Question 1

The sole proprietor of the Milwaukee Machine Company receives all accounting profits earned by her firm. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates that would have returned $22,000 this year. If accounting profits for the year were $50,000, then her economic profits were (based solely on the given figures)

Accepted Answer

A)  $107,000.
B)  $−7,000.
C)  $57,000.
D)  $50,000.E) None of the above
F) A) and B)

Question 2

If marginal cost exceeds average total cost in the short run, then which is likely to be true?

Accepted Answer

A)  Average total cost is increasing.
B)  Average variable cost is decreasing.
C)  Average total cost is less than average variable cost.
D)  Marginal cost is less than average variable cost.E) A) and B)
F) A) and C)

Question 3

In the long run, a firm will choose a plant size that has the

Accepted Answer

A)  minimum of average fixed costs.
B)  capacity to produce the largest quantity of the product.
C)  minimum average total cost of producing the target level of output.
D)  maximum level of resource use per unit of the total product of output.E) B) and C)
F) A) and C)

Question 4

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by 8 percent. This means that initially it was producing

Accepted Answer

A)  in the range of diseconomies of scale.
B)  in the range of economies of scale.
C)  where AP is less than MP.
D)  in the range of constant returns to scale.E) All of the above
F) A) and B)

Question 5

Refer to the diagram. This firm's average fixed costs

Accepted Answer

A)  cannot be determined with the information in the diagram.
B)  are the vertical distance between AVC and MC.
C)  are the vertical distance between AVC and ATC.
D)  equal the per-unit change in MC.E) C) and D)
F) B) and C)

Question 6

Which of the following is an example of a sunk cost, as it relates to a firm?

Accepted Answer

A)  an expenditure on raw materials used in the production process
B)  an expenditure on a nonrefundable, nontransferable airline ticket
C)  an expenditure to buy a delivery van
D)  an expenditure for a new factoryE) A) and B)
F) A) and C)

Question 7

The total output of a firm will be at a maximum where

Accepted Answer

A)  MP is at a maximum.
B)  AP is at a minimum.
C)  MP is zero.
D)  AP is at a maximum.E) A) and D)
F) C) and D)

Question 8

If a firm doubles its resource inputs and as a result output triples, then the long-run average cost curve must be upward-sloping.

Accepted Answer

A) True 
 B)False

Question 9

What is the relationship between marginal cost and marginal product?

Accepted Answer

The MC curve is a mirror reflection of t...

Question 10

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

Accepted Answer

A)  $8.
B)  $24.
C)  $16.
D)  $12.E) None of the above
F) A) and B)

Question 11

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.  Economies of scale in plant ATC-A are realized over the ___ to ___ levels of output; diseconomies of scale exist over the ___ to ___ levels of output.

Accepted Answer

A)  10, 30; 40, 100
B)  10, 40; 80, 100
C)  10, 50; 60, 100
D)  10, 70; 80, 100E) None of the above
F) C) and D)

Question 12

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs

Accepted Answer

A)  are $2.50.
B)  are $1,250.
C)  are $750.
D)  are $1,100.E) B) and D)
F) B) and C)

Question 13

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $40,000Annual lease on building = $25,000Annual revenue from operations = $420,000Payments to workers = $150,000Utilities (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 = $6,000If, other things equal, Creamy Crisp's revenue fell to $309,000,

Accepted Answer

A)  its implicit costs would exceed its economic costs.
B)  it would earn a normal profit but not an economic profit.
C)  it would suffer an economic loss.
D)  its accounting profit would fall to $0.E) A) and C)
F) B) and D)

Question 14

Refer to the provided graph. If the firm is producing at Q ₁, the area 0 BEQ ₁ represents

Accepted Answer

A)  total costs.
B)  total variable costs.
C)  total fixed costs.
D)  average variable costs.E) A) and D)
F) A) and C)

Question 15

The long run is a period of time, or a time frame, in which

Accepted Answer

A)  all resources are fixed in quantity.
B)  the level of output is variable.
C)  the amount of all resources can be varied.
D)  the capacity of the production plant is fixed.E) A) and B)
F) None of the above

Question 16

An explicit cost is

Accepted Answer

A)  omitted when accounting profits are calculated.
B)  a money payment made for resources not owned by the firm itself.
C)  an implicit cost to the resource owner who receives that payment.
D)  always in excess of a resource's opportunity cost.E) A) and C)
F) C) and D)

Question 17

If start-up firms can quickly shift the short-run cost curves up and to the left, they would improve their chances of becoming profitable.

