Question 1

Fixed cost is

Accepted Answer

A)   the cost of producing one more unit of capital, for example, machinery.
B)   any cost that does not change when the firm changes its output.
C)   average cost multiplied by the firm's output.
D)   usually zero in the short run.E) None of the above
F) B) and C)

Question 2

Use the following data to answer the question.   Inputs of Labor  Total Product 0018218325430533634732\begin{array} { | c | c | } \hline 	ext { Inputs of Labor } & 	ext { Total Product } \\hline 0 & 0 \\hline 1 & 8 \\hline 2 & 18 \\hline 3 & 25 \\hline 4 & 30 \\hline 5 & 33 \\hline 6 & 34 \\hline 7 & 32 \\hline\end{array} Inputs of Labor 01234567​ Total Product 08182530333432​​  Diminishing returns begin to occur with the hiring of the unit of labor.

Accepted Answer

A)   first
B)   second
C)   third
D)   seventh E) None of the above
F) B) and C)

Question 3

Plant sizes get larger as you move from ATC-1 to ATC-4.  Which plant size would produce at the least cost for the 3,000-4,000 range of output?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) A) and B)
F) All of the above

Question 4

Over the range of positive, but diminishing, marginal returns for an input, the total product curve

Accepted Answer

A)   falls.
B)   rises at a constant rate.
C)   rises at a decreasing rate.
D)   rises at an increasing rate.E) A) and B)
F) A) and C)

Question 5

What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common?

Accepted Answer

A)   None are either implicit or explicit costs.
B)   All are opportunity costs.
C)   All are implicit costs.
D)   All are explicit costs.E) B) and C)
F) A) and D)

Question 6

Which of the following is not correct?

Accepted Answer

A)   Where marginal product is greater than average product, average product is rising.
B)   Where total product is at a maximum, average product is also at a maximum.
C)   Where marginal product is zero, total product is at a maximum.
D)   Marginal product becomes negative before average product becomes negative.E) None of the above
F) B) and C)

Question 7

Which of the following is correct as it relates to cost curves?

Accepted Answer

A)   Average variable cost intersects marginal cost at the latter's minimum point.
B)   Marginal cost intersects average total cost at the latter's minimum point.
C)   Average fixed cost intersects marginal cost at the latter's minimum point.
D)   Marginal cost intersects average fixed cost at the latter's minimum point.E) None of the above
F) B) and D)

Question 8

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

Accepted Answer

A)   $500,000 and an economic profit of $200,000.
B)   $2,000,000 and an economic profit of $200,000.
C)   $200,000 and an economic profit of $2,000,000.
D)   $200,000 and an economic profit of $500,000.E) None of the above
F) All of the above

Question 9

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Accepted Answer

A)   None, because fixed costs do not affect marginal cost.
B)   Marginal cost would increase by 50 percent.
C)   Marginal cost would increase by less than 50 percent.
D)   Marginal cost would increase by more than 50 percent.E) A) and C)
F) All of the above

Question 10

Marginal product is highest where marginal cost is lowest.

Accepted Answer

A) True 
 B)False

Question 11

The question is based on the following table, which provides information on the production of a product that requires one variable input.  Marginal product is largest for the

Accepted Answer

A)   second unit of variable input.
B)   third unit of variable input.
C)   seventh unit of variable input.
D)   ninth unit of variable input.E) A) and B)
F) None of the above

Question 12

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased,

Accepted Answer

A)   total cost at first increases at a decreasing rate and then increases at an increasing rate.
B)   total variable cost at first increases at an increasing rate and then increases at a decreasing rate.
C)   average total cost at first increases and then diminishes.
D)   average fixed cost will rise beyond the point of diminishing returns.E) B) and C)
F) A) and D)

Question 13

The short run is a period of time during which all costs are fixed costs.

Accepted Answer

A) True 
 B)False

Question 14

This question is based on the following table, which provides information on the production of a product that requires one variable input.  There are negative marginal returns when the

Accepted Answer

A)   fifth unit of input is added.
B)   sixth unit of input is added.
C)   seventh unit of input is added.
D)   ninth unit of input is added.E) A) and D)
F) A) and C)

Question 15

Economic profits are usually larger than accounting profits.

Accepted Answer

A) True 
 B)False

Question 16

The law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one

Accepted Answer

A)   more worker will increase the average amount of output per worker.
B)   more worker will decrease the average amount of output per worker.
C)   fewer worker will decrease the average amount of output per worker.
D)   fewer worker will not affect the average amount of output per worker.E) A) and B)
F) A) and C)

Question 17

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.  At what level of output is minimum efficient scale realized?

Accepted Answer

A)   30
B)   40
C)   50
D)   60E) C) and D)
F) B) and D)

Question 18

The law of diminishing returns results in

Accepted Answer

A)   an eventually rising marginal product curve.
B)   a total product curve that eventually increases at a decreasing rate.
C)   an eventually falling marginal cost curve.
D)   a total product curve that rises indefinitely.E) All of the above
F) None of the above

Question 19

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.E) A) and B)
F) B) and D)

Question 20

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

Accepted Answer

A)   diseconomies of scale.
B)   diminishing marginal utility.
C)   diminishing marginal returns.
D)   increasing opportunity cost.E) A) and D)
F) B) and D)

Exam 9: Businesses and the Costs of Production

Economic profits are usually larger than accounting profits.

Correct Answer
verified

The short run is a period of time during which all costs are fixed costs.

Correct Answer
verified

Marginal product is highest where marginal cost is lowest.

Correct Answer
verified

Fixed cost is

Correct Answer
verified

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

Correct Answer
verified

Over the range of positive, but diminishing, marginal returns for an input, the total product curve

Correct Answer
verified

The law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one

Correct Answer
verified

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased,

Correct Answer
verified

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

Correct Answer
verified

Correct Answer
verified

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Correct Answer
verified

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. At what level of output is minimum efficient scale realized?

Correct Answer
verified

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

Correct Answer
verified

What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common?

Correct Answer
verified

Plant sizes get larger as you move from ATC-1 to ATC-4. Which plant size would produce at the least cost for the 3,000-4,000 range of output?

Correct Answer
verified

The question is based on the following table, which provides information on the production of a product that requires one variable input. Marginal product is largest for the

Correct Answer
verified

Which of the following is correct as it relates to cost curves?

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

This question is based on the following table, which provides information on the production of a product that requires one variable input. There are negative marginal returns when the

Correct Answer
verified

The law of diminishing returns results in

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

Economic profits are usually larger than accounting profits.

Correct AnswerverifiedShow Answer

The short run is a period of time during which all costs are fixed costs.

Correct AnswerverifiedShow Answer

Marginal product is highest where marginal cost is lowest.

Correct AnswerverifiedShow Answer

Fixed cost is

Correct AnswerverifiedShow Answer

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

Correct AnswerverifiedShow Answer

Over the range of positive, but diminishing, marginal returns for an input, the total product curve

Correct AnswerverifiedShow Answer

The law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one

Correct AnswerverifiedShow Answer

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased,

Correct AnswerverifiedShow Answer

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the price of a fixed factor of production increases by 50 percent, what effect would this have on the marginal-cost schedule facing a firm?

Correct AnswerverifiedShow Answer

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. At what level of output is minimum efficient scale realized?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common?

Correct AnswerverifiedShow Answer

Plant sizes get larger as you move from ATC-1 to ATC-4. Which plant size would produce at the least cost for the 3,000-4,000 range of output?

Correct AnswerverifiedShow Answer

The question is based on the following table, which provides information on the production of a product that requires one variable input. Marginal product is largest for the

Correct AnswerverifiedShow Answer

Which of the following is correct as it relates to cost curves?

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

This question is based on the following table, which provides information on the production of a product that requires one variable input. There are negative marginal returns when the

Correct AnswerverifiedShow Answer

The law of diminishing returns results in

Correct AnswerverifiedShow Answer

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