question 4

Average product measures:

Accepted Answer

A)  the quantity of output produced per unit of input.
B)  the additional output created from an additional unit of input.
C)  marginal product averaged across all inputs.
D)  All of these are correct.E) All of the above
F) None of the above

Question 5

The amount that a firm receives from the sale of goods and services is called:

Accepted Answer

A)  total cost.
B)  total revenue.
C)  profit.
D)  maximum profit.E) A) and B)
F) A) and C)

Question 6

When a company's economic profit is positive, what will the accounting profit most likely be?

Accepted Answer

A)  Positive
B)  Negative
C)  Zero
D)  All of these are equally likely.E) B) and D)
F) A) and B)

Question 7

Constant returns to scale occur when:

Accepted Answer

A)  an increase in the quantity of output decreases average total cost in the long run.
B)  an increase in the quantity of output increases average total cost in the long run.
C)  average total cost does not depend on the quantity of output in the long run.
D)  None of these are correct.E) C) and D)
F) B) and C)

Question 8

A soft drink factory employs seven workers and produces 500 bottles of soda a day. When the company reduces the workforce to six workers output decreases to 450 bottles a day. The seventh worker:

Accepted Answer

A)  had a marginal product of 50 bottles of soda.
B)  caused average product to fall.
C)  had a lower marginal product than the sixth worker.
D)  All of these are correct.E) B) and C)
F) B) and D)

Question 9

Marginal cost is:

Accepted Answer

A)  the additional output a firm will get by employing one additional unit of input.
B)  the additional cost a firm will incur by producing one additional unit of output.
C)  the total cost a firm will incur by producing a given level of output.
D)  the costs that sit on the margin, that do not change regardless of the level of output.E) All of the above
F) C) and D)

Question 10

A college student is thinking about running an ice cream truck over the summer. Which of the following would likely be a one-time expense of the business?

Accepted Answer

A)  The cost of ice cream cones
B)  The cost of the truck
C)  The cost of the gasoline
D)  All of these are one-time expenses.E) A) and B)
F) C) and D)

Question 11

In general, the cost of an input _____ when a firm has reached the point of diminishing marginal product.

Accepted Answer

A)  decreases
B)  stays the same
C)  increases
D)  is minimizedE) B) and C)
F) B) and D)

Question 12

Explicit costs are costs that:

Accepted Answer

A)  require a firm to spend money.
B)  are zero when no output is produced.
C)  do not depend on the quantity of output produced.
D)  depend on the quantity of output produced.E) B) and C)
F) A) and B)

Question 13

The table shows costs for an individual firm. What is the marginal cost of the third unit produced?

Accepted Answer

A)  12
B)  14
C)  36
D)  48E) All of the above
F) B) and C)

Question 14

Marginal cost:

Accepted Answer

A)  is calculated as the change in total cost divided by the change in total output.
B)  is calculated as the change in total output divided by the change in total cost.
C)  increases then decreases, as output increases, to reflect marginal product.
D)  All of these are correct.E) A) and D)
F) None of the above

Question 15

How is total revenue calculated?

Accepted Answer

A)  Cost multiplied by the quantity of each item produced
B)  Price multiplied by the quantity of each item sold, subtracted from total cost
C)  Price multiplied by the quantity of each item sold
D)  None of these calculations are correct.E) B) and C)
F) None of the above

Question 16

Suppose Larry's Lariats produces lassos in a factory, using nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length and seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. Which of the following expenses would be considered a fixed cost for this company?

Accepted Answer

A)  Employee wages
B)  The cost of rope
C)  The packaging material
D)  None of these expenses are fixed costs.E) B) and C)
F) A) and B)

Question 17

The marginal cost curve:

Accepted Answer

A)  is U-shaped.
B)  rises when marginal product falls, and falls when marginal product rises.
C)  intersects the average total cost curve at its minimum.
D)  All of these are correct.E) None of the above
F) A) and D)

Question 18

When a company's accounting profit is negative, what will the economic profit be?