Accepted Answer

A) True 
 B)False

Question 18

Implicit and explicit costs are different in that

Accepted Answer

A)  explicit costs are opportunity costs; implicit costs are not.
B)  implicit costs are opportunity costs; explicit costs are not.
C)  the latter refer to nonexpenditure costs and the former to monetary payments.
D)  the former refer to nonexpenditure costs and the latter to monetary payments.E) A) and D)
F) None of the above

Question 19

The main difference between the short run and the long run is that

Accepted Answer

A)  firms earn zero profits in the long run.
B)  the long run always refers to a time period of one year or longer.
C)  in the short run, some inputs are fixed and some are variable.
D)  in the long run, all inputs are fixed.E) B) and C)
F) None of the above

Question 20

In the diagram, curves 1, 2, and 3 represent

Accepted Answer

A)  average fixed cost, average variable cost, and average total cost respectively.
B)  total variable cost, total fixed cost, and total cost respectively.
C)  total fixed cost, total variable cost, and total cost respectively.
D)  marginal product, average variable cost, and average total cost respectively.E) B) and C)
F) A) and B)

Exam 9: Businesses and the Costs of Production

The main difference between the short run and the long run is that

Correct Answer
verified

In the diagram, curves 1, 2, and 3 represent

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Refer to the diagram. This firm's average fixed costs

Correct Answer
verified

Refer to the provided graph. If the firm is producing at Q ₁, the area 0 BEQ ₁ represents

Correct Answer
verified

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by 8 percent. This means that initially it was producing

Correct Answer
verified

In the long run, a firm will choose a plant size that has the

Correct Answer
verified

What is the relationship between marginal cost and marginal product?

Correct Answer
verified
The MC curve is a mirror reflection of t...
View Answer

An explicit cost is

Correct Answer
verified

If a firm doubles its resource inputs and as a result output triples, then the long-run average cost curve must be upward-sloping.

Correct Answer
verified

If marginal cost exceeds average total cost in the short run, then which is likely to be true?

Correct Answer
verified

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs

Correct Answer
verified

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. Economies of scale in plant ATC-A are realized over the _ to _ levels of output; diseconomies of scale exist over the _ to _ levels of output.

Correct Answer
verified

Which of the following is an example of a sunk cost, as it relates to a firm?

Correct Answer
verified

If start-up firms can quickly shift the short-run cost curves up and to the left, they would improve their chances of becoming profitable.

Correct Answer
verified

Implicit and explicit costs are different in that

Correct Answer
verified

The total output of a firm will be at a maximum where

Correct Answer
verified

Correct Answer
verified

The long run is a period of time, or a time frame, in which

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

The main difference between the short run and the long run is that

Correct AnswerverifiedShow Answer

In the diagram, curves 1, 2, and 3 represent

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the diagram. This firm's average fixed costs

Correct AnswerverifiedShow Answer

Refer to the provided graph. If the firm is producing at Q ₁, the area 0 BEQ ₁ represents

Correct AnswerverifiedShow Answer

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by 8 percent. This means that initially it was producing

Correct AnswerverifiedShow Answer

In the long run, a firm will choose a plant size that has the

Correct AnswerverifiedShow Answer

What is the relationship between marginal cost and marginal product?

Correct AnswerverifiedThe MC curve is a mirror reflection of t...View AnswerShow Answer

An explicit cost is

Correct AnswerverifiedShow Answer

If a firm doubles its resource inputs and as a result output triples, then the long-run average cost curve must be upward-sloping.

Correct AnswerverifiedShow Answer

If marginal cost exceeds average total cost in the short run, then which is likely to be true?

Correct AnswerverifiedShow Answer

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs

Correct AnswerverifiedShow Answer

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. Economies of scale in plant ATC-A are realized over the ___ to ___ levels of output; diseconomies of scale exist over the ___ to ___ levels of output.

Correct AnswerverifiedShow Answer

Which of the following is an example of a sunk cost, as it relates to a firm?

Correct AnswerverifiedShow Answer

If start-up firms can quickly shift the short-run cost curves up and to the left, they would improve their chances of becoming profitable.

Correct AnswerverifiedShow Answer

Implicit and explicit costs are different in that

Correct AnswerverifiedShow Answer

The total output of a firm will be at a maximum where

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The long run is a period of time, or a time frame, in which

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The MC curve is a mirror reflection of t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. Economies of scale in plant ATC-A are realized over the _ to _ levels of output; diseconomies of scale exist over the _ to _ levels of output.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified