Question 1

Real capital includes

Accepted Answer

A)   a firmʹs physical assets.
B)   corporate bonds.
C)   corporate stock.
D)   a firmʹs balance in its bank account.
E)   ownerʹs equity.

Question 2

Suppose a firm is producing 500 units of output, incurring a total cost of $700 000 and total fixed cost of $100
000)  It can be concluded that average variable cost is

Accepted Answer

A)   $200.
B)   $600.
C)   $1200.
D)   $1400.
E)   $1600.

Question 3

The point of diminishing marginal productivity is the point where

Accepted Answer

A)   marginal product has reached its maximum.
B)   average product has reached its maximum.
C)   the marginal product begins to fall at an increasing rate.
D)   the total product begins to fall.
E)   the marginal product curve lies below the average product curve.

Question 4

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.  TABLE 7-4
-Refer to Table 7-4. The total fixed cost of producing 305 units of output is

Accepted Answer

A)   $100.
B)   $125.
C)   $112.50.
D)   $225
E)   $305.

Question 5

The table below provides the total revenues and costs for a small landscaping company in a recent year.  TABLE 7-2
-The period of time over which the firm can vary any of its inputs for a given production technology is called the

Accepted Answer

A)   very-short run.
B)   short run.
C)   long run.
D)   very-long run.
E)   immediate run.

Question 6

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital. Assume that the wage per unit of labour is $10 and the cost of the capital is $50.  TABLE 7-3
-Refer to Table 7-3. The average variable cost when this firm is producing 10 units of output is

Accepted Answer

A)   $0.10.
B)   $0.50.
C)   $0.60.
D)   $1.00.
E)   $6.00.

Question 7

Consider a firmʹs short-run cost curves. Which one of the following types of cost declines over the whole range of output?

Accepted Answer

A)   average fixed cost
B)   marginal cost
C)   total fixed cost
D)   average variable cost
E)   total variable cost

Question 8

The figure below shows the isocost lines and the isoquant map for a firm producing golf tees.
  FIGURE 8-6
-A single proprietorship is a form of business organization which

Accepted Answer

A)   has one owner-manager who is personally responsible for the firmʹs actions and debts.
B)   has a single owner but has directors who are responsible for the firmʹs debts.
C)   has limited liability.
D)   has unlimited access to money capital.
E)   allows easy transferability of ownership by the trading of shares.

Question 9

The table below provides the annual revenues and costs for a family-owned firm producing catered meals.  TABLE 7-1
-Refer to Table 7-1. The accounting profits for this family-owned firm are

Accepted Answer

A)   -$15 000.
B)   $0.
C)   $10 000.
D)   $30 000.
E)   $500 000.

Question 10

The opportunity cost to a firm of using an asset is zero if

Accepted Answer

A)   the asset is already owned by the firm.
B)   no money was spent to acquire the asset.
C)   the asset has no alternative uses.
D)   the asset has zero sunk costs associated with it.
E)   the asset was given to the firm for free.

Question 11

Suppose a production function for a firm takes the following algebraic form: Q = 0.5) KL - 40L, where Q is the output of paintbrushes per week. Now suppose the firm is operating with 100 units of capital K = 100)  and 30 000 units of labour L = 30 000) . What is the output of paintbrushes per week?

Accepted Answer

A)   30 000
B)   300 000
C)   1 200 000
D)   1 500 000
E)   3 000 000

Question 12

It is assumed in standard economic theory that a firm makes decisions in an effort to

Accepted Answer

A)   become as large as possible.
B)   have a highly diversified product.
C)   be favoured politically.
D)   maximize its revenue.
E)   maximize its profits.

Question 13

Consider the short-run costs of a firm. Suppose the firmʹs total fixed costs are $100 and average variable costs are constant regardless of output. Which of the following is then true?

Accepted Answer

A)   Marginal cost will equal average total cost.
B)   Average total cost will decrease when output is increased.
C)   Marginal cost will be less than average variable cost.
D)   Average total costs will be constant.
E)   Marginal cost will be rising as output rises.

Question 14

Economists use the notation Q = fL,K)  to describe

Accepted Answer

A)   the flow of labour L)  and capital K)  services that are available when output is Q) .
B)   the financial relationship between the inputs that a firm uses and the outputs that it produces.
C)   the arithmetic relationship between the outputs that a firm uses and the inputs that it produces.
D)   the technological relationship between the inputs that a firm uses and the outputs that it produces.
E)   the level of output Q)  required to fully employ labour L)  and capital K) .

Question 15

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.  TABLE 7-4
-Refer to Table 7-4. The marginal product of labour curve intersects the average product of labour curve from above when the firm changes the amount of labour per unit of time from

Accepted Answer

A)   0 to 1 units.
B)   1 to 2 units.
C)   2 to 3 units.
D)   3 to 4 units.
E)   4 to 5 units.

Question 16

Which of the following statements describes an advantage to the owner of a single proprietorship?

Accepted Answer

A)   The ownerʹs liability is limited to the amount he or she actually invests in the firm.
B)   He or she has limited liability.
C)   The owner can readily maintain full and complete control over every aspect of the firmʹs operation.
D)   The firm has a legal existence separate from its owner.
E)   Shares of the firm can be traded on any stock exchange.