Accepted Answer

A)  Positive
B)  Negative
C)  Zero
D)  It could be positive, negative, or zero.E) B) and C)
F) A) and B)

Question 19

Diminishing marginal product:

Accepted Answer

A)  causes the variable cost curve to become flatter.
B)  causes the variable cost curve to become steeper.
C)  has no relation to the variable cost curve.
D)  causes the fixed cost curve to become flatter.E) B) and C)
F) A) and C)

Question 20

Davy's Doggie Daycare rents a warehouse and field for $2,000 a month to house its boarded pooches. Farmer Fred owns the property; he used to use it for farming and made $3,000 a month, but has since retired. What is the cost of the warehouse and field to Davy?

Accepted Answer

A)  It is an explicit cost of $2,000.
B)  It is an implicit cost of $3,000.
C)  It is an implicit cost of $0.
D)  There is both an explicit and implicit cost totalling $5,000.E) B) and D)
F) A) and B)

Exam 12: The Costs of Production

Explicit costs are costs that:

Correct Answer
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The table shows costs for an individual firm. What is the marginal cost of the third unit produced?

Correct Answer
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In general, the cost of an input _____ when a firm has reached the point of diminishing marginal product.

Correct Answer
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When a company's economic profit is positive, what will the accounting profit most likely be?

Correct Answer
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How long is the short run?

Correct Answer
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Average product measures:

Correct Answer
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Marginal cost:

Correct Answer
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Marginal cost is:

Correct Answer
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Total revenue is:

Correct Answer
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How is total revenue calculated?

Correct Answer
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Correct Answer
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The marginal cost curve:

Correct Answer
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Constant returns to scale occur when:

Correct Answer
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Davy's Doggie Daycare rents a warehouse and field for $2,000 a month to house its boarded pooches. Farmer Fred owns the property; he used to use it for farming and made $3,000 a month, but has since retired. What is the cost of the warehouse and field to Davy?

Correct Answer
verified

A soft drink factory employs seven workers and produces 500 bottles of soda a day. When the company reduces the workforce to six workers output decreases to 450 bottles a day. The seventh worker:

Correct Answer
verified

When a company's accounting profit is negative, what will the economic profit be?

Correct Answer
verified

A college student is thinking about running an ice cream truck over the summer. Which of the following would likely be a one-time expense of the business?

Correct Answer
verified

The amount that a firm receives from the sale of goods and services is called:

Correct Answer
verified

Correct Answer
verified

Diminishing marginal product:

Correct Answer
verified

Exam 12: The Costs of Production

Explicit costs are costs that:

Correct AnswerverifiedShow Answer

The table shows costs for an individual firm. What is the marginal cost of the third unit produced?

Correct AnswerverifiedShow Answer

In general, the cost of an input _____ when a firm has reached the point of diminishing marginal product.

Correct AnswerverifiedShow Answer

When a company's economic profit is positive, what will the accounting profit most likely be?

Correct AnswerverifiedShow Answer

How long is the short run?

Correct AnswerverifiedShow Answer

Average product measures:

Correct AnswerverifiedShow Answer

Marginal cost:

Correct AnswerverifiedShow Answer

Marginal cost is:

Correct AnswerverifiedShow Answer

Total revenue is:

Correct AnswerverifiedShow Answer

How is total revenue calculated?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The marginal cost curve:

Correct AnswerverifiedShow Answer

Constant returns to scale occur when:

Correct AnswerverifiedShow Answer

Davy's Doggie Daycare rents a warehouse and field for $2,000 a month to house its boarded pooches. Farmer Fred owns the property; he used to use it for farming and made $3,000 a month, but has since retired. What is the cost of the warehouse and field to Davy?

Correct AnswerverifiedShow Answer

A soft drink factory employs seven workers and produces 500 bottles of soda a day. When the company reduces the workforce to six workers output decreases to 450 bottles a day. The seventh worker:

Correct AnswerverifiedShow Answer

When a company's accounting profit is negative, what will the economic profit be?

Correct AnswerverifiedShow Answer

A college student is thinking about running an ice cream truck over the summer. Which of the following would likely be a one-time expense of the business?

Correct AnswerverifiedShow Answer

The amount that a firm receives from the sale of goods and services is called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Diminishing marginal product:

Correct AnswerverifiedShow Answer

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