Question 1

Total revenue minus only implicit costs is called

Accepted Answer

A)   accounting profit.
B)   economic profit.
C)   opportunity cost.
D)   None of the above is correct.E) All of the above
F) C) and D)

Question 2

Diseconomies of scale occur when a firm's

Accepted Answer

A)   marginal costs are constant as output increases.
B)   long-run average total costs are decreasing as output increases.
C)   long-run average total costs are increasing as output increases.
D)   marginal costs are equal to average total costs for all levels of output.E) B) and D)
F) A) and B)

Question 3

Average total cost and marginal cost express information that is already contained in a firm's total cost.

Accepted Answer

A) True 
 B)False

Question 4

Table 12-16
Listed in the table are the long-run total costs for three different firms.
 
-Refer to Table 12-16.Firm C is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 5

Table 12-13
 
-Refer to Table 12-13.What is average fixed cost when output is 40 units?

Accepted Answer

A)   $1.00
B)   $3.32
C)   $5.00
D)   $8.00E) A) and B)
F) B) and D)

Question 6

In the short run,if a firm produces nothing,total costs are zero.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

Accepted Answer

A)   average fixed cost
B)   average variable cost
C)   average total cost
D)   marginal costE) B) and D)
F) All of the above

Question 8

A certain firm manufactures and sells computer chips.Last year it sold 2 million chips at a price of $10 per chip.For last year,the firm's

Accepted Answer

A)   accounting profit was $20 million.
B)   economic profit was $20 million.
C)   total revenue was $20 million.
D)   explicit costs was $20 million.E) All of the above
F) C) and D)

Question 9

The Big Box corporation produced and sold 500 units of output.The average cost of production per unit was $50.Each unit sold for a price of $65.The Big Box corporation's total revenues are

Accepted Answer

A)   $7,500.
B)   $25,000.
C)   $32,500.
D)   $67,500.E) B) and C)
F) A) and D)

Question 10

Figure 12-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 12-9.At levels of output between M and N,the firm experiences

Accepted Answer

A)   economies of scale.
B)   diseconomies of scale.
C)   constant returns to scale.
D)   both the benefits of specialization and diminishing marginal productivity.E) B) and C)
F) B) and D)

Question 11

A firm's total profit equals its marginal revenue minus its marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

Figure 12-3 
-Refer to Figure 12-3.The changing slope of the total cost curve reflects

Accepted Answer

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

Question 13

Which of the following statements is correct?

Accepted Answer

A)   If marginal cost is rising,then average total cost is rising.
B)   If marginal cost is rising,then average variable cost is rising.
C)   If average variable cost is rising,then marginal cost is minimized.
D)   If average total cost is rising,then marginal cost is greater than average total cost.E) C) and D)
F) None of the above

Question 14

At low levels of production,the firm

Accepted Answer

A)   benefits from increased size because it can take advantage of greater specialization.
B)   has the potential for economies of scale.
C)   is unlikely to experiences acute problems with coordination.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 15

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output.The firm's total fixed costs equal

Accepted Answer

A)   $2.
B)   $4.
C)   $1,000.
D)   $2,000.E) B) and C)
F) C) and D)

Question 16

Economic profit is equal to total revenue minus the

Accepted Answer

A)   explicit cost of producing goods and services.
B)   opportunity cost of producing goods and services.
C)   accounting cost of producing goods and services.
D)   implicit cost of producing goods and services.E) B) and C)
F) A) and D)

Question 17

Table 12-5
 
-Refer to Table 12-5.Assume that fixed costs are $500,and variable costs are $100 per worker.For this firm,what are the shapes of the production function and the total-cost curve?

Accepted Answer

A)   Both the production function and total-cost curve are increasing at an increasing rate.
B)   Both the production function and total-cost curve are increasing at a decreasing rate.
C)   The production function is increasing at a decreasing rate,whereas the total-cost function is increasing at an increasing rate.
D)   The production function is increasing at an increasing rate,whereas the total-cost function is increasing at a decreasing rate.E) B) and C)
F) A) and C)

Question 18

Table 12-1
 
-Refer to Table 12-1.What is total output when 1 worker is hired?

Accepted Answer

A)   30
B)   40
C)   120
D)   160E) A) and B)
F) A) and C)

Question 19

An example of an explicit cost would be the wages that a business owner pays her employees.

Accepted Answer

A) True 
 B)False

Question 20

Table 12-1
 
-Refer to Table 12-1.What is total output when 5 workers are hired?

Accepted Answer

A)   -10
B)   120
C)   160
D)   190E) A) and B)
F) None of the above

Exam 12: The Costs of Production

Average total cost and marginal cost express information that is already contained in a firm's total cost.

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Table 12-1 -Refer to Table 12-1.What is total output when 5 workers are hired?

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Which of the following statements is correct?

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An example of an explicit cost would be the wages that a business owner pays her employees.

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Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

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Table 12-5 -Refer to Table 12-5.Assume that fixed costs are $500,and variable costs are $100 per worker.For this firm,what are the shapes of the production function and the total-cost curve?

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Economic profit is equal to total revenue minus the

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Figure 12-3 -Refer to Figure 12-3.The changing slope of the total cost curve reflects

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Table 12-13 -Refer to Table 12-13.What is average fixed cost when output is 40 units?

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In the short run,if a firm produces nothing,total costs are zero.

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Total revenue minus only implicit costs is called

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Table 12-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 12-16.Firm C is experiencing economies of scale.

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A firm's total profit equals its marginal revenue minus its marginal cost.

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At low levels of production,the firm

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Diseconomies of scale occur when a firm's

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A certain firm manufactures and sells computer chips.Last year it sold 2 million chips at a price of $10 per chip.For last year,the firm's

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Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output.The firm's total fixed costs equal

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Figure 12-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 12-9.At levels of output between M and N,the firm experiences

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Table 12-1 -Refer to Table 12-1.What is total output when 1 worker is hired?

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The Big Box corporation produced and sold 500 units of output.The average cost of production per unit was $50.Each unit sold for a price of $65.The Big Box corporation's total revenues are

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