Question 1

The additional cost a firm incurs from selling an extra unit of output is

Accepted Answer

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

Question 2

If the marginal cost is lower than the average cost, the average cost is falling.

Accepted Answer

A) True 
 B)False

Question 3

When a firm's marginal revenue exceeds its marginal cost, it is producing

Accepted Answer

A)   too much, and should cut back on production to maximize profit/minimize losses.
B)   too little, and should increase production to maximize profit/minimize losses.
C)   the right amount, as revenue exceeds cost.
D)   too much and its machines and employees are overworked.
E)   Not enough information is provided to determine what the firm should do.

Question 4

Economic profit is

Accepted Answer

A)   part of total cost.
B)   total revenue minus all opportunity costs.
C)   total revenue minus accounting costs.
D)   the opportunity cost of doing business.
E)   total variable cost minus total fixed cost.

Question 5

Assume that marginal revenue equals rising marginal cost at 100 units of output. At this output level, a profit-maximizing firm's total fixed cost is $600 and its total variable cost is $400. If the price of the product is $8 per unit, the firm should produce

Accepted Answer

A)   zero units of output.
B)   less than 100 units of output.
C)   100 units of output.
D)   more than 100 units of output.
E)   The amount is impossible to determine from the information given.

Question 6

Which of the following sayings illustrates diminishing returns in the short run?

Accepted Answer

A)   Too many cooks spoil the broth.
B)   Jack be nimble, Jack be quick.
C)   When the cat is away, the mouse will play.
D)   A rolling stone gathers no moss.
E)   The grass is always greener on the other side of the fence.

Question 7

If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing the seventh unit?

Accepted Answer

A)   $35
B)   $245
C)   $3
D)   $38
E)   $17

Question 8

Which of the following is not a variable cost at the sandwich shop?

Accepted Answer

A)   Cost of tomatoes
B)   Cost of labor
C)   Cost of rent
D)   Cost of electricity
E)   Cost of bread

Question 9

-Refer to Table 5.3. Assuming that costs are equally distributed for the odd output integers, the marginal cost of the sixth unit is

Accepted Answer

A)   $49.
B)   $98.
C)   $310.
D)   $80.
E)   $261.

Question 10

The short run is a

Accepted Answer

A)   5K run.
B)   period of time when plant size cannot be changed.
C)   period of time when all resources are variable.
D)   period of time when average total costs decline.
E)   maximum of 90 days.

Question 11

-Refer to Table 5.2. We can conclude that the marginal-cost curve intersects the average-variable-cost curve at ____ units of output and the average-total-cost curve at ____ units of output.

Accepted Answer

A)   1; 1
B)   2; 3
C)   4; 4
D)   4; 5
E)   6; 7

Question 12

A profit-maximizing firm will produce the level of output such that

Accepted Answer

A)   average revenue equals average cost.
B)   average revenue equals variable cost.
C)   marginal revenue equals rising marginal cost.
D)   marginal cost equals rising marginal revenue.
E)   marginal revenue exceeds marginal cost by the maximum amount.

Question 13

The marginal cost and average cost curves always intersect at the minimum average cost.

Accepted Answer

A) True 
 B)False

Question 14

Diminishing marginal returns occur because

Accepted Answer

A)   average and marginal relationships behave very differently with respect to each other.
B)   the efficiency of variable resources depends on the quantity of the fixed resources.
C)   producers are not careful enough in the manufacturing process.
D)   workers are lazy and inefficient.
E)   workers in some industries lack an adequate formal education.

Question 15

If the marginal costs exceed marginal revenue, the firm

Accepted Answer

A)   is maximizing profit.
B)   should reduce its level of output to increase profit.
C)   would increase profits by increasing production.
D)   should shut down.
E)   is minimizing its loss.

Question 16

Assume that a firm is producing an output level such that marginal revenue equals marginal cost. One can correctly conclude that the firm is earning a normal profit.

Accepted Answer

A) True 
 B)False

Question 17

Economic profit is the difference between a firm's total revenue and its

Accepted Answer

A)   average costs.
B)   mandatory costs.
C)   opportunity costs not measured in explicit costs.
D)   accounting costs.
E)   opportunity costs.

Question 18

Economic profit is the difference between a firm's total revenue and its accounting costs.

Accepted Answer

A) True 
 B)False

Question 19

The existence of economic profits in a competitive market

Accepted Answer

A)   will attract competitors.
B)   is usually against the law.
C)   allows firms to create monopolies.
D)   results in normality.
E)   increases negative economic net worth.

Question 20

In the long run,

Accepted Answer

A)   all of a firm's resources are variable.
B)   new technology cannot be introduced.
C)   at least one of the firm's resources is fixed.
D)   most of the firm's resources cannot be varied.
E)   none of the firm's resources is variable.

Exam 5: Costs and Profit Maximization

If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing the seventh unit?

Correct AnswerverifiedShow Answer

-Refer to Table 5.2. We can conclude that the marginal-cost curve intersects the average-variable-cost curve at ____ units of output and the average-total-cost curve at ____ units of output.

Correct AnswerverifiedShow Answer

The short run is a

Correct AnswerverifiedShow Answer

-Refer to Table 5.3. Assuming that costs are equally distributed for the odd output integers, the marginal cost of the sixth unit is

Correct AnswerverifiedShow Answer

If the marginal cost is lower than the average cost, the average cost is falling.

Correct AnswerverifiedShow Answer

A profit-maximizing firm will produce the level of output such that

Correct AnswerverifiedShow Answer

Economic profit is

Correct AnswerverifiedShow Answer

Assume that a firm is producing an output level such that marginal revenue equals marginal cost. One can correctly conclude that the firm is earning a normal profit.

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

The marginal cost and average cost curves always intersect at the minimum average cost.

Correct AnswerverifiedShow Answer

Diminishing marginal returns occur because

Correct AnswerverifiedShow Answer

The existence of economic profits in a competitive market

Correct AnswerverifiedShow Answer

Assume that marginal revenue equals rising marginal cost at 100 units of output. At this output level, a profit-maximizing firm's total fixed cost is $600 and its total variable cost is $400. If the price of the product is $8 per unit, the firm should produce

Correct AnswerverifiedShow Answer

Economic profit is the difference between a firm's total revenue and its

Correct AnswerverifiedShow Answer

Which of the following sayings illustrates diminishing returns in the short run?

Correct AnswerverifiedShow Answer

When a firm's marginal revenue exceeds its marginal cost, it is producing

Correct AnswerverifiedShow Answer

Which of the following is not a variable cost at the sandwich shop?

Correct AnswerverifiedShow Answer

Economic profit is the difference between a firm's total revenue and its accounting costs.

Correct AnswerverifiedShow Answer

If the marginal costs exceed marginal revenue, the firm

Correct AnswerverifiedShow Answer

The additional cost a firm incurs from selling an extra unit of output is

Correct AnswerverifiedShow Answer

Correct Answer
verified

-Refer to Table 5.2. We can conclude that the marginal-cost curve intersects the average-variable-cost curve at units of output and the average-total-cost curve at units of output.

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