Question 1

Scenario 13-1
Joe wants to start his own business,which will require that he purchase a factory that costs $400,000.Joe currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1.If Joe purchases the factory with his own money,what is the annual implicit opportunity cost of purchasing the factory?

Accepted Answer

A)   $0
B)   $3,000
C)   $12,000
D)   $15,000E) B) and C)
F) All of the above

Question 2

Economies of scale occur when

Accepted Answer

A)   long-run average total costs rise as output increases.
B)   long-run average total costs fall as output increases.
C)   average fixed costs are falling.
D)   average fixed costs are constant.E) None of the above
F) A) and B)

Question 3

Which of the following statements is not correct?

Accepted Answer

A)   In the long run,there are no fixed costs.
B)   Marginal cost is independent of fixed costs.
C)   Economies of scale is a short-run concept.
D)   Diminishing marginal product explains increasing marginal cost.E) A) and D)
F) A) and B)

Question 4

Economic profit

Accepted Answer

A)   will never exceed accounting profit.
B)   is most often equal to accounting profit.
C)   is always at least as large as accounting profit.
D)   is a less complete measure of profitability than accounting profit.E) A) and B)
F) All of the above

Question 5

Table 13-2
 
-Refer to Table 13-2.The marginal product of the third worker is

Accepted Answer

A)   230 units.
B)   100 units.
C)   77 units.
D)   60 units.E) A) and B)
F) A) and C)

Question 6

Average total cost (ATC) is calculated as follows:

Accepted Answer

A)   ATC = (change in total cost) /(change in quantity of output) .
B)   ATC = (change in total cost) /(change in quantity of input) .
C)   ATC = (total cost) /(quantity of output) .
D)   ATC = (total cost) /(quantity of input) .E) C) and D)
F) B) and C)

Question 7

Which of the following is the best example of a variable cost?

Accepted Answer

A)   monthly wage payments for hired labor
B)   annual property tax payments for a building
C)   monthly rent payments for a warehouse
D)   annual insurance payments for a warehouseE) None of the above
F) C) and D)

Question 8

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,600 when output is 40 units.Firm A exhibits

Accepted Answer

A)   diseconomies of scale because total cost is rising as output rises.
B)   constant returns to scale because average total cost is constant as output rises.
C)   diseconomies of scale because average total cost is rising as output rises.
D)   economies of scale because average total cost is falling as output rises.E) All of the above
F) A) and D)

Question 9

If Amanda sells 200 glasses of lemonade at $0.50 each,her total revenues are

Accepted Answer

A)   $100.
B)   $199.50.
C)   $200.
D)   $400.E) B) and C)
F) A) and B)

Question 10

Table 13-7
 
-Refer to Table 13-7.What is the marginal cost of producing the first widget?

Accepted Answer

A)   $1.00
B)   $10.00
C)   $11.00
D)   It can't be determined from the information given.E) None of the above
F) A) and B)

Question 11

Diminishing marginal productivity implies decreasing total product.

Accepted Answer

A) True 
 B)False

Question 12

The amount by which total cost rises when the firm produces one additional unit of output is called

Accepted Answer

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

Question 13

Scenario 13-4
Wanda owns a lemonade stand.She produces lemonade using five inputs: water,sugar,lemons,paper cups,and labor.Her costs per glass are as follows: $0.01 for water,$0.02 for sugar,$0.03 for lemons,$0.02 for cups,and $0.10 for the opportunity cost of her labor.She can sell 300 glasses for $0.50 each.
-Refer to Scenario 13-4.What are Wanda's total accounting profits?

Accepted Answer

A)   $150
B)   $126
C)   $96
D)   $24E) All of the above
F) A) and D)

Question 14

Table 13-10
Jimmy's Gigaplots Factory
 
-Refer to Table 13-10.What is the average fixed cost of producing 3 gigaplots at Jimmy's Gigaplot factory?

Accepted Answer

A)   $1.67
B)   $2.67
C)   $5.33
D)   $8.33E) C) and D)
F) A) and C)

Question 15

The Wacky Widget company has total fixed costs of $100,000 per year.The firm's average variable cost is $5 for 10,000 widgets.At that level of output,the firm's average total costs equal

Accepted Answer

A)   $10
B)   $15
C)   $100
D)   $150E) A) and C)
F) None of the above

Question 16

Variable costs usually change as the firm alters the quantity of output produced.

Accepted Answer

A) True 
 B)False

Question 17

If a firm experiences constant returns to scale at all output levels,then its long-run average total cost curve would

Accepted Answer

A)   slope downward.
B)   be horizontal.
C)   slope upward.
D)   slope downward for low output levels and upward for high output levels.E) B) and C)
F) All of the above

Question 18

When marginal cost exceeds average total cost,

Accepted Answer

A)   average fixed cost must be rising.
B)   average total cost must be rising.
C)   average total cost must be falling.
D)   marginal cost must be falling.E) B) and C)
F) All of the above

Question 19

Table 13-13
Consider the following table of long-run total cost for four different firms:
 
-Refer to Table 13-13.Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?

Accepted Answer

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

Question 20

Table 13-8
Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business.Each pair is shipped in a separate box.She rents a small room for $150 a week in the downtown business district that serves as her factory.She can hire workers for $275 a week.There are no implicit costs.
 
-Refer to Table 13-8.What is the marginal product of the second worker?

Accepted Answer

A)   110
B)   200
C)   260
D)   300E) A) and B)
F) A) and C)

Exam 13: The Costs of Production

If a firm experiences constant returns to scale at all output levels,then its long-run average total cost curve would

Correct Answer
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Average total cost (ATC) is calculated as follows:

Correct Answer
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Economies of scale occur when

Correct Answer
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Which of the following is the best example of a variable cost?

Correct Answer
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Variable costs usually change as the firm alters the quantity of output produced.

Correct Answer
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Table 13-7 -Refer to Table 13-7.What is the marginal cost of producing the first widget?

Correct Answer
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The amount by which total cost rises when the firm produces one additional unit of output is called

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When marginal cost exceeds average total cost,

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Diminishing marginal productivity implies decreasing total product.

Correct Answer
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Table 13-2 -Refer to Table 13-2.The marginal product of the third worker is

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Table 13-10 Jimmy's Gigaplots Factory -Refer to Table 13-10.What is the average fixed cost of producing 3 gigaplots at Jimmy's Gigaplot factory?

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Economic profit

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Table 13-13 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-13.Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?

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Which of the following statements is not correct?

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In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,600 when output is 40 units.Firm A exhibits

Correct Answer
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If Amanda sells 200 glasses of lemonade at $0.50 each,her total revenues are

Correct Answer
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The Wacky Widget company has total fixed costs of $100,000 per year.The firm's average variable cost is $5 for 10,000 widgets.At that level of output,the firm's average total costs equal

Correct Answer
verified

Exam 13: The Costs of Production

If a firm experiences constant returns to scale at all output levels,then its long-run average total cost curve would

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Average total cost (ATC) is calculated as follows:

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Economies of scale occur when

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Which of the following is the best example of a variable cost?

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Variable costs usually change as the firm alters the quantity of output produced.

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Table 13-7 -Refer to Table 13-7.What is the marginal cost of producing the first widget?

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The amount by which total cost rises when the firm produces one additional unit of output is called

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When marginal cost exceeds average total cost,

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Diminishing marginal productivity implies decreasing total product.

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Table 13-2 -Refer to Table 13-2.The marginal product of the third worker is

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Table 13-10 Jimmy's Gigaplots Factory -Refer to Table 13-10.What is the average fixed cost of producing 3 gigaplots at Jimmy's Gigaplot factory?

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Economic profit

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Table 13-13 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-13.Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?

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Which of the following statements is not correct?

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In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,600 when output is 40 units.Firm A exhibits

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If Amanda sells 200 glasses of lemonade at $0.50 each,her total revenues are

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The Wacky Widget company has total fixed costs of $100,000 per year.The firm's average variable cost is $5 for 10,000 widgets.At that level of output,the firm's average total costs equal

Correct AnswerverifiedShow Answer

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