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Exam 9: Businesses and the Costs of Production

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Question 71

Multiple Choice

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Average fixed costs for a given level of output can be determined graphically by

A) summing the marginal costs of any number of units of output and dividing the sum by that output.
B) the vertical distance between TC and TVC.
C) the vertical distance between AVC and MC.
D) the vertical distance between ATC and AVC.

E) A) and D)
F) All of the above

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Question 72

Multiple Choice

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Which of the following represents a long-run adjustment?

A) A farmer uses an extra dose of fertilizer on his corn crop.
B) Unable to meet foreign competition, a U.S.watch manufacturer sells one of its branch plants.
C) A steel manufacturer cuts back on its purchases of coke and iron ore.
D) A supermarket hires four additional clerks.

E) B) and D)
F) None of the above

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Question 73

Multiple Choice

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In which of the following industries are economies of scale exhausted at relatively low levels of output?

In the short run it is impossible for an expansion of output to increase

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 total revenues of Harvey's firm in the first year were

If the total cost of 20 units of a product is $20, and the total cost of 21 units is $21, then from 20 to 21 units of product the

If start-up firms can quickly shift the short-run cost curves up and to the left, they would improve their chances of becoming profitable.

The law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one

Average fixed cost

Economic cost can best be defined as

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 total revenues exceed its total costs, including a normal profit, by

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 implicit costs, including a normal profit, are

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then

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 If, other things equal, Creamy Crisp's revenue fell to $286,000,

If the price of a variable resource increased for the typical firm, there would be

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year.If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

A firm's economic profit is usually higher than its accounting profit.

The law of diminishing returns results in

If a firm wanted to know how much it would save by producing one less unit of output, it would look to

3-D printers are capable of producing real output like chairs or machine parts using a computer-controlled special printer at low cost even if you produce only one unit of output.