Question 1

The table shows the total production of burritos in a burrito shop given various numbers of employees. Diminishing marginal product sets in with the:

Accepted Answer

A)  fourth worker.
B)  third worker.
C)  fifth worker.
D)  second worker.E) A) and B)
F) B) and D)

Question 2

How long is the long run?

Accepted Answer

A)  It is a defined, set period of time, usually a year.
B)  It is however long it would take a firm to vary all of its costs.
C)  It is however long it would take a firm to have at least one variable cost.
D)  None of these defines the long run.E) B) and D)
F) None of the above

Question 3

Marginal product is represented by:

Accepted Answer

A)  the x-axis of the total production curve.
B)  total product minus total cost.
C)  the slope of the total production curve.
D)  total revenue minus total cost.E) All of the above
F) A) and B)

Question 4

Which of the following could be true about a firm that is on the flat portion of its long-run ATC curve?

Accepted Answer

A)  It is experiencing constant returns to scale.
B)  Changing its firm size will not affect its total cost per unit.
C)  It is capturing the lowest average total costs possible in the industry.
D)  All of these are correct.E) C) and D)
F) None of the above

Question 5

Suppose Chip's Chips produces bags of potato chips. What is needed to calculate the company's total revenue?

Accepted Answer

A)  The cost per bag
B)  The quantity of bags sold
C)  The cost per bag and the quantity of bags sold
D)  The company's market shareE) B) and D)
F) None of the above

Question 6

A jewelry company has three employees who together produce 10 bracelets an hour. When a fourth worker joins them, the output for the company increases to 11 bracelets an hour. Which of the following is true?

Accepted Answer

A)  Diminishing marginal product started with the fourth worker.
B)  Average product has increased.
C)  Total product is increasing.
D)  None of these are correct.E) C) and D)
F) B) and C)

Question 7

Assume a snowboard company is at a point in production at which marginal product is below average product. Which of the following must be true?

Accepted Answer

A)  Diminishing marginal product must have set in.
B)  Marginal product must be falling.
C)  Average product must be falling.
D)  All of these are correct.E) A) and D)
F) A) and B)

Question 8

The relationship between the quantity of inputs and the quantity of outputs is called a(n) :

Accepted Answer

A)  input-output function.
B)  production function.
C)  cost function.
D)  resource function.E) A) and D)
F) C) and D)

Question 9

Implicit costs are costs that:

Accepted Answer

A)  require a firm to spend money.
B)  represent forgone opportunities.
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 C)

Question 10

Suppose Chip's Chips produces bags of potato chips. An example of a variable cost for this firm would be:

Accepted Answer

A)  the potato peeling machine.
B)  the factory building.
C)  the deep fryer.
D)  None of these are examples of variable costs.E) A) and B)
F) A) and C)

Question 11

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

Accepted Answer

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

Question 12

Economic profit is calculated as:

Accepted Answer

A)  total revenue minus explicit costs.
B)  total revenue minus all opportunity costs (explicit and implicit) .
C)  total revenue minus implicit costs.
D)  None of these calculations are correct.E) A) and B)
F) None of the above

Question 13

When a firm can achieve economies of scale by expanding, its long-run ATC curve:

Accepted Answer

A)  slopes down.
B)  slopes up.
C)  is flat.
D)  can slope up, slope down, or be flat.E) B) and C)
F) None of the above

Question 14

When a firm is on the portion of its long-run ATC curve that slopes upward, it is experiencing:

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  constant returns to scale.
D)  All of these are possible.E) B) and C)
F) All of the above

Question 15

Accounting profit is calculated as:

Accepted Answer

A)  total revenue minus explicit costs.
B)  total revenue minus all opportunity costs (explicit and implicit) .
C)  total revenue minus implicit costs.
D)  None of these calculations are correct.E) None of the above
F) A) and D)

Question 16

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 implicit cost?

Accepted Answer

A)  $64,000
B)  $72,000
C)  $4,000
D)  $60,000E) All of the above
F) None of the above

Question 17

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. Has Tom made the best decision?

Accepted Answer

A)  Yes, because his accounting profit is positive.
B)  No, because his economic profit is negative.
C)  Yes, because his accounting profit is larger than his economic profit.
D)  No, because his accounting profit is larger than his economic profit.E) All of the above
F) None of the above

Question 18

Suppose Sam's Shoe Co. makes only one kind of shoe, which sells for $50 a pair. If Sam's sells 500,000 pairs of shoes, and has a total cost of $1,000,000, what would the company's profit be?

Accepted Answer

A)  $1,500,000
B)  $24,000,000
C)  $40,000,000
D)  Not enough information is given to calculate profit.E) B) and C)
F) C) and D)

Question 19

An example of an ongoing expense for a toy company would be buying:

Accepted Answer

A)  a delivery truck.
B)  a new factory.
C)  advertising.
D)  None of these are ongoing expenses.E) B) and C)
F) A) and C)

Question 20

Jermaine wants to open his own repair shop, and is considering using his savings of $30,000 to get it started. He is currently earning 3 percent interest on his savings. However, Jermaine's friend Bob wishes to borrow the $30,000 to start up a bagel shop, offering to pay Jermaine 5 percent interest if he loans out the money. If Jermaine were to use the money to open his repair shop, rather than loan it to Bob, how can he accurately account for his costs?

Accepted Answer

A)  Jermaine must consider the $900 in forgone interest on his savings as an implicit cost.
B)  Jermaine must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost.
C)  Jermaine must consider the $900 in forgone interest on his savings as an explicit cost.
D)  Jermaine must consider the $1,500 in forgone interest from loaning the money to Bob as an explicit cost.E) A) and B)
F) A) and C)

Exam 12: The Costs of Production

Suppose Chip's Chips produces bags of potato chips. What is needed to calculate the company's total revenue?

Correct Answer
verified

Suppose Chip's Chips produces bags of potato chips. An example of a variable cost for this firm would be:

Correct Answer
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When a firm can achieve economies of scale by expanding, its long-run ATC curve:

Correct Answer
verified

Economic profit is calculated as:

Correct Answer
verified

Accounting profit is calculated as:

Correct Answer
verified

When a firm is on the portion of its long-run ATC curve that slopes upward, it is experiencing:

Correct Answer
verified

The relationship between the quantity of inputs and the quantity of outputs is called a(n) :

Correct Answer
verified

A jewelry company has three employees who together produce 10 bracelets an hour. When a fourth worker joins them, the output for the company increases to 11 bracelets an hour. Which of the following is true?

Correct Answer
verified

Suppose Sam's Shoe Co. makes only one kind of shoe, which sells for $50 a pair. If Sam's sells 500,000 pairs of shoes, and has a total cost of $1,000,000, what would the company's profit be?

Correct Answer
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Correct Answer
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Correct Answer
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An example of an ongoing expense for a toy company would be buying:

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

Correct Answer
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How long is the long run?

Correct Answer
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Marginal product is represented by:

Correct Answer
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Implicit costs are costs that:

Correct Answer
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Assume a snowboard company is at a point in production at which marginal product is below average product. Which of the following must be true?

Correct Answer
verified

The table shows the total production of burritos in a burrito shop given various numbers of employees. Diminishing marginal product sets in with the:

Correct Answer
verified

Which of the following could be true about a firm that is on the flat portion of its long-run ATC curve?

Correct Answer
verified

Correct Answer
verified

Exam 12: The Costs of Production

Suppose Chip's Chips produces bags of potato chips. What is needed to calculate the company's total revenue?

Correct AnswerverifiedShow Answer

Suppose Chip's Chips produces bags of potato chips. An example of a variable cost for this firm would be:

Correct AnswerverifiedShow Answer

When a firm can achieve economies of scale by expanding, its long-run ATC curve:

Correct AnswerverifiedShow Answer

Economic profit is calculated as:

Correct AnswerverifiedShow Answer

Accounting profit is calculated as:

Correct AnswerverifiedShow Answer

When a firm is on the portion of its long-run ATC curve that slopes upward, it is experiencing:

Correct AnswerverifiedShow Answer

The relationship between the quantity of inputs and the quantity of outputs is called a(n) :

Correct AnswerverifiedShow Answer

A jewelry company has three employees who together produce 10 bracelets an hour. When a fourth worker joins them, the output for the company increases to 11 bracelets an hour. Which of the following is true?

Correct AnswerverifiedShow Answer

Suppose Sam's Shoe Co. makes only one kind of shoe, which sells for $50 a pair. If Sam's sells 500,000 pairs of shoes, and has a total cost of $1,000,000, what would the company's profit be?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An example of an ongoing expense for a toy company would be buying:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How long is the long run?

Correct AnswerverifiedShow Answer

Marginal product is represented by:

Correct AnswerverifiedShow Answer

Implicit costs are costs that:

Correct AnswerverifiedShow Answer

Assume a snowboard company is at a point in production at which marginal product is below average product. Which of the following must be true?

Correct AnswerverifiedShow Answer

The table shows the total production of burritos in a burrito shop given various numbers of employees. Diminishing marginal product sets in with the:

Correct AnswerverifiedShow Answer

Which of the following could be true about a firm that is on the flat portion of its long-run ATC curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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