Question 1

Profit is the:

Accepted Answer

A)   total revenue minus total cost.
B)   sum of total revenue and total cost.
C)   total cost minus total revenue.
D)   None of these is true.E) A) and B)
F) B) and C)

Question 2

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,which of the following is true regarding Bev's costs?

Accepted Answer

A)   The variable cost of fabric would drop to zero.
B)   The fixed cost of thread would stay the same.
C)   The variable cost of cutting shears would drop to zero.
D)   All of these are true.E) A) and D)
F) None of the above

Question 3

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

Accepted Answer

A)   Diminishing marginal product must not have set in yet.
B)   Marginal product must be rising.
C)   Average product must be rising.
D)   All of these are true.E) A) and C)
F) A) and B)

Question 4

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.What are Tom's accounting profits?

Accepted Answer

A)   $50,000
B)   $24,000
C)   $35,000
D)   $6,000E) C) and D)
F) B) and D)

Question 5

Suppose Sam's Shoe Co.makes only one kind of shoe,which sells for $50 a pair.If they sold 500,000 pairs of shoes,then their total revenue would be:

Accepted Answer

A)   $25,000,000.
B)   $10,000.
C)   $2,500,000.
D)   Cannot answer this question without knowing the cost per pair.E) C) and D)
F) B) and D)

Question 6

Suppose that an accounting firm with 10 employees hires another accountant.By doing so,it goes from serving 30 customers each week to serving 32 customers each week.What is the marginal product of labor for the new accountant?

Accepted Answer

A)   32
B)   2
C)   62
D)   10E) A) and B)
F) B) and D)

Question 7

Economic profits are 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 is true.E) None of the above
F) B) and C)

Question 8

In general,the cost of an input:

Accepted Answer

A)   decreases when you've reached the point of diminishing marginal product in your firm.
B)   stays the same when you've reached the point of diminishing marginal product in your firm.
C)   increases when you've reached the point of diminishing marginal product in your firm.
D)   is minimized when you've reached the point of diminishing marginal product in your firm.E) C) and D)
F) B) and C)

Question 9

Suppose Sam's Shoe Co.makes one kind of shoe.An example of a variable cost for this company would be:

Accepted Answer

A)   the design pattern for the shoes. .
B)   the leather needed to make the shoes.
C)   the lease to the factory building.
D)   All of these are examples of variable costs.E) C) and D)
F) B) and C)

Question 10

Explicit costs are costs that:

Accepted Answer

A)   require a firm to spend money.
B)   are zero when no output is produced.
C)   do not depend on the quantity of output produced.
D)   depend on the quantity of output produced.E) A) and C)
F) A) and D)

Question 11

Marginal cost:

Accepted Answer

A)   is calculated as change in total cost divided by change in total output.
B)   is calculated as change in total output divided by change in total cost.
C)   increases then decreases, as output increases, to reflect marginal product.
D)   None of these is true.E) A) and C)
F) All of the above

Question 12

Fixed costs are:

Accepted Answer

A)   costs that depend on the quantity of output produced.
B)   inputs costs that stay the same price per unit.
C)   costs that don't depend on the quantity of output produced.
D)   costs that are negotiated to stay the same throughout the life of a contract.E) A) and B)
F) A) and C)

Question 13

In business,the "bottom line" refers to the very last line of a(n) :

Accepted Answer

A)   income statement, which shows profit.
B)   balance sheet, which shows profit.
C)   income statement, which shows total revenue.
D)   balance sheet, which shows total income.E) None of the above
F) A) and D)

Question 14

Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.What was the total revenue for this company?

Accepted Answer

A)   $3,150,000
B)   $375,000
C)   $3,525,000
D)   $2,850,000E) All of the above
F) A) and D)

Question 15

In the long run when average total cost does not depend on the quantity of output,this is called:

Accepted Answer

A)   economies of scale.
B)   diseconomies of scale.
C)   constant economies to scale.
D)   minimum average total cost.E) A) and B)
F) B) and C)

Question 16

When economic profits are negative,accounting profits could be:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   All of these are possible.E) B) and C)
F) A) and D)

Question 17

Total revenue is:

Accepted Answer

A)   the amount that a firm spends on all inputs that go into producing a good or service.
B)   the quantity sold multiplied by the price paid for each unit.
C)   the quantity produced multiplied by the cost of producing each unit.
D)   the amount that an individual gets paid over a specified period of time, typically annually.E) A) and D)
F) B) and D)

Question 18

A production function represents:

Accepted Answer

A)   the relationship between the quantity of inputs and the quantity of outputs.
B)   the relative values of the inputs and modes of production.
C)   the relative costs of the inputs across various modes of production.
D)   the relationship between the cost of the inputs and the revenue generated by the outputs.E) All of the above
F) A) and B)

Question 19

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 fifth worker?

Accepted Answer

A)   40
B)   50
C)   30
D)   200E) A) and D)
F) A) and C)

Question 20

When accounting profits are zero,which of the following is most likely to be true?

Accepted Answer

A)   Economic profits could be zero.
B)   Economic profits could be positive.
C)   Economic profits are negative.
D)   All of these are likely.E) None of the above
F) A) and C)

Exam 12: The Costs of Production

Marginal cost:

Correct Answer
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Total revenue is:

Correct Answer
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In business,the "bottom line" refers to the very last line of a(n) :

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

Correct Answer
verified

Suppose that an accounting firm with 10 employees hires another accountant.By doing so,it goes from serving 30 customers each week to serving 32 customers each week.What is the marginal product of labor for the new accountant?

Correct Answer
verified

Fixed costs are:

Correct Answer
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Economic profits are calculated as:

Correct Answer
verified

A production function represents:

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 fifth worker?

Correct Answer
verified

Suppose Sam's Shoe Co.makes only one kind of shoe,which sells for $50 a pair.If they sold 500,000 pairs of shoes,then their total revenue would be:

Correct Answer
verified

Correct Answer
verified

Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.What was the total revenue for this company?

Correct Answer
verified

In general,the cost of an input:

Correct Answer
verified

When economic profits are negative,accounting profits could be:

Correct Answer
verified

Correct Answer
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Profit is the:

Correct Answer
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When accounting profits are zero,which of the following is most likely to be true?

Correct Answer
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Suppose Sam's Shoe Co.makes one kind of shoe.An example of a variable cost for this company would be:

Correct Answer
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In the long run when average total cost does not depend on the quantity of output,this is called:

Correct Answer
verified

Explicit costs are costs that:

Correct Answer
verified

Exam 12: The Costs of Production

Marginal cost:

Correct AnswerverifiedShow Answer

Total revenue is:

Correct AnswerverifiedShow Answer

In business,the "bottom line" refers to the very last line of a(n) :

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that an accounting firm with 10 employees hires another accountant.By doing so,it goes from serving 30 customers each week to serving 32 customers each week.What is the marginal product of labor for the new accountant?

Correct AnswerverifiedShow Answer

Fixed costs are:

Correct AnswerverifiedShow Answer

Economic profits are calculated as:

Correct AnswerverifiedShow Answer

A production function represents:

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 fifth worker?

Correct AnswerverifiedShow Answer

Suppose Sam's Shoe Co.makes only one kind of shoe,which sells for $50 a pair.If they sold 500,000 pairs of shoes,then their total revenue would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.What was the total revenue for this company?

Correct AnswerverifiedShow Answer

In general,the cost of an input:

Correct AnswerverifiedShow Answer

When economic profits are negative,accounting profits could be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Profit is the:

Correct AnswerverifiedShow Answer

When accounting profits are zero,which of the following is most likely to be true?

Correct AnswerverifiedShow Answer

Suppose Sam's Shoe Co.makes one kind of shoe.An example of a variable cost for this company would be:

Correct AnswerverifiedShow Answer

In the long run when average total cost does not depend on the quantity of output,this is called:

Correct AnswerverifiedShow Answer

Explicit costs are costs that:

Correct AnswerverifiedShow Answer

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