Question 1

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.To run the business,he outlays $8,000 in cash to cover all the costs involved with running the business,and earns revenues of $150,000.What are Winston's economic profits?

Accepted Answer

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

Question 2

Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.Adding a third worker increases production:

Accepted Answer

A)   by 60 hats.
B)   by more than the second worker.
C)   to 110 hats.
D)   All of these are true.E) A) and D)
F) A) and C)

Question 3

When the slope of the total production curve begins to flatten:

Accepted Answer

A)   the marginal product must be decreasing.
B)   diminishing marginal product must be occurring.
C)   additional inputs adds less to total production than the inputs added before.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A)   Diminishing marginal product must have set it.
B)   Marginal product must be falling.
C)   Average product must be falling.
D)   All of these are true.E) C) and D)
F) None of the above

Question 5

The short run:

Accepted Answer

A)   means the firm cannot increase or decrease at least one of its inputs.
B)   means that output cannot be changed.
C)   means the price of output is fixed.
D)   All of these are true.E) B) and C)
F) A) and D)

Question 6

Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets 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.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.Tom should:

Accepted Answer

A)   close his shop and go back to what he was doing before with his time and assets, because it was earning him $6,000 more than he's earning now.
B)   keep his shop going because he's earning a healthy $35,000 a year.
C)   keep his shop going because he's earning $5,000 more than his salary before.
D)   None of these is true.E) B) and C)
F) A) and D)

Question 7

Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.What is the marginal product of the ninth worker?

Accepted Answer

A)   10
B)   5
C)   15
D)   290E) A) and B)
F) All of the above

Question 8

Assume the table shown is for a hat factory,and shows the total production of hats 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) B) and D)
F) B) and C)

Question 9

The slope of the total production curve becomes:

Accepted Answer

A)   steeper when marginal product increases, typically at low levels of input.
B)   flatter when marginal product increases, typically at high levels of input.
C)   steeper when marginal product decreases, typically at high levels of input.
D)   flatter when marginal product decreases, typically at low levels of input.E) A) and D)
F) B) and C)

Question 10

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 is true.E) C) and D)
F) None of the above

Question 11

Costs that are "fixed":

Accepted Answer

A)   depend on what timescale you are thinking.
B)   are those that will never change.
C)   vary with output, but not with resource prices.
D)   None of these is true.E) A) and B)
F) B) and C)

Question 12

If a sandwich shop produces zero sandwiches,which of the following costs will it still incur?

Accepted Answer

A)   Employee's wages
B)   Sandwich ingredients
C)   Rented storefront
D)   None of these costs will be incurred if they no longer make sandwiches.E) A) and B)
F) B) and C)

Question 13

A long-run ATC curve shows:

Accepted Answer

A)   the minimum average total cost possible for every possible size firm across an industry.
B)   which size firm can capture the lowest costs per unit for an industry.
C)   what size firms can capture economies of scale by expanding.
D)   All of these are true.E) B) and C)
F) None of the above

Question 14

Davy's Doggie Daycare rents a warehouse and field for $2,000 a month to house its boarding 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 totaling $5,000.E) All of the above
F) A) and D)

Question 15

Which of the following would be considered an ongoing expense?

Accepted Answer

A)   Employee salaries
B)   Raw materials
C)   Advertising
D)   All of these could be considered ongoing expenses.E) B) and D)
F) B) and C)

Question 16

Suppose Bev's Bags makes two kinds of handbags-large and small.Bev rents an industrial space where she keeps the fabric,the industrial sewing machine,her measuring board and cutting shears,extra needles,thread and buttons,and labels.If Bev were to produce no bags,what would her variable cost include?

Accepted Answer

A)   The cost of the fabric
B)   The sewing machine
C)   The measuring board
D)   Her variable cost would be zero if she produced zero bags.E) A) and D)
F) None of the above

Question 17

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 is true.E) A) and B)
F) All of the above

Question 18

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Accepted Answer

A)   The marginal product of the fifth worker is three sandwiches.
B)   The total product of the sandwich shop is now 27 sandwiches.
C)   Diminishing marginal product has set in.
D)   All of these are true.E) A) and B)
F) None of the above

Question 19

Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the profit for this company?

Accepted Answer

A)   $250,000
B)   $25,000
C)   $125,000
D)   Cannot calculate profit without more information.E) All of the above
F) C) and D)

Question 20

Which of the following would be considered a one-time expense?

Accepted Answer

A)   Raw materials
B)   A delivery truck
C)   Radio ads
D)   A manager's salaryE) None of the above
F) B) and C)

Exam 12: The Costs of Production

The short run:

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

Correct Answer
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Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.Diminishing marginal product sets in with the:

Correct Answer
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Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the profit for this company?

Correct Answer
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Correct Answer
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A long-run ATC curve shows:

Correct Answer
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The marginal product curve:

Correct Answer
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Which of the following would be considered an ongoing expense?

Correct Answer
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Costs that are "fixed":

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

Correct Answer
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Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Correct Answer
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Davy's Doggie Daycare rents a warehouse and field for $2,000 a month to house its boarding 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

Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.What is the marginal product of the ninth worker?

Correct Answer
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Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.Adding a third worker increases production:

Correct Answer
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Correct Answer
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Correct Answer
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When the slope of the total production curve begins to flatten:

Correct Answer
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Which of the following would be considered a one-time expense?

Correct Answer
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The slope of the total production curve becomes:

Correct Answer
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If a sandwich shop produces zero sandwiches,which of the following costs will it still incur?

Correct Answer
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Exam 12: The Costs of Production

The short run:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.Diminishing marginal product sets in with the:

Correct AnswerverifiedShow Answer

Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the profit for this company?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A long-run ATC curve shows:

Correct AnswerverifiedShow Answer

The marginal product curve:

Correct AnswerverifiedShow Answer

Which of the following would be considered an ongoing expense?

Correct AnswerverifiedShow Answer

Costs that are "fixed":

Correct AnswerverifiedShow Answer

The marginal product of any input into the production process:

Correct AnswerverifiedShow Answer

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Correct AnswerverifiedShow Answer

Davy's Doggie Daycare rents a warehouse and field for $2,000 a month to house its boarding 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

Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.What is the marginal product of the ninth worker?

Correct AnswerverifiedShow Answer

Assume the table shown is for a hat factory,and shows the total production of hats given various numbers of employees.Adding a third worker increases production:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the slope of the total production curve begins to flatten:

Correct AnswerverifiedShow Answer

Which of the following would be considered a one-time expense?

Correct AnswerverifiedShow Answer

The slope of the total production curve becomes:

Correct AnswerverifiedShow Answer

If a sandwich shop produces zero sandwiches,which of the following costs will it still incur?

Correct AnswerverifiedShow Answer

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