Question 1

When total product is increasing at a decreasing rate, marginal product is

Accepted Answer

A)  positive and increasing.
B)  positive and decreasing.
C)  constant.
D)  negative.E) None of the above
F) All of the above

Question 2

In comparing the changes in TC and TVC associated with an additional unit of output, we find that

Accepted Answer

A)  the change in TVC is equal to MC, while the change in TC is equal to TFC.
B)  the change in TC exceeds the change in TVC.
C)  the change in TVC exceeds the change in TC.
D)  both TC and TVC changes are equal to MC.E) A) and B)
F) A) and C)

Question 3

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

Accepted Answer

A)  5 percent
B)  10 percent
C)  20 percent
D)  25 percentE) A) and D)
F) None of the above

Question 4

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 5

Past costs that are not affected by new decisions are known as

Accepted Answer

A)  variable costs.
B)  fixed costs.
C)  marginal costs.
D)  sunk costs.E) A) and D)
F) C) and D)

Question 6

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)  $2
B)  $1
C)  $3
D)  $4E) B) and C)
F) A) and D)

Question 7

In the figure, curves 1, 2, 3, and 4 represent the

Accepted Answer

A)  ATC, MC, AFC, and AVC curves, respectively.
B)  MC, AFC, AVC, and ATC curves, respectively.
C)  MC, ATC, AVC, and AFC curves, respectively.
D)  ATC, AVC, AFC, and MC curves, respectively.E) A) and B)
F) A) and D)

Question 8

The law of diminishing returns only applies in cases where

Accepted Answer

A)  there is increasing scarcity of factors of production.
B)  the price of extra units of a factor is increasing.
C)  there is at least one fixed factor of production.
D)  capital is a variable input.E) All of the above
F) C) and D)

Question 9

Use the following data to answer the question.  When five units of labor are hired, the marginal product (MP) of the last worker is

Accepted Answer

A)  11.6.
B)  10.
C)  290.
D)  20.E) B) and D)
F) A) and D)

Question 10

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.  The marginal cost of the fourth unit of output is

Accepted Answer

A)  $2.
B)  $12.
C)  $37.
D)  $16.E) All of the above
F) C) and D)

Question 11

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that

Accepted Answer

A)  technological progress has occurred.
B)  economies of scale are being realized.
C)  the firm is encountering diminishing returns.
D)  diseconomies of scale are being encountered.E) A) and C)
F) A) and D)

Question 12

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostMarginal cost is _______.

Accepted Answer

A)  Change in TVC / Q
B)  Change in TVC / Change in Q
C)  P − Q / Change in Q
D)  Change in TFC / Change in QE) B) and C)
F) None of the above

Question 13

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) B) and D)

Question 14

3-D printers are capable of producing real output like chairs or machine parts using a computer-controlled special printer at low cost even if you produce only one unit of output.

Accepted Answer

A) True 
 B)False

Question 15

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.  The average variable cost of 4 units of output is

Accepted Answer

A)  $33.50.
B)  $28.50.
C)  $19.00.
D)  $21.00.E) None of the above
F) A) and B)

Question 16

Refer to the graph. Which one of the following would cause a move from point b to point c along short-run average total cost curve ATC ₁?

Accepted Answer

A)  diminishing marginal returns
B)  an increase in the wage rate
C)  a decrease in the wage rate
D)  increasing marginal returnsE) All of the above
F) B) and C)

Question 17

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 = $6,000Creamy Crisp's economic profit is

Accepted Answer

A)  $286,000.
B)  $150,000.
C)  $230,000.
D)  $94,000.E) A) and D)
F) C) and D)

Question 18

When a firm increases its output, its average fixed costs will stay constant.

Accepted Answer

A) True 
 B)False

Question 19

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 C)
F) A) and B)

Question 20

Answer the question on the basis of the following cost data.  The average variable cost of producing 3 units of output is

Accepted Answer

A)  $8.
B)  $24.
C)  $16.
D)  $12.E) C) and D)
F) All of the above

Exam 9: Businesses and the Costs of Production

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostMarginal cost is _______.

Correct Answer
verified

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that

Correct Answer
verified

Refer to the graph. Which one of the following would cause a move from point b to point c along short-run average total cost curve ATC ₁?

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

3-D printers are capable of producing real output like chairs or machine parts using a computer-controlled special printer at low cost even if you produce only one unit of output.

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 law of diminishing returns only applies in cases where

Correct Answer
verified

When a firm increases its output, its average fixed costs will stay constant.

Correct Answer
verified

Correct Answer
verified

Answer the question on the basis of the following cost data. The average variable cost of producing 3 units of output is

Correct Answer
verified

In comparing the changes in TC and TVC associated with an additional unit of output, we find that

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

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. The average variable cost of 4 units of output is

Correct Answer
verified

In the figure, curves 1, 2, 3, and 4 represent the

Correct Answer
verified

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

Correct Answer
verified

Use the following data to answer the question. When five units of labor are hired, the marginal product (MP) of the last worker is

Correct Answer
verified

Past costs that are not affected by new decisions are known as

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

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. The marginal cost of the fourth unit of output is

Correct Answer
verified

When total product is increasing at a decreasing rate, marginal product is

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostMarginal cost is _______.

Correct AnswerverifiedShow Answer

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that

Correct AnswerverifiedShow Answer

Refer to the graph. Which one of the following would cause a move from point b to point c along short-run average total cost curve ATC ₁?

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

3-D printers are capable of producing real output like chairs or machine parts using a computer-controlled special printer at low cost even if you produce only one unit of output.

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 law of diminishing returns only applies in cases where

Correct AnswerverifiedShow Answer

When a firm increases its output, its average fixed costs will stay constant.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The average variable cost of producing 3 units of output is

Correct AnswerverifiedShow Answer

In comparing the changes in TC and TVC associated with an additional unit of output, we find that

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

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. The average variable cost of 4 units of output is

Correct AnswerverifiedShow Answer

In the figure, curves 1, 2, 3, and 4 represent the

Correct AnswerverifiedShow Answer

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

Correct AnswerverifiedShow Answer

Use the following data to answer the question. When five units of labor are hired, the marginal product (MP) of the last worker is

Correct AnswerverifiedShow Answer

Past costs that are not affected by new decisions are known as

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

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. The marginal cost of the fourth unit of output is

Correct AnswerverifiedShow Answer

When total product is increasing at a decreasing rate, marginal product is

Correct AnswerverifiedShow Answer

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