Question 1

The total cost curve:

Accepted Answer

A)  is the sum of the variable cost curve and fixed cost curve.
B)  is parallel to the variable cost curve.
C)  always lies above the variable cost curve.
D)  All of these are correct.E) None of the above
F) B) and C)

Question 2

The marginal product of any input into the production process:

Accepted Answer

A)  is the increase in output that is generated by an additional unit of input.
B)  is the decrease in input that is generated by an additional unit of output.
C)  is the constant ratio of inputs to outputs.
D)  None of these are correct.E) B) and C)
F) A) and C)

Question 3

Average total cost:

Accepted Answer

A)  is the sum of average fixed costs and average variable costs.
B)  is total cost divided by total output.
C)  is minimized when it equals marginal cost.
D)  All of these are correct.E) B) and D)
F) B) and C)

Question 4

A sandwich shop currently employs four workers and produces sandwiches at a total cost per sandwich (ATC) of $3. Each sandwich sells for $5. If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich, which of the following is true?

Accepted Answer

A)  It will cost $5.50 to make another sandwich, which can only be sold for $5.
B)  The shop will lose $0.50 per sandwich if it hires another worker.
C)  The shop should not hire a fifth worker.
D)  All of these are correct.E) A) and C)
F) C) and D)

Question 5

The larger the implicit cost of a business:

Accepted Answer

A)  the greater accounting profit will be.
B)  the smaller economic profit will be.
C)  the more successful the venture will be.
D)  the smaller the explicit cost will be.E) A) and B)
F) A) and C)

Question 6

The marginal product curve:

Accepted Answer

A)  typically decreases at low levels of input, but increases as input increases.
B)  cannot be negative, since total output cannot be negative.
C)  shows how many extra outputs are created with each additional input.
D)  None of these are correct.E) A) and D)
F) A) and B)

Question 7

Variable costs are:

Accepted Answer

A)  costs that don't depend on the quantity of output produced.
B)  costs that depend on the quantity of output produced.
C)  one-time costs.
D)  usually sunk and thus irrelevant.E) None of the above
F) B) and C)

Question 8

Suppose Bev's Bags makes large handbags and small handbags. Bev's sells 70,000 large bags for $45 each and 25,000 small bags for $15 each. If the company has total costs of $2,000,000, what is its profit?

Accepted Answer

A)  $1,525,000
B)  $3,525,000
C)  $375,000
D)  $850,000E) A) and D)
F) C) and D)

Question 9

Suppose Winston's annual salary as an accountant is $60,000 and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What is Winston's economic profit?

Accepted Answer

A)  $78,000
B)  $142,000
C)  $138,000
D)  $150,000E) A) and B)
F) A) and C)

Question 10

If a firm stops production, then its:

Accepted Answer

A)  variable costs decrease to zero.
B)  fixed costs stay the same.
C)  total costs decrease.
D)  All of these are correct.E) A) and D)
F) A) and C)

Question 11

If the marginal cost of hiring another worker to produce sandwiches is $4 per sandwich, and sandwiches sell for $5 each, then:

Accepted Answer

A)  another worker should be hired.
B)  another worker should not be hired.
C)  two more workers should be hired.
D)  Not enough information is given to answer this question.E) B) and D)
F) C) and D)

Question 12

In the long run, when an increase in the quantity of output decreases average total cost, a firm experiences:

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  constant economies to scale.
D)  minimum average total cost.E) C) and D)
F) A) and D)

Question 13

A college student is thinking about running an ice cream truck over the summer. What would economists say is the student's main objective?

Accepted Answer

A)  To spend as little on inputs as possible
B)  To maximize hourly earnings
C)  To sell as many ice cream cones as possible
D)  To maximize his profitE) C) and D)
F) B) and C)

Question 14

If a firm stops production, its:

Accepted Answer

A)  fixed costs rise.
B)  total costs may increase or decrease.
C)  variable costs drop to zero.
D)  All are correct.E) All of the above
F) None of the above

Question 15

A long-run ATC curve shows:

Accepted Answer

A)  the minimum average total cost possible for firms of all different sizes across an industry.
B)  which size of firm can capture the lowest costs per unit for an industry.
C)  which firms can capture economies of scale by expanding.
D)  All of these are correct.E) C) and D)
F) B) and C)

Question 16

The table shows the total production of burritos in a burrito shop given various numbers of employees. What is the marginal product of labor for the sixth worker?

Accepted Answer

A)  180
B)  150
C)  60
D)  30E) A) and C)
F) None of the above

Question 17

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 included in the company's total costs?

