Question 1

Which of the following is an implicit cost?

Accepted Answer

A)  Jones buys $100 worth of supplies from Smith.
B)  Brown pays the bill he received in the mail.
C)  Smith, who could work for someone else, works for himself.
D)  Williamson pays his income taxes on April 15.
E)  a, c, and dF) None of the above
G) B) and C)

Question 2

Shirking, being a form of __________, is a good that individuals may consume more of the __________ its cost.

Accepted Answer

A)  work; higher
B)  work; lower
C)  leisure; higher
D)  leisure; lowerE) A) and B)
F) A) and C)

Question 3

Economic profit is the difference between total revenue and implicit costs.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average fixed cost at two units of output is

Accepted Answer

A)  $50.
B)  $60.
C)  $100.
D)  $110.
E)  There is not enough information provided to answer this question.F) B) and C)
G) A) and E)

Question 5

The marginal cost curve cuts through the AVC, ATC, and AFC curves at their lowest points.

Accepted Answer

A) True 
 B)False

Question 6

Constant returns to scale are said to exist when inputs are increased by some percentage and output increases by a(n)  __________ percentage, causing unit costs to __________.

Accepted Answer

A)  greater; fall
B)  smaller; fall
C)  greater; rise
D)  smaller; rise
E)  equal; remain constantF) A) and B)
G) C) and E)

Question 7

The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Accepted Answer

A)  total variable cost rises as output rises.
B)  of the law of diminishing marginal returns.
C)  total fixed cost does not change as output changes.
D)  total cost does not change as output changes.E) A) and B)
F) A) and C)

Question 8

Which of the following statements is true?

Accepted Answer

A)  If the marginal cost curve is above the AFC curve, the AFC curve must be rising.
B)  Average total cost equals average variable cost minus average fixed cost.
C)  As output increases, the average variable cost curve gets closer to the average total cost curve.
D)  The AFC curve is horizontal as output increases.E) A) and D)
F) C) and D)

Question 9

If the marginal productivity of labor is falling, it follows that

Accepted Answer

A)  the average productivity of labor is rising.
B)  marginal cost is falling.
C)  marginal cost is rising.
D)  average productivity of labor is falling.
E)  c and dF) B) and D)
G) B) and C)

Question 10

Exhibit 21-4
​
 
-Diseconomies of scale are present when the __________ average total cost curve is __________.

Accepted Answer

A)  short-run; falling
B)  short-run; rising
C)  long-run; falling
D)  long-run; rising
E)  b and dF) A) and B)
G) A) and C)

Question 11

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Accepted Answer

A)  $100.
B)  $150.
C)  $90.
D)  $90.83.E) A) and D)
F) A) and C)

Question 12

Explain the difference between the law of diminishing marginal returns and diseconomies of scale.

Accepted Answer

The law of diminishing marginal returns ...

Question 13

Economies of scale are said to exist when

Accepted Answer

A)  inputs are increased by some percentage and output increases by the same percentage.
B)  inputs are increased by some percentage and output increases by a lesser percentage.
C)  inputs are increased by some percentage and output increases by a greater percentage.
D)  the LRATC curve slopes upward.
E)  none of the aboveF) B) and C)
G) C) and D)

Question 14

Exhibit 21-10
​
  ​
-Refer to Exhibit 21-10. Professor Jones, who is encouraging the three students to work together in order to be "more productive," is implicitly assuming that by working together they will be able to

Accepted Answer

A)  solve more problems in the same amount of time than they would by studying separately.
B)  solve the same number of problems in less time than they would by studying separately.
C)  decrease their marginal products through joint efforts.
D)  all of the above
E)  a and bF) A) and B)
G) B) and E)

Question 15

What is the typical shape of the AFC curve? Explain why it is shaped this way.

Accepted Answer

The formula for determining AFC is TFC/Q...

Question 16

In the theory of the firm (as put forth by Alchian and Demsetz) , trade or exchange pops up in the following situation:

Accepted Answer

A)  when individuals choose to form a team
B)  when the monitor fires an employee
C)  when individuals in a team shirk
D)  a and cE) B) and C)
F) C) and D)

Question 17

Given that fixed costs are constant as output increases, average fixed costs are also constant.

Accepted Answer

A) True 
 B)False

Question 18

An example of an implicit cost is the foregone income that a business owner-manager could have earned working for someone else.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 21-13
​
 
-Refer to Exhibit 21-13. What dollar amounts go in blanks (I)  and (J) , respectively?

Accepted Answer

A)  $100; $50
B)  $25; $32.50
C)  $500; $40
D)  $50; $32
E)  There is not enough information to answer this question.F) B) and D)
G) C) and E)

Question 20

Exhibit 21-7
​
 
-Refer to Exhibit 21-7. The average fixed cost of producing 5 units of output is

Accepted Answer

A)  $16.25.
B)  $4.00.
C)  $11.15.
D)  $6.00.
E)  There is not enough information to answer this question.F) None of the above
G) B) and D)

Exam 21: Production and Costs

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Average fixed cost at two units of output is

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Shirking, being a form of __________, is a good that individuals may consume more of the __________ its cost.

Correct AnswerverifiedShow Answer

Exhibit 21-13 ​ -Refer to Exhibit 21-13. What dollar amounts go in blanks (I) and (J) , respectively?

Correct AnswerverifiedShow Answer

What is the typical shape of the AFC curve? Explain why it is shaped this way.

Correct AnswerverifiedThe formula for determining AFC is TFC/Q...View AnswerShow Answer

An example of an implicit cost is the foregone income that a business owner-manager could have earned working for someone else.

Correct AnswerverifiedShow Answer

Economic profit is the difference between total revenue and implicit costs.

Correct AnswerverifiedShow Answer

Explain the difference between the law of diminishing marginal returns and diseconomies of scale.

Correct AnswerverifiedThe law of diminishing marginal returns ...View AnswerShow Answer

Given that fixed costs are constant as output increases, average fixed costs are also constant.

Correct AnswerverifiedShow Answer

Exhibit 21-7 ​ -Refer to Exhibit 21-7. The average fixed cost of producing 5 units of output is

Correct AnswerverifiedShow Answer

The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Correct AnswerverifiedShow Answer

Exhibit 21-10 ​ ​ -Refer to Exhibit 21-10. Professor Jones, who is encouraging the three students to work together in order to be "more productive," is implicitly assuming that by working together they will be able to

Correct AnswerverifiedShow Answer

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Correct AnswerverifiedShow Answer

Constant returns to scale are said to exist when inputs are increased by some percentage and output increases by a(n) __________ percentage, causing unit costs to __________.

Correct AnswerverifiedShow Answer

Which of the following is an implicit cost?

Correct AnswerverifiedShow Answer

Economies of scale are said to exist when

Correct AnswerverifiedShow Answer

If the marginal productivity of labor is falling, it follows that

Correct AnswerverifiedShow Answer

In the theory of the firm (as put forth by Alchian and Demsetz) , trade or exchange pops up in the following situation:

Correct AnswerverifiedShow Answer

Exhibit 21-4 ​ -Diseconomies of scale are present when the __________ average total cost curve is __________.

Correct AnswerverifiedShow Answer

The marginal cost curve cuts through the AVC, ATC, and AFC curves at their lowest points.

Correct AnswerverifiedShow Answer

Exhibit 21-11 -Refer to Exhibit 21-11. Average fixed cost at two units of output is

Correct Answer
verified

Correct Answer
verified

Shirking, being a form of , is a good that individuals may consume more of the its cost.

Correct Answer
verified

Exhibit 21-13 -Refer to Exhibit 21-13. What dollar amounts go in blanks (I) and (J) , respectively?

Correct Answer
verified

Correct Answer
verified
The formula for determining AFC is TFC/Q...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The law of diminishing marginal returns ...
View Answer

Correct Answer
verified

Exhibit 21-7 -Refer to Exhibit 21-7. The average fixed cost of producing 5 units of output is

Correct Answer
verified

Correct Answer
verified

Exhibit 21-10 -Refer to Exhibit 21-10. Professor Jones, who is encouraging the three students to work together in order to be "more productive," is implicitly assuming that by working together they will be able to

Correct Answer
verified

Exhibit 21-11 -Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Correct Answer
verified

Constant returns to scale are said to exist when inputs are increased by some percentage and output increases by a(n) percentage, causing unit costs to .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 21-4 -Diseconomies of scale are present when the average total cost curve is .

Correct Answer
verified

Correct Answer
verified