Question 1

The selling of stock is debt financing for a corporation.

Accepted Answer

A) True 
 B)False

Question 2

To economists,the main difference between the short run and the long run is that:

Accepted Answer

A)   the law of diminishing returns applies in the long run,but not in the short run.
B)   in the long run all resources are variable,while in the short run at least one resource is fixed.
C)   fixed costs are more important to decision making in the long run than they are in the short run.
D)   in the short run all resources are fixed,while in the long run all resources are variable.E) A) and D)
F) A) and B)

Question 3

If you owned a small farm,which of the following would be a fixed cost?

Accepted Answer

A)   Harvest labor
B)   Hail insurance
C)   Fertilizer
D)   SeedE) None of the above
F) B) and C)

Question 4

The Sunshine Corporation finds its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table.  Refer to the above information.The marginal cost of the third unit of output is:

Accepted Answer

A)   $105.
B)   $25.
C)   $15.
D)   $20.The marginal cost of the third unit of output is $65 - 50 = $15.E) A) and B)
F) A) and C)

Question 5

Minimum efficient scale occurs at the smallest level of output at which a firm can minimize long-run average costs.

Accepted Answer

A) True 
 B)False

Question 6

Assume a firm closes down in the short run and produces no output.Under these conditions:

Accepted Answer

A)   TVC is positive,but TFC and TC are zero.
B)   TFC is positive,but TVC and TC are zero.
C)   TFC and TC are positive,but TVC is zero.
D)   TFC,TVC,and TC will all be positive.E) B) and C)
F) A) and D)

Question 7

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.Total revenue was 100,000 * $50 = $5,000,000 and explicit costs were also $5,000,000.So the firm lost its implicit costs for an economic loss of $500,000.E) B) and C)
F) A) and D)

Question 8

One major advantage of limited liability is that it:

Accepted Answer

A)   is not subject to a free-rider problem.
B)   is not subject to a principal-agent problem.
C)   has unlimited profit sharing among the firm's owners.
D)   shields the personal assets of owners from liability claims.E) A) and B)
F) All of the above

Question 9

Marginal cost is the:

Accepted Answer

A)   rate of change in total fixed cost that results from producing one more unit of output.
B)   change in total cost that results from producing one more unit of output.
C)   change in average variable cost that results from producing one more unit of output.
D)   change in average total cost that results from producing one more unit of output.E) C) and D)
F) B) and D)

Question 10

Which of the following is not a source of economies of scale?

Accepted Answer

A)   Learning-by-doing
B)   Labor specialization
C)   Use of larger machines
D)   Inelastic resource supply curvesE) A) and B)
F) None of the above

Question 11

In the above figure,curves 1,2,3,and 4 represent the:

Accepted Answer

A)   ATC,MC,AFC,and AVC curves respectively.
B)   MC,AFC,AVC,and ATC curves respectively.
C)   MC,ATC,AVC,and AFC curves respectively.
D)   ATC,AVC,AFC,and MC curves respectively.E) All of the above
F) C) and D)

Question 12

From an economist's point of view,costs:

Accepted Answer

A)   consist only of explicit costs.
B)   may or may not involve monetary outlays.
C)   never reflect monetary outlays.
D)   always reflect monetary outlays.E) B) and C)
F) A) and D)

Question 13

Which of the following represents a long-run adjustment?

Accepted Answer

A)   A farmer uses an extra dose of fertilizer on his corn crop.
B)   Unable to meet foreign competition,a U.S.watch manufacturer sells one of its branch plants.
C)   A steel manufacturer cuts back on its purchases of coke and iron ore.
D)   A supermarket hires four additional clerks.E) All of the above
F) B) and D)

Question 14

In a corporation,the interests of the owners,who seek to maximize profits,may differ from the interests of the managers,who seek prestige and high income.This divergence would be considered:

Accepted Answer

A)   a free-rider problem.
B)   a rationing problem.
C)   a limited liability problem.
D)   a principal-agent problem.E) C) and D)
F) A) and C)

Question 15

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

Accepted Answer

A)   average total cost to rise.
B)   average total cost to fall.
C)   total cost to rise.
D)   average total cost to be unaffected.E) All of the above
F) B) and C)

Question 16

Which of the following is most likely to be an implicit cost for Company X?

Accepted Answer

A)   Depreciation charges on company-owned equipment
B)   Rental payments on IBM equipment
C)   Payments for raw materials purchased from Company Y
D)   Transportation costs paid to a nearby trucking firmE) A) and B)
F) A) and C)

Question 17

Which of the following is a short-run adjustment?

Accepted Answer

A)   A local bakery hires two additional bakers.
B)   Six new firms enter the plastics industry.
C)   The number of farms in the United States declines by 5 percent.
D)   BMW constructs a new assembly plant in South Carolina.E) B) and D)
F) A) and B)

Question 18

To the economist,total cost includes:

Accepted Answer

A)   explicit and implicit costs,including a normal profit.
B)   neither implicit nor explicit costs.
C)   implicit,but not explicit,costs.
D)   explicit,but not implicit,costs.E) C) and D)
F) A) and B)

Question 19

Most business firms in the United States are corporations.

Accepted Answer

A) True 
 B)False

Question 20

A fixed cost is:

Accepted Answer

A)   associated with any productive resource whose price is fixed.
B)   any cost that increases proportionately with output.
C)   any cost that a firm would incur even if output was zero.
D)   associated with all inputs whose short-run supply is perfectly inelastic.E) B) and C)
F) A) and D)

Exam 6: Businesses and Their Costs

The Sunshine Corporation finds its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table. Refer to the above information.The marginal cost of the third unit of output is:

Correct AnswerverifiedShow Answer

Most business firms in the United States are corporations.

Correct AnswerverifiedShow Answer

To economists,the main difference between the short run and the long run is that:

Correct AnswerverifiedShow Answer

Marginal cost is the:

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

In the above figure,curves 1,2,3,and 4 represent the:

Correct AnswerverifiedShow Answer

Which of the following represents a long-run adjustment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a source of economies of scale?

Correct AnswerverifiedShow Answer

A fixed cost is:

Correct AnswerverifiedShow Answer

The selling of stock is debt financing for a corporation.

Correct AnswerverifiedShow Answer

If you owned a small farm,which of the following would be a fixed cost?

Correct AnswerverifiedShow Answer

In a corporation,the interests of the owners,who seek to maximize profits,may differ from the interests of the managers,who seek prestige and high income.This divergence would be considered:

Correct AnswerverifiedShow Answer

From an economist's point of view,costs:

Correct AnswerverifiedShow Answer

Assume a firm closes down in the short run and produces no output.Under these conditions:

Correct AnswerverifiedShow Answer

Which of the following is a short-run adjustment?

Correct AnswerverifiedShow Answer

To the economist,total cost includes:

Correct AnswerverifiedShow Answer

Minimum efficient scale occurs at the smallest level of output at which a firm can minimize long-run average costs.

Correct AnswerverifiedShow Answer

One major advantage of limited liability is that it:

Correct AnswerverifiedShow Answer

Which of the following is most likely to be an implicit cost for Company X?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified