Question 1

The long run is a period of time:

Accepted Answer

A)   that is too short to change the size of a firm's plant.
B)   that is long enough to permit changes in all the firm's inputs, both fixed and variable.
C)   in which production occurs beyond one year.
D)   in which production occurs beyond five years.E) B) and D)
F) A) and B)

Question 2

Which of the following is an example of a fixed input?

Accepted Answer

A)   The acreage of a farmer's land.
B)   Machinery.
C)   The size of a firm's plant.
D)   All of these.E) None of the above
F) B) and D)

Question 3

For a typical firm, the long-run average total cost curve:

Accepted Answer

A)   is tangent to the minimum point of each possible short-run average total cost curves.
B)   is tangent to each possible short-run average total cost curve at one point.
C)   intersects each possible short-run average total cost curve at two points.
D)   passes through the minimum points of all possible short-run average total cost curves.E) All of the above
F) None of the above

Question 4

Which of the following best describes the law of diminishing returns?

Accepted Answer

A)   The principle that beyond some point the marginal product decreases as additional units of a variable factor (ex: labor)  are added to a fixed factor (ex: a restaurant kitchen) .
B)   The concept that as a person consumes more and more of a good, such as pizza slices, that the marginal utility from each additional slice will decline.
C)   The empirical fact that the profitability of firms declines in the long run due to increasing competition.
D)   None of the above.E) B) and D)
F) A) and D)

Question 5

The law of diminishing marginal returns implies that, in the short run:

Accepted Answer

A)   output must fall beyond a certain point.
B)   price must fall beyond a certain point.
C)   the marginal product of the variable input must eventually decrease.
D)   wages of workers must eventually increase.
E)   total cost must fall beyond a certain point.F) B) and C)
G) A) and E)

Question 6

Exhibit 7-14 Cost curves 
-In Exhibit 7-14, constant returns to scale only exist for output levels between:

Accepted Answer

A)   0 and 1,000.
B)   1,000 and 2,000.
C)   2,000 and 3,000.
D)   3,000 and 4,000.
E)   4,000 and infinity.F) A) and E)
G) A) and D)

Question 7

Payments to nonowners of a firm are called:

Accepted Answer

A)   implicit costs.
B)   accounting costs.
C)   explicit costs.
D)   economic costs.E) None of the above
F) A) and B)

Question 8

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

Accepted Answer

A)   negative response.
B)   inverse return to labor.
C)   diminishing returns.
D)   demand.E) B) and C)
F) A) and D)

Question 9

Exhibit 7-17 Long-run average cost curve 1 units. B)  Q2 units. C)  Q3 units. D)  Q4 units." class="answers-bank-image d-inline" rel="preload" >
-In Exhibit 7-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

Accepted Answer

A)   Q1 units.
B)   Q2 units.
C)   Q3 units.
D)   Q4 units.E) A) and B)
F) B) and C)

Question 10

The minimum point on the marginal cost curve corresponds to the:

Accepted Answer

A)   maximum point on the total cost curve.
B)   minimum point on the total cost curve.
C)   inflection point on the total variable cost curve.
D)   midpoint of the total cost curve.E) All of the above
F) B) and C)

Question 11

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

Accepted Answer

A)   the firm should try to produce less output.
B)   total fixed costs are constant along the LRAC curve.
C)   there are economies of scale.
D)   the firm is probably having significant management problems.
E)   when output is doubled, total costs are doubled.F) All of the above
G) A) and B)

Question 12

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing a sixth unit is $5.

Accepted Answer

A) True 
 B)False

Question 13

Explicit costs would include:

Accepted Answer

A)   rent.
B)   the interest loss of the business owner on money withdrawn from his/her saving account and invested in the business.
C)   the loss of rent on a building the business owner owns and uses in his/her business.
D)   the opportunity costs of the business owner's time.
E)   the use of tools owned by the business owner and dedicated to the business.F) B) and D)
G) A) and D)

Question 14

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of: ​

Accepted Answer

A)   ​negative response.
B)   ​inverse return to labor.
C)   ​diminishing returns.
D)   ​demand.E) A) and D)
F) C) and D)

Question 15

In the long run, total fixed cost:

Accepted Answer

A)   falls.
B)   rises.
C)   is constant.
D)   does not exist.E) A) and C)
F) C) and D)

Question 16

Exhibit 7-8 Costs schedules for producing pizza   Pizzas  Fixed  Cost  Variable  Cost  Total  Cost  Marginal  Cost 0$$$$1521331041001405206857215\begin{array}{|c|c|c|c|c|}\hline	ext { Pizzas } & \begin{array}{c}	ext { Fixed } \	ext { Cost }\end{array} & \begin{array}{c}	ext { Variable } \	ext { Cost }\end{array} & \begin{array}{c}	ext { Total } \	ext { Cost }\end{array} & \begin{array}{c}	ext { Marginal } \	ext { Cost }\end{array} \\hline 0 & \$ & \$ & \$ & \$ \1 & & 5 & & \2 & & 13 & & \3 & & && 10 \4 & 100 & &140 & \5 & & &&20 \6 & &85 & & \7 & & & 215 \\hline\end{array} Pizzas 01234567​ Fixed  Cost ​$100​ Variable  Cost ​$51385​ Total  Cost ​$140215​ Marginal  Cost ​$1020​​ 
-By filling in the blanks in Exhibit 7-8, the average variable cost of producing 4 pizzas is shown to be equal to:

Accepted Answer

A)   $10.
B)   $15.
C)   $20.
D)   $40.
E)   $85. F) C) and D)
G) B) and C)

Question 17

The total fixed cost curve:

Accepted Answer

A)   varies with the quantity of inputs used.
B)   decreases with output.
C)   increases with output.
D)   remains constant regardless of output.E) B) and C)
F) A) and B)

Question 18

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Accepted Answer

A)   The tax payments on property owned by the firm.
B)   The wages paid to the 12 employees.
C)   The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees.
D)   The accounting services provided free of charge to the firm by Paul's wife, who is an accountant.E) A) and B)
F) C) and D)

Question 19

Exhibit 7-1 Production of pizza data   Workers  Pizzas 0014210315418519\begin{array} { | c | c | } \hline 	ext { Workers } & 	ext { Pizzas } \\hline 0 & 0 \1 & 4 \2 & 10 \3 & 15 \4 & 18 \5 & 19 \\hline\end{array} Workers 012345​ Pizzas 0410151819​​ 
-Exhibit 7-1 shows the change in the short-run production of pizzas as more workers are hired. The table shows the marginal product of the labor input is decreasing with the hiring of the third worker. A possible reason for this diminishing marginal product is:

Accepted Answer

A)   decreased wages.
B)   increases in plant size.
C)   decreases in fixed cost.
D)   increased division of labor as additional workers are hired.
E)   decreases in labor productivity. F) B) and D)
G) A) and D)

Question 20

Exhibit 7-12 Cost schedule for producing pizza   Pizzas  Fixed  Cost  Variable  Cost  Total  Cost 0$$$148217327478540664780\begin{array} { | c | c | c | c | } \hline 	ext { Pizzas } & \begin{array} { c } 	ext { Fixed } \	ext { Cost }\end{array} & \begin{array} { c } 	ext { Variable } \	ext { Cost }\end{array} & \begin{array} { c } 	ext { Total } \	ext { Cost }\end{array} \\hline 0 & \$ & \$ & \$ \1 &&&48 \2 &&17  \3 &&27 \4 &&&78  \5 &40 \6 &&64 \7 &&80\\hline\end{array} Pizzas 01234567​ Fixed  Cost ​$40​ Variable  Cost ​$17276480​ Total  Cost ​$4878​​ 
-By filling in the blanks in Exhibit 7-12, the ATC of 3 pizzas is shown to be equal to:

Accepted Answer

A)   $10