Question 1

Which of the following types of firms are least likely to have their MC,AVC,and ATC curves affected by fluctuations in gasoline prices?

Accepted Answer

A)   Firms like UPS that use a fleet of gasoline-powered vehicles.
B)   Taxi cab and limousine companies.
C)   Companies that operate bus tours to popular vacation destinations.
D)   Firms like iTunes that distribute their products over the internet.E) B) and D)
F) C) and D)

Question 2

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10:   Output  ATC 1$40227329431538\begin{array} { c r } 	ext { Output } & 	ext { ATC } \\hline 1 & \$ 40 \2 & 27 \3 & 29 \4 & 31 \5 & 38\end{array} Output 12345​ ATC $4027293138​​  Refer to the data.The average variable cost of 4 units of output is:

Accepted Answer

A)   $33.50.
B)   $28.50.
C)   $19.00.
D)   $21.00. E) A) and B)
F) B) and D)

Question 3

If a variable input is added to some fixed input,beyond some point the resulting extra output will decline.This statement describes:

Accepted Answer

A)   economies and diseconomies of scale.
B)   X-inefficiency.
C)   the law of diminishing returns.
D)   the law of diminishing marginal utility.E) A) and C)
F) None of the above

Question 4

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs:

Accepted Answer

A)   are $2.50.
B)   are $1,250.
C)   are $750.
D)   are $1,100.E) None of the above
F) B) and D)

Question 5

The law of diminishing returns results in:

Accepted Answer

A)   an eventually rising marginal product curve.
B)   a total product curve that eventually increases at a decreasing rate.
C)   an eventually falling marginal cost curve.
D)   a total product curve that rises indefinitely.E) B) and C)
F) None of the above

Question 6

If a technological advance increases a firm's labor productivity,we would expect its:

Accepted Answer

A)   average total cost curve to rise.
B)   average total cost curve to fall.
C)   total cost curve to rise.
D)   average total cost curve to be unaffected.E) None of the above
F) A) and D)

Question 7

The law of diminishing returns indicates that:

Accepted Answer

A)   as extra units of a variable resource are added to a fixed resource,marginal product will decline beyond some point.
B)   because of economies and diseconomies of scale,a competitive firm's long-run average total cost curve will be U-shaped.
C)   the demand for goods produced by purely competitive industries is downsloping.
D)   beyond some point,the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.E) B) and D)
F) A) and B)

Question 8

The law of diminishing returns explains why short-run marginal cost curves are upsloping.

Accepted Answer

A) True 
 B)False

Question 9

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) B) and C)
F) A) and D)

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) A) and B)
F) All of the above

Question 11

An explicit cost is:

Accepted Answer

A)   omitted when accounting profits are calculated.
B)   a money payment made for resources not owned by the firm itself.
C)   an implicit cost to the resource owner who receives that payment.
D)   always in excess of a resource's opportunity cost.E) All of the above
F) A) and C)

Question 12

Other things equal,if the prices of a firm's variable inputs were to fall:

Accepted Answer

A)   one could not predict how unit costs of production would be affected.
B)   marginal cost,average variable cost,and average fixed cost would all fall.
C)   marginal cost,average variable cost,and average total cost would all fall.
D)   average variable cost would fall,but marginal cost would be unchanged.E) C) and D)
F) A) and D)

Question 13

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10:   Output  ATC 1$40227329431538\begin{array} { c r } 	ext { Output } & 	ext { ATC } \\hline 1 & \$ 40 \2 & 27 \3 & 29 \4 & 31 \5 & 38\end{array} Output 12345​ ATC $4027293138​​  Refer to the data.The profit-maximizing level of output for this firm:

Accepted Answer

A)   is 3.
B)   is 4.
C)   is 5.
D)   cannot be determined from the information given. E) B) and D)
F) A) and D)

Question 14

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 average fixed cost of 3 units of output is:

Accepted Answer

A)   $13.33.
B)   $12.50.
C)   $40.
D)   $18.50. E) None of the above
F) B) and D)

Question 15

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.The average product (AP) when two units of labor are hired is:

Accepted Answer

A)   8.
B)   9.
C)   10.
D)   18. E) A) and D)
F) B) and C)

Question 16

Use the following data to answer the question.The letters A,B,and C designate three successively larger plant sizes.   Output  ATC-A 10$6205304405507601070148019902510032 ATC-B  ATC-C $13$449356274203144115876105167\begin{array}{c}\begin{array}{ccc}	ext { Output } & & 	ext { ATC-A } \\hline10 & & \$ 6 \20 & & 5 \30 & & 4 \40 & & 5 \50 & & 7 \60 & & 10 \70 & & 14 \80 & & 19 \90 & & 25 \100 & & 32\end{array}\begin{array}{ccc}	ext { ATC-B } & & 	ext { ATC-C } \\hline\$ 13 & & \$ 44 \9 & & 35 \6 & & 27 \4 & & 20 \3 & & 14 \4 & & 11 \5 & & 8 \7 & & 6 \10 & & 5 \16 & & 7\end{array}\end{array} Output 102030405060708090100​​ ATC-A $654571014192532​​ ATC-B $1396434571016​​ ATC-C $4435272014118657​​​  Refer to the data.In the long run the firm should use plant size "C" for:

Accepted Answer

A)   all possible levels of output.
B)   10 to 30 units of output.
C)   40 to 70 units of output.
D)   all units of output greater than or equal to 80. E) All of the above
F) A) and D)

Question 17

Implicit and explicit costs are different in that:

Accepted Answer

A)   explicit costs are opportunity costs;implicit costs are not.
B)   implicit costs are opportunity costs;explicit costs are not.
C)   the latter refer to nonexpenditure costs and the former to monetary payments.
D)   the former refer to nonexpenditure costs and the latter to monetary payments.E) B) and C)
F) A) and D)

Question 18

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:

Accepted Answer

A)   has lower implicit costs,including a normal profit,than its explicit costs.
B)   is earning a normal profit but not an economic profit.
C)   is earning an economic profit.
D)   is suffering an economic loss,when implicit costs are considered.E) C) and D)
F) B) and C)

Question 19

Suppose a firm is in a range of production where it is experiencing economies of scale.Knowing this,we can predict that:

Accepted Answer

A)   the long-run average total cost curve is upsloping.
B)   a 10 percent increase in all inputs will increase output by less than 10 percent.
C)   a 10 percent increase in all inputs will increase output by more than 10 percent.
D)   the firm is encountering problems of managerial bureaucracy because of its size.E) A) and B)
F) A) and C)

Question 20

If a technological advance reduces the amount of variable resources needed to produce any level of output,then the:

Accepted Answer

A)   AVC curve will shift upward.
B)   MC curve will shift downward.
C)   ATC curve will shift upward.
D)   AFC curve will shift downward.E) C) and D)
F) A) and D)

Exam 9: Businesses and the Cost of Production

Correct Answer
verified

If a technological advance reduces the amount of variable resources needed to produce any level of output,then the:

Correct Answer
verified

An explicit cost is:

Correct Answer
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The law of diminishing returns explains why short-run marginal cost curves are upsloping.

Correct Answer
verified

If a technological advance increases a firm's labor productivity,we would expect its:

Correct Answer
verified

Correct Answer
verified

If a variable input is added to some fixed input,beyond some point the resulting extra output will decline.This statement describes:

Correct Answer
verified

Correct Answer
verified

The law of diminishing returns results in:

Correct Answer
verified

Implicit and explicit costs are different in that:

Correct Answer
verified

The long-run average total cost curve:

Correct Answer
verified

Correct Answer
verified

Which of the following types of firms are least likely to have their MC,AVC,and ATC curves affected by fluctuations in gasoline prices?

Correct Answer
verified

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs:

Correct Answer
verified

Other things equal,if the prices of a firm's variable inputs were to fall:

Correct Answer
verified

If marginal cost is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The law of diminishing returns indicates that:

Correct Answer
verified

Suppose a firm is in a range of production where it is experiencing economies of scale.Knowing this,we can predict that:

Correct Answer
verified

Exam 9: Businesses and the Cost of Production

Correct AnswerverifiedShow Answer

If a technological advance reduces the amount of variable resources needed to produce any level of output,then the:

Correct AnswerverifiedShow Answer

An explicit cost is:

Correct AnswerverifiedShow Answer

The law of diminishing returns explains why short-run marginal cost curves are upsloping.

Correct AnswerverifiedShow Answer

If a technological advance increases a firm's labor productivity,we would expect its:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a variable input is added to some fixed input,beyond some point the resulting extra output will decline.This statement describes:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The law of diminishing returns results in:

Correct AnswerverifiedShow Answer

Implicit and explicit costs are different in that:

Correct AnswerverifiedShow Answer

The long-run average total cost curve:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following types of firms are least likely to have their MC,AVC,and ATC curves affected by fluctuations in gasoline prices?

Correct AnswerverifiedShow Answer

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output.Its average variable costs are $2.00 and its average fixed costs are $.50.The firm's total costs:

Correct AnswerverifiedShow Answer

Other things equal,if the prices of a firm's variable inputs were to fall:

Correct AnswerverifiedShow Answer

If marginal cost is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The law of diminishing returns indicates that:

Correct AnswerverifiedShow Answer

Suppose a firm is in a range of production where it is experiencing economies of scale.Knowing this,we can predict that:

Correct AnswerverifiedShow Answer

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