Question 1

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
Refer to the data.Creamy Crisp's accounting profit is:

Accepted Answer

A)   $150,000.
B)   $380,000.
C)   $230,000.
D)   $294,000.E) A) and C)
F) B) and C)

Question 2

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

Accepted Answer

A) True 
 B)False

Question 3

Fixed costs are associated with:

Accepted Answer

A)   highly adjustable inputs such as labor.
B)   both the short run and the long run.
C)   the short run only.
D)   the long run only.E) None of the above
F) All of the above

Question 4

The Sunshine Corporation finds that its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table.Use this information to answer the following question.   Output  TVC 1$302503654855110\begin{array} { c c c } 	ext { Output } & & 	ext { TVC } \\hline1 & & \$ 30 \2 & & 50 \3 & & 65 \4 & & 85 \5 & & 110\end{array} Output 12345​​ TVC $30506585110​​  Refer to the information.The marginal cost of the third unit of output is:

Accepted Answer

A)   $105.
B)   $25.
C)   $15.
D)   $20. E) A) and B)
F) None of the above

Question 5

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year.If the firm sold 100,000 units of its output at $50 per unit,its accounting:

Accepted Answer

A)   profits were $100,000 and its economic profits were zero.
B)   losses were $500,000 and its economic losses were zero.
C)   profits were $500,000 and its economic profits were $1 million.
D)   profits were zero and its economic losses were $500,000.E) All of the above
F) A) and D)

Question 6

Introduction of the Verson Stamping Machine helped firms in the automobile industry:

Accepted Answer

A)   eliminate diminishing returns in production.
B)   achieve greater economies of scale.
C)   reach their minimum efficient scale at a lower level of production.
D)   shift their AVC,ATC,and MC curves upward.E) B) and C)
F) None of the above

Question 7

Answer the question on the basis of the following cost data:   Total  Output  Cost 0$24133241348454561669\begin{array} { c c c } &&	ext { Total } \	ext { Output }&&	ext { Cost }\\hline0 & & \$ 24 \1 & & 33 \2 & & 41 \3 & & 48 \4 & & 54 \5 & & 61 \6 & & 69\end{array} Output 0123456​​ Total  Cost $24334148546169​​  Refer to the data.The total variable cost of producing 5 units is:

Accepted Answer

A)   $61.
B)   $48.
C)   $37.
D)   $24. E) C) and D)
F) All of the above

Question 8

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

Accepted Answer

A)   Payments of wages to its office workers.
B)   Rent paid for the use of equipment owned by the Schultz Machinery Company.
C)   Use of savings to pay operating expenses instead of generating interest income.
D)   Economic profits resulting from current production.E) B) and C)
F) A) and D)

Question 9

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 C)
F) B) and D)

Question 10

The short run is characterized by:

Accepted Answer

A)   plenty of time for firms to either enter or leave the industry.
B)   increasing but not diminishing returns.
C)   fixed plant capacity.
D)   zero fixed costs.E) B) and C)
F) A) and B)

Question 11

If a firm decides to produce no output in the short run,its costs will be:

Accepted Answer

A)   its marginal costs.
B)   its variable costs.
C)   its fixed costs.
D)   zero.E) All of the above
F) A) and D)

Question 12

For most producing firms:

Accepted Answer

A)   marginal cost rises as output is carried to a certain level,and then begins to decline.
B)   total costs rise as output is carried to a certain level,and then begin to decline.
C)   average total costs decline as output is carried to a certain level,and then begin to rise.
D)   average total costs rise as output is carried to a certain level,and then begin to decline.E) C) and D)
F) A) and C)

Question 13

The Sunshine Corporation finds that its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table.Use this information to answer the following question.   Output  TVC 1$302503654855110\begin{array} { c c c } 	ext { Output } & & 	ext { TVC } \\hline1 & & \$ 30 \2 & & 50 \3 & & 65 \4 & & 85 \5 & & 110\end{array} Output 12345​​ TVC $30506585110​​  Refer to the information.The total cost of producing 3 units of output is:

Accepted Answer

A)   $65.
B)   $105.
C)   $145.
D)   $185. E) B) and D)
F) A) and D)

Question 14

Use the following data to answer the question:   Inputs of  Labor  Total  Product 0018218325430533634732\begin{array} { c c c } \begin{array} { c } 	ext { Inputs of } \	ext { Labor }\\hline\end{array} & & \begin{array} { c } 	ext { Total } \	ext { Product }\\hline\end{array} \0 & & 0 \1 & & 8 \2 & & 18 \3 & & 25 \4 & & 30 \5 & & 33 \6 & & 34 \7 & & 32\end{array} Inputs of  Labor ​​01234567​​ Total  Product ​​08182530333432​  Refer to the data.Marginal product becomes negative with the hiring of the __________ unit of labor.

Accepted Answer

A)   third
B)   fourth
C)   sixth
D)   seventh E) A) and B)
F) None of the above

Question 15

A natural monopoly exists when:

Accepted Answer

A)   unit costs are minimized by having one firm produce an industry's entire output.
B)   several formerly competing producers merge to become the only firm in an industry.
C)   short-run average total cost curves are tangent to long-run average total cost curves.
D)   minimum efficient scale is attained at a small level of output.E) B) and C)
F) A) and D)

Question 16

The law of diminishing returns explains diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 17

Answer the question on the basis of the following cost data:  Output‾12345678AverageFixedCost ‾$50.0025.0016.6712.5010.008.377.146.25AverageVariableCost ‾$100.0080.0066.6765.0068.0073.3380.0087.50\begin{array}{c}\begin{array}{c}\\\underline{	ext {Output}}\1 \2 \3 \4 \5 \6 \7 \8\end{array}\begin{array}{c}	ext {Average}\	ext {Fixed}\\underline{	ext {Cost }}\\$ 50.00  \25.00 \16.67 \12.50 \10.00 \8.37 \7.14 \6.25\end{array}\begin{array}{c}	ext {Average}\	ext {Variable}\\underline{	ext {Cost }}\ \$ 100.00  \80.00 \66.67 \65.00 \68.00 \73.33 \80.00 \87.50\end{array}\end{array}Output​12345678​AverageFixedCost ​$50.0025.0016.6712.5010.008.377.146.25​AverageVariableCost ​$100.0080.0066.6765.0068.0073.3380.0087.50​​ 
 Refer to the data.The marginal cost of the fifth unit of output is:

Accepted Answer

A)   $3.
B)   $62.
C)   $80.
D)   $78. E) All of the above
F) B) and D)

Question 18

If an industry's long-run average total cost curve has an extended range of constant returns to scale,this implies that:

Accepted Answer

A)   technology precludes both economies and diseconomies of scale.
B)   the industry will be a natural monopoly.
C)   both relatively small and relatively large firms can be viable in the industry.
D)   the industry will be comprised of a very large number of small firms.E) None of the above
F) A) and B)

Question 19

When diseconomies of scale occur:

Accepted Answer

A)   the long-run average total cost curve falls.
B)   marginal cost intersects average total cost.
C)   the long-run average total cost curve rises.
D)   average fixed costs will rise.E) A) and B)
F) C) and D)

Question 20

Marginal product is:

Accepted Answer

A)   the increase in total output attributable to the employment of one more worker.
B)   the increase in total revenue attributable to the employment of one more worker.
C)   the increase in total cost attributable to the employment of one more worker.
D)   total product divided by the number of workers employed.E) B) and C)
F) A) and D)

Exam 9: Businesses and the Cost of Production

Introduction of the Verson Stamping Machine helped firms in the automobile industry:

Correct Answer
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Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year.If the firm sold 100,000 units of its output at $50 per unit,its accounting:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If a firm decides to produce no output in the short run,its costs will be:

Correct Answer
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If an industry's long-run average total cost curve has an extended range of constant returns to scale,this implies that:

Correct Answer
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Correct Answer
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Marginal product is:

Correct Answer
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For most producing firms:

Correct Answer
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Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

Correct Answer
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Correct Answer
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Correct Answer
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Fixed costs are associated with:

Correct Answer
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When diseconomies of scale occur:

Correct Answer
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Marginal cost:

Correct Answer
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Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

Correct Answer
verified

The law of diminishing returns explains diseconomies of scale.

Correct Answer
verified

The short run is characterized by:

Correct Answer
verified

A natural monopoly exists when:

Correct Answer
verified

Exam 9: Businesses and the Cost of Production

Introduction of the Verson Stamping Machine helped firms in the automobile industry:

Correct AnswerverifiedShow Answer

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year.If the firm sold 100,000 units of its output at $50 per unit,its accounting:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a firm decides to produce no output in the short run,its costs will be:

Correct AnswerverifiedShow Answer

If an industry's long-run average total cost curve has an extended range of constant returns to scale,this implies that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Marginal product is:

Correct AnswerverifiedShow Answer

For most producing firms:

Correct AnswerverifiedShow Answer

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Fixed costs are associated with:

Correct AnswerverifiedShow Answer

When diseconomies of scale occur:

Correct AnswerverifiedShow Answer

Marginal cost:

Correct AnswerverifiedShow Answer

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

Correct AnswerverifiedShow Answer

The law of diminishing returns explains diseconomies of scale.

Correct AnswerverifiedShow Answer

The short run is characterized by:

Correct AnswerverifiedShow Answer

A natural monopoly exists when:

Correct AnswerverifiedShow Answer

Correct Answer
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