Question 1

If the short-run average variable cost of production for a firm is decreasing, then it follows that

Accepted Answer

A)  average variable cost must be above average fixed cost.
B)  marginal cost must be below average variable cost.
C)  average fixed cost must be constant.
D)  marginal cost must be decreasing.

Question 2

Economic profits are calculated by subtracting

Accepted Answer

A)  explicit costs from total revenue.
B)  implicit costs from total revenue.
C)  implicit costs from normal profits.
D)  explicit and implicit costs from total revenue.

Question 3

Marginal product

Accepted Answer

A)  diminishes at all levels of production.
B)  may initially increase, then diminish, but never become negative.
C)  may initially increase, then diminish, and ultimately become negative.
D)  is always less than average product.

Question 4

Refer to the provided graph of cost curves. Total fixed cost at output level Q ₂ is measured by

Accepted Answer

A)  0C.
B)  AC.
C)  CD.
D)  DE.

Question 5

The table shows the relationship between total cost and output for a firm.  The firm has a U-shaped

Accepted Answer

A)  total cost curve.
B)  marginal cost curve.
C)  average fixed cost curve.
D)  total variable cost curve.

Question 6

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars. For which graph is the output level Q ₀ at minimum efficient scale?

Accepted Answer

A)  graph A
B)  graph B
C)  graph C
D)  graph D

Question 7

Use the following data to answer the question.  Marginal product becomes negative with the hiring of the __________ unit of labor.

Accepted Answer

A)  third
B)  fourth
C)  sixth
D)  seventh

Question 8

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000If, other things equal, Creamy Crisp's revenue fell to $286,000,

Accepted Answer

A)  its implicit costs would exceed its economic costs.
B)  it would earn a normal profit but not an economic profit.
C)  it would suffer an economic loss.
D)  its accounting profit would fall to $0.

Question 9

Answer the question on the basis of the following cost data.  The marginal cost of producing the fifth unit of output is

Accepted Answer

A)  $7.40.
B)  $7.
C)  $12.20.
D)  $37.

Question 10

Refer to the diagram. At output level Q, average fixed cost

Accepted Answer

A)  is equal to EF.
B)  is equal to QE.
C)  is measured by both QF and ED.
D)  cannot be determined from the information given.

Question 11

A firm's economic profit is usually higher than its accounting profit.

Accepted Answer

A) True 
 B)False

Question 12

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.  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)  0 units of output.

Question 13

When a firm is experiencing economies of scale,

Accepted Answer

A)  long-run total cost is decreasing.
B)  long-run average (per-unit) total cost is decreasing.
C)  an increase in output is accompanied by a more-than-proportionate increase in long-run total cost.
D)  a given percentage increase in output requires a more-than-proportionate increase in resources.

Question 14

When total product is increasing at a decreasing rate, marginal product is positive, but falling.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the provided graphs. They show the long-run average total cost (LRATC) for a product. For which graph would a firm not be experiencing diseconomies of scale?

Accepted Answer

A)  graph A
B)  graph B
C)  graph C
D)  graph D

Question 16

In the short run, total output in an industry

Accepted Answer

A)  is fixed at a specific level.
B)  can vary as the result of using a fixed amount of plant and equipment more or less intensively.
C)  may be altered by varying the size of plant and equipment which now exist in the industry.
D)  can vary as the result of new firms entering or leaving the industry.

Question 17

As output increases, average fixed costs

Accepted Answer

A)  increase.
B)  decrease.
C)  remain constant.
D)  first increase and then decrease.

Question 18

Many people have turned to the Internet to get the news. This has caused the circulation numbers of newspapers to fall drastically, which in turn caused their

Accepted Answer

A)  average fixed costs to increase.
B)  average total costs to decrease.
C)  average fixed costs to decrease.
D)  marginal costs to increase.

Question 19

What is minimum efficient scale? What insights does it give about the size of firms in an industry?

Accepted Answer

An industry's minimum efficient scale (M...

Question 20

Refer to the diagram. If labor is the only variable input, the marginal product of labor is at a

Accepted Answer

A)  maximum at point a.
B)  minimum at point a.
C)  maximum at point b.
D)  minimum at point b.

Exam 9: Businesses and the Costs of Production

In the short run, total output in an industry

Correct Answer
verified

When total product is increasing at a decreasing rate, marginal product is positive, but falling.

Correct Answer
verified

What is minimum efficient scale? What insights does it give about the size of firms in an industry?

Correct Answer
verified
An industry's minimum efficient scale (M...
View Answer

Use the following data to answer the question. Marginal product becomes negative with the hiring of the __________ unit of labor.

Correct Answer
verified

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. The marginal product of the sixth worker is

Correct Answer
verified

Answer the question on the basis of the following cost data. The marginal cost of producing the fifth unit of output is

Correct Answer
verified

Refer to the provided graphs. They show the long-run average total cost (LRATC) for a product. For which graph would a firm not be experiencing diseconomies of scale?

Correct Answer
verified

If the short-run average variable cost of production for a firm is decreasing, then it follows that

Correct Answer
verified

Economic profits are calculated by subtracting

Correct Answer
verified

Refer to the diagram. If labor is the only variable input, the marginal product of labor is at a

Correct Answer
verified

When a firm is experiencing economies of scale,

Correct Answer
verified

Correct Answer
verified

As output increases, average fixed costs

Correct Answer
verified

Many people have turned to the Internet to get the news. This has caused the circulation numbers of newspapers to fall drastically, which in turn caused their

Correct Answer
verified

The table shows the relationship between total cost and output for a firm. The firm has a U-shaped

Correct Answer
verified

A firm's economic profit is usually higher than its accounting profit.

Correct Answer
verified

Refer to the provided graph of cost curves. Total fixed cost at output level Q ₂ is measured by

Correct Answer
verified

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars. For which graph is the output level Q ₀ at minimum efficient scale?

Correct Answer
verified

Refer to the diagram. At output level Q, average fixed cost

Correct Answer
verified

Marginal product

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

In the short run, total output in an industry

Correct AnswerverifiedShow Answer

When total product is increasing at a decreasing rate, marginal product is positive, but falling.

Correct AnswerverifiedShow Answer

What is minimum efficient scale? What insights does it give about the size of firms in an industry?

Correct AnswerverifiedAn industry's minimum efficient scale (M...View AnswerShow Answer

Use the following data to answer the question. Marginal product becomes negative with the hiring of the __________ unit of labor.

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. The marginal product of the sixth worker is

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The marginal cost of producing the fifth unit of output is

Correct AnswerverifiedShow Answer

Refer to the provided graphs. They show the long-run average total cost (LRATC) for a product. For which graph would a firm not be experiencing diseconomies of scale?

Correct AnswerverifiedShow Answer

If the short-run average variable cost of production for a firm is decreasing, then it follows that

Correct AnswerverifiedShow Answer

Economic profits are calculated by subtracting

Correct AnswerverifiedShow Answer

Refer to the diagram. If labor is the only variable input, the marginal product of labor is at a

Correct AnswerverifiedShow Answer

When a firm is experiencing economies of scale,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As output increases, average fixed costs

Correct AnswerverifiedShow Answer

Many people have turned to the Internet to get the news. This has caused the circulation numbers of newspapers to fall drastically, which in turn caused their

Correct AnswerverifiedShow Answer

The table shows the relationship between total cost and output for a firm. The firm has a U-shaped

Correct AnswerverifiedShow Answer

A firm's economic profit is usually higher than its accounting profit.

Correct AnswerverifiedShow Answer

Refer to the provided graph of cost curves. Total fixed cost at output level Q ₂ is measured by

Correct AnswerverifiedShow Answer

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars. For which graph is the output level Q ₀ at minimum efficient scale?

Correct AnswerverifiedShow Answer

Refer to the diagram. At output level Q, average fixed cost

Correct AnswerverifiedShow Answer

Marginal product

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An industry's minimum efficient scale (M...
View 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