Question 1

Implicit costs are

Accepted Answer

A)  the same as economic costs.
B)  comprised entirely of actual expenses paid by the firm for its inputs.
C)  opportunity costs of self-employed resources.
D)  always greater than accounting costs.E) B) and C)
F) A) and D)

Question 2

Suppose that you could either prepare your own tax return in 8 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at$20.00an hour; the tax specialist will charge you $45 an hour. The opportunity cost of preparing your own tax return is

Accepted Answer

A)  $250.
B)  $45.
C)  $90.
D)  $160.E) All of the above
F) B) and D)

Question 3

When marginal cost is increasing,

Accepted Answer

A)  total cost must be increasing.
B)  average total cost must be increasing.
C)  average total cost must be decreasing.
D)  average fixed cost might be increasing or decreasing.E) A) and D)
F) B) and D)

Question 4

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

Accepted Answer

A)  The firm will earn positive accounting and economic profits.
B)  The firm will face accounting and economic losses.
C)  The firm will face an accounting loss but earn positive economic profits.
D)  The firm may earn positive accounting profits but will face economic losses.E) A) and B)
F) B) and C)

Question 5

Which of the following would be an implicit cost for a firm? The cost

Accepted Answer

A)  of worker wages and salaries for the firm.
B)  paid for leasing a building for the firm.
C)  paid for production supplies for the firm.
D)  of wages forgone by the owner of the firm.E) C) and D)
F) A) and B)

Question 6

In order to apply the concept of diminishing returns to study time,

Accepted Answer

A)  the amount of study time available must be held constant.
B)  study time must be considered a long-run production process.
C)  all inputs to the learning process must be allowed to vary.
D)  all inputs to the learning process except for study time must be assumed to be fixed.E) A) and B)
F) None of the above

Question 7

Answer the question on the basis of the following cost data.  The average total cost of 6 units of output is

Accepted Answer

A)  $79.33.
B)  $100.00.
C)  $81.70.
D)  $8.37.E) None of the above
F) A) and B)

Question 8

The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  minimum efficient scale.
D)  constant returns to scale.E) B) and C)
F) All of the above

Question 9

Answer the question on the basis of the following cost data.  If the firm closed down in the short run and produced zero units of output, its total cost would be

Accepted Answer

A)  $0.
B)  $50.
C)  $150.
D)  $100.E) A) and D)
F) A) and C)

Question 10

The long-run average total cost curve

Accepted Answer

A)  displays declining unit costs so long as output is increasing.
B)  indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.
C)  has a shape that is the inverse of the law of diminishing returns.
D)  can be derived by summing horizontally the average total cost curves of all firms in an industry.E) B) and D)
F) B) and C)

Question 11

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

Accepted Answer

A)  200 units.
B)  400 units.
C)  800 units.
D)  1,600 units.E) A) and C)
F) B) and D)

Question 12

If marginal cost is

Accepted Answer

A)  falling, then average total cost must also be falling.
B)  rising, then average total cost must also be rising.
C)  rising, then average total cost could be either falling or rising.
D)  falling, then average total cost could be either falling or rising.E) A) and D)
F) A) and B)

Question 13

Harvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The economic profits of Harvey's firm in the first year were

Accepted Answer

A)  $120,000.
B)  $71,000.
C)  $49,000.
D)  $720,000.E) C) and D)
F) B) and C)

Question 14

What effect does the increase of the price of gasoline have on the cost curves of package delivery firms such as FedEx or UPS? How might the effects differ for a software firm such as Symantec that uses the Internet?

Accepted Answer

Because gasoline powers the majority of ...