Accepted Answer

A)  The cost of the rope
B)  Employee wages
C)  The rope-cutting machine
D)  All of these expenses would be included in total cost.E) All of the above
F) C) and D)

Question 18

The additional output produced by adding one more unit of an input is:

Accepted Answer

A)  marginal product.
B)  average product.
C)  total production.
D)  the slope of the marginal product curve.E) C) and D)
F) A) and B)

Question 19

If a firm produces nothing, its _____ equal zero.

Accepted Answer

A)  variable costs
B)  fixed costs
C)  total costs
D)  All of these are correct.E) B) and C)
F) None of the above

Question 20

Suppose Winston's annual salary as an accountant is $60,000 and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What costs would be considered when calculating economic profit?

Accepted Answer

A)  The opportunity cost of his job and interest forgone of $64,000 and the explicit cost of $8,000
B)  The implicit cost of the interest forgone of $4,000 and the explicit cost of $8,000
C)  The explicit cost of $8,000
D)  The implicit cost of his job of $60,000 and the opportunity cost of forgone interest of $4,000E) A) and B)
F) C) and D)

Exam 12: The Costs of Production

The total cost curve:

Correct Answer
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The larger the implicit cost of a business:

Correct Answer
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Average total cost:

Correct Answer
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If a firm stops production, then its:

Correct Answer
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Variable costs are:

Correct Answer
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If the marginal cost of hiring another worker to produce sandwiches is $4 per sandwich, and sandwiches sell for $5 each, then:

Correct Answer
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Correct Answer
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If a firm stops production, its:

Correct Answer
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If a firm produces nothing, its _____ equal zero.

Correct Answer
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The marginal product of any input into the production process:

Correct Answer
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Correct Answer
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A college student is thinking about running an ice cream truck over the summer. What would economists say is the student's main objective?

Correct Answer
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A long-run ATC curve shows:

Correct Answer
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A sandwich shop currently employs four workers and produces sandwiches at a total cost per sandwich (ATC) of $3. Each sandwich sells for $5. If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich, which of the following is true?

Correct Answer
verified

The additional output produced by adding one more unit of an input is:

Correct Answer
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Suppose Bev's Bags makes large handbags and small handbags. Bev's sells 70,000 large bags for $45 each and 25,000 small bags for $15 each. If the company has total costs of $2,000,000, what is its profit?

Correct Answer
verified

The table shows the total production of burritos in a burrito shop given various numbers of employees. What is the marginal product of labor for the sixth worker?

Correct Answer
verified

Correct Answer
verified

In the long run, when an increase in the quantity of output decreases average total cost, a firm experiences:

Correct Answer
verified

The marginal product curve:

Correct Answer
verified

Exam 12: The Costs of Production

The total cost curve:

Correct AnswerverifiedShow Answer

The larger the implicit cost of a business:

Correct AnswerverifiedShow Answer

Average total cost:

Correct AnswerverifiedShow Answer

If a firm stops production, then its:

Correct AnswerverifiedShow Answer

Variable costs are:

Correct AnswerverifiedShow Answer

If the marginal cost of hiring another worker to produce sandwiches is $4 per sandwich, and sandwiches sell for $5 each, then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a firm stops production, its:

Correct AnswerverifiedShow Answer

If a firm produces nothing, its _____ equal zero.

Correct AnswerverifiedShow Answer

The marginal product of any input into the production process:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A college student is thinking about running an ice cream truck over the summer. What would economists say is the student's main objective?

Correct AnswerverifiedShow Answer

A long-run ATC curve shows:

Correct AnswerverifiedShow Answer

A sandwich shop currently employs four workers and produces sandwiches at a total cost per sandwich (ATC) of $3. Each sandwich sells for $5. If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich, which of the following is true?

Correct AnswerverifiedShow Answer

The additional output produced by adding one more unit of an input is:

Correct AnswerverifiedShow Answer

Suppose Bev's Bags makes large handbags and small handbags. Bev's sells 70,000 large bags for $45 each and 25,000 small bags for $15 each. If the company has total costs of $2,000,000, what is its profit?

Correct AnswerverifiedShow Answer

The table shows the total production of burritos in a burrito shop given various numbers of employees. What is the marginal product of labor for the sixth worker?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the long run, when an increase in the quantity of output decreases average total cost, a firm experiences:

Correct AnswerverifiedShow Answer

The marginal product curve:

Correct AnswerverifiedShow Answer

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