Question 17

The table below provides the total revenues and costs for a small landscaping company in a recent year.  TABLE 7-2
-Refer to Table 7-2. The explicit costs for this firm are

Accepted Answer

A)   $178 500.
B)   $186 500.
C)   $186 900.
D)   $217 300.
E)   $217 700.

Question 18

Marginal cost is defined as the

Accepted Answer

A)   change in total cost resulting from an additional unit of output.
B)   change in fixed cost resulting from an additional unit of output.
C)   difference between average total cost and average variable cost.
D)   cost per unit when the firm is operating at capacity.
E)   cost of an additional unit of a variable factor of production.

Question 19

The theory of the firm is based on the following two key assumptions:

Accepted Answer

A)   Firms seek to become as large as possible, and they seek to maximize total revenue.
B)   Each firm has a highly diversified product, and this leads to profit maximization.
C)   Firms seek to maximize profit, and to distribute the maximum value in dividends.
D)   Firms seek to maximize profits, and the firm is a single, consistent decision-making unit.
E)   Firms seek to maximize revenues, and to maximize undistributed profits.

Question 20

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.  TABLE 7-4
-Refer to Table 7-4. The total variable cost of producing 305 units of output is

Accepted Answer

A)   $100.
B)   $125.
C)   $225.
D)   $305.
E)   $325.

Exam 7: Producers in the Short Run

Consider a firmʹs short-run cost curves. Which one of the following types of cost declines over the whole range of output?

Correct Answer
verified

Consider the short-run costs of a firm. Suppose the firmʹs total fixed costs are $100 and average variable costs are constant regardless of output. Which of the following is then true?

Correct Answer
verified

Correct Answer
verified

Suppose a production function for a firm takes the following algebraic form: Q = 0.5) KL - 40L, where Q is the output of paintbrushes per week. Now suppose the firm is operating with 100 units of capital K = 100) and 30 000 units of labour L = 30 000) . What is the output of paintbrushes per week?

Correct Answer
verified

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1. The accounting profits for this family-owned firm are

Correct Answer
verified

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -The period of time over which the firm can vary any of its inputs for a given production technology is called the

Correct Answer
verified

Marginal cost is defined as the

Correct Answer
verified

The point of diminishing marginal productivity is the point where

Correct Answer
verified

The figure below shows the isocost lines and the isoquant map for a firm producing golf tees. FIGURE 8-6 -A single proprietorship is a form of business organization which

Correct Answer
verified

Which of the following statements describes an advantage to the owner of a single proprietorship?

Correct Answer
verified

Correct Answer
verified

Economists use the notation Q = fL,K) to describe

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The theory of the firm is based on the following two key assumptions:

Correct Answer
verified

It is assumed in standard economic theory that a firm makes decisions in an effort to

Correct Answer
verified

Real capital includes

Correct Answer
verified

The opportunity cost to a firm of using an asset is zero if

Correct Answer
verified

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -Refer to Table 7-2. The explicit costs for this firm are

Correct Answer
verified

Suppose a firm is producing 500 units of output, incurring a total cost of $700 000 and total fixed cost of $100 000) It can be concluded that average variable cost is

Correct Answer
verified

Exam 7: Producers in the Short Run

Consider a firmʹs short-run cost curves. Which one of the following types of cost declines over the whole range of output?

Correct AnswerverifiedShow Answer

Consider the short-run costs of a firm. Suppose the firmʹs total fixed costs are $100 and average variable costs are constant regardless of output. Which of the following is then true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a production function for a firm takes the following algebraic form: Q = 0.5) KL - 40L, where Q is the output of paintbrushes per week. Now suppose the firm is operating with 100 units of capital K = 100) and 30 000 units of labour L = 30 000) . What is the output of paintbrushes per week?

Correct AnswerverifiedShow Answer

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1. The accounting profits for this family-owned firm are

Correct AnswerverifiedShow Answer

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -The period of time over which the firm can vary any of its inputs for a given production technology is called the

Correct AnswerverifiedShow Answer

Marginal cost is defined as the

Correct AnswerverifiedShow Answer

The point of diminishing marginal productivity is the point where

Correct AnswerverifiedShow Answer

The figure below shows the isocost lines and the isoquant map for a firm producing golf tees. FIGURE 8-6 -A single proprietorship is a form of business organization which

Correct AnswerverifiedShow Answer

Which of the following statements describes an advantage to the owner of a single proprietorship?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economists use the notation Q = fL,K) to describe

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The theory of the firm is based on the following two key assumptions:

Correct AnswerverifiedShow Answer

It is assumed in standard economic theory that a firm makes decisions in an effort to

Correct AnswerverifiedShow Answer

Real capital includes

Correct AnswerverifiedShow Answer

The opportunity cost to a firm of using an asset is zero if

Correct AnswerverifiedShow Answer

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -Refer to Table 7-2. The explicit costs for this firm are

Correct AnswerverifiedShow Answer

Suppose a firm is producing 500 units of output, incurring a total cost of $700 000 and total fixed cost of $100 000) It can be concluded that average variable cost is

Correct AnswerverifiedShow Answer

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