Question 15

A given level of consumer demand will support a large number of producers in an industry if

Accepted Answer

A)  minimum efficient scale (MES) is very large.
B)  the long-run ATC curve decreases as output levels increase.
C)  diseconomies of scale are already encountered even at low levels of output.
D)  exclusive patents and high government license fees are prevalent in the industry.E) B) and C)
F) A) and D)

Question 16

Use the following data to answer the question.  When seven units of labor are hired, the marginal product (MP) of the last worker is

Accepted Answer

A)  9.
B)  -3.
C)  441.
D)  18.E) B) and C)
F) A) and B)

Question 17

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

Accepted Answer

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) C) and D)
F) None of the above

Question 18

The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the diagram. At output level Q, total fixed cost is

Accepted Answer

A)  0 BEQ.
B)  BCDE.
C)  0 BEQ −0 AFQ.
D)  0 CDQ.E) C) and D)
F) B) and C)

Question 20

Marginal cost

Accepted Answer

A)  equals both average variable cost and average total cost at their respective minimums.
B)  is the difference between total cost and total variable cost.
C)  rises for a time but then begins to decline when diminishing returns set in.
D)  declines continuously as output increases.E) A) and B)
F) All of the above

Exam 9: Businesses and the Costs of Production

A given level of consumer demand will support a large number of producers in an industry if

Correct Answer
verified

Correct Answer
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What effect does the increase of the price of gasoline have on the cost curves of package delivery firms such as FedEx or UPS? How might the effects differ for a software firm such as Symantec that uses the Internet?

Correct Answer
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Because gasoline powers the majority of ...
View Answer

If marginal cost is

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Answer the question on the basis of the following cost data. The average total cost of 6 units of output is

Correct Answer
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Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

Correct Answer
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Refer to the diagram. At output level Q, total fixed cost is

Correct Answer
verified

Use the following data to answer the question. When seven units of labor are hired, the marginal product (MP) of the last worker is

Correct Answer
verified

Implicit costs are

Correct Answer
verified

In order to apply the concept of diminishing returns to study time,

Correct Answer
verified

Which of the following would be an implicit cost for a firm? The cost

Correct Answer
verified

Answer the question on the basis of the following cost data. If the firm closed down in the short run and produced zero units of output, its total cost would be

Correct Answer
verified

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

Correct Answer
verified

Suppose that you could either prepare your own tax return in 8 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at$20.00an hour; the tax specialist will charge you $45 an hour. The opportunity cost of preparing your own tax return is

Correct Answer
verified

The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X.

Correct Answer
verified

When marginal cost is increasing,

Correct Answer
verified

Marginal cost

Correct Answer
verified

The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

Correct Answer
verified

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

Correct Answer
verified

The long-run average total cost curve

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

A given level of consumer demand will support a large number of producers in an industry if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What effect does the increase of the price of gasoline have on the cost curves of package delivery firms such as FedEx or UPS? How might the effects differ for a software firm such as Symantec that uses the Internet?

Correct AnswerverifiedBecause gasoline powers the majority of ...View AnswerShow Answer

If marginal cost is

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The average total cost of 6 units of output is

Correct AnswerverifiedShow Answer

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

Correct AnswerverifiedShow Answer

Refer to the diagram. At output level Q, total fixed cost is

Correct AnswerverifiedShow Answer

Use the following data to answer the question. When seven units of labor are hired, the marginal product (MP) of the last worker is

Correct AnswerverifiedShow Answer

Implicit costs are

Correct AnswerverifiedShow Answer

In order to apply the concept of diminishing returns to study time,

Correct AnswerverifiedShow Answer

Which of the following would be an implicit cost for a firm? The cost

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. If the firm closed down in the short run and produced zero units of output, its total cost would be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that you could either prepare your own tax return in 8 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at$20.00an hour; the tax specialist will charge you $45 an hour. The opportunity cost of preparing your own tax return is

Correct AnswerverifiedShow Answer

The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X.

Correct AnswerverifiedShow Answer

When marginal cost is increasing,

Correct AnswerverifiedShow Answer

Marginal cost

Correct AnswerverifiedShow Answer

The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

Correct AnswerverifiedShow Answer

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

Correct AnswerverifiedShow Answer

The long-run average total cost curve

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Because gasoline powers the majority of ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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