Question 1

(Consider This) Past costs that are not affected by new decisions are known as:

Accepted Answer

A)   variable costs.
B)   fixed costs.
C)   marginal costs.
D)   sunk costs.E) A) and C)
F) A) and B)

Question 2

The minimum efficient scale of a firm:

Accepted Answer

A)   is realized somewhere in the range of diseconomies of scale.
B)   occurs where marginal product becomes zero.
C)   is in the middle of the range of constant returns to scale.
D)   is the smallest level of output at which long-run average total cost is minimized.E) None of the above
F) B) and C)

Question 3

In comparing the changes in TVC and TC associated with an additional unit of output,we find that:

Accepted Answer

A)   no generalization about the changes in TC and TVC can be made.
B)   the changes in TC and TVC are equal.
C)   the change in TC is greater than the change in TVC.
D)   the change in TVC is greater than the change in TC.E) A) and B)
F) All of the above

Question 4

Fixed cost is:

Accepted Answer

A)   the cost of producing one more unit of capital,for example,machinery.
B)   any cost that does not change when the firm changes its output.
C)   average cost multiplied by the firm's output.
D)   usually zero in the short run.E) A) and B)
F) A) and C)

Question 5

In the short run it is impossible for an expansion of output to increase:

Accepted Answer

A)   average total cost.
B)   average fixed cost.
C)   marginal cost.
D)   average variable cost.E) C) and D)
F) None of the above

Question 6

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 total economic costs are:

Accepted Answer

A)   $286,000.
B)   $150,000.
C)   $94,000.
D)   $156,000.E) A) and B)
F) All of the above

Question 7

Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:

Accepted Answer

A)   $5,000.
B)   $500.
C)   $0.50.
D)   $50.E) A) and D)
F) None of the above

Question 8

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 9

Economic cost can best be defined as:

Accepted Answer

A)   any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers.
B)   any contractual obligation to labor or material suppliers.
C)   a payment that must be made to obtain and retain the services of a resource.
D)   all costs exclusive of payments to fixed factors of production.E) C) and D)
F) B) and D)

Question 10

Answer the question on the basis of the following output data for a firm.Assume that the amounts of all nonlabor resources are fixed.   Number of Units of  Workers  Output 001402903126415051656180\begin{array}{l}\begin{array} { c c c } 	ext { Number of}&&	ext{ Units of }\	ext { Workers } & & 	ext { Output } \\hline0 & & 0 \1 & & 40 \2 & & 90 \3 & & 126 \4 & & 150 \5 & & 165 \6 & & 180\end{array}\end{array} Number of Workers 0123456​​ Units of  Output 04090126150165180​​​  Refer to the data.The marginal product of the sixth worker is:

Accepted Answer

A)   180 units of output.
B)   30 units of output.
C)   15 units of output.
D)   negative. E) None of the above
F) A) and B)

Question 11

Which of the following definitions is correct?

Accepted Answer

A)   Accounting profit + economic profit = normal profit.
B)   Economic profit - accounting profit = explicit costs.
C)   Economic profit = accounting profit + implicit costs.
D)   Economic profit - implicit costs = accounting profits.E) C) and D)
F) B) and C)

Question 12

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.Diminishing returns begin to occur with the hiring of the _________ unit of labor.

Accepted Answer

A)   first
B)   second
C)   third
D)   seventh E) B) and D)
F) A) and D)

Question 13

In the short run,which of the following statements is correct?

Accepted Answer

A)   The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points.
B)   Average variable cost declines continuously as total output is expanded.
C)   Total cost will exceed variable cost.
D)   If the inputs of all resources are increased by equal amounts,total output will expand by diminishing amounts.E) B) and C)
F) B) and D)

Question 14

(Consider This) 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) None of the above
F) A) and C)

Question 15

The basic difference between the short run and the long run is that:

Accepted Answer

A)   all costs are fixed in the short run,but all costs are variable in the long run.
B)   the law of diminishing returns applies in the long run but not in the short run.
C)   at least one resource is fixed in the short run,while all resources are variable in the long run.
D)   economies of scale may be present in the short run but not in the long run.E) A) and D)
F) C) and D)

Question 16

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year.If the firm sold 4,000 units of its output at $300 per unit,its accounting profits were:

Accepted Answer

A)   $100,000 and its economic profits were zero.
B)   $200,000 and its economic profits were zero.
C)   $100,000 and its economic profits were $100,000.
D)   zero and its economic loss was $200,000.E) A) and B)
F) B) and C)

Question 17

Which of the following is most likely to be a fixed cost?

Accepted Answer

A)   Shipping charges.
B)   Property insurance premiums.
C)   Wages for unskilled labor.
D)   Expenditures for raw materials.E) All of the above
F) A) and B)

Question 18

Economies and diseconomies of scale explain:

Accepted Answer

A)   the profit-maximizing level of production.
B)   why the firm's long-run average total cost curve is U-shaped.
C)   why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point.
D)   the distinction between fixed and variable costs.E) A) and D)
F) B) and C)

Question 19

The total output of a firm will be at a maximum where:

Accepted Answer

A)   MP is at a maximum.
B)   AP is at a minimum.
C)   MP is zero.
D)   AP is at a maximum.E) A) and D)
F) All of the above

Question 20

Which of the following is correct?

Accepted Answer

A)   There is no relationship between MP and MC.
B)   When AP is rising MC is falling,and when AP is falling MC is rising.
C)   When MP is rising MC is rising,and when MP is falling MC is falling.
D)   When MP is rising MC is falling,and when MP is falling MC is rising.E) B) and C)
F) C) and D)

Exam 9: Businesses and the Cost of Production

(Consider This) Past costs that are not affected by new decisions are known as:

Correct Answer
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Fixed cost is:

Correct Answer
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Which of the following is most likely to be a fixed cost?

Correct Answer
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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

The basic difference between the short run and the long run is that:

Correct Answer
verified

In comparing the changes in TVC and TC associated with an additional unit of output,we find that:

Correct Answer
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Which of the following definitions is correct?

Correct Answer
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The minimum efficient scale of a firm:

Correct Answer
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In the short run,which of the following statements is correct?

Correct Answer
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Economic cost can best be defined as:

Correct Answer
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Correct Answer
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Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:

Correct Answer
verified

Economies and diseconomies of scale explain:

Correct Answer
verified

In the short run it is impossible for an expansion of output to increase:

Correct Answer
verified

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year.If the firm sold 4,000 units of its output at $300 per unit,its accounting profits were:

Correct Answer
verified

The total output of a firm will be at a maximum where:

Correct Answer
verified

Which of the following is correct?

Correct Answer
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Correct Answer
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(Consider This) In order to apply the concept of diminishing returns to study time:

Correct Answer
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Correct Answer
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Exam 9: Businesses and the Cost of Production

(Consider This) Past costs that are not affected by new decisions are known as:

Correct AnswerverifiedShow Answer

Fixed cost is:

Correct AnswerverifiedShow Answer

Which of the following is most likely to be a fixed cost?

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

The basic difference between the short run and the long run is that:

Correct AnswerverifiedShow Answer

In comparing the changes in TVC and TC associated with an additional unit of output,we find that:

Correct AnswerverifiedShow Answer

Which of the following definitions is correct?

Correct AnswerverifiedShow Answer

The minimum efficient scale of a firm:

Correct AnswerverifiedShow Answer

In the short run,which of the following statements is correct?

Correct AnswerverifiedShow Answer

Economic cost can best be defined as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:

Correct AnswerverifiedShow Answer

Economies and diseconomies of scale explain:

Correct AnswerverifiedShow Answer

In the short run it is impossible for an expansion of output to increase:

Correct AnswerverifiedShow Answer

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year.If the firm sold 4,000 units of its output at $300 per unit,its accounting profits were:

Correct AnswerverifiedShow Answer

The total output of a firm will be at a maximum where:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Consider This) In order to apply the concept of diminishing returns to study time:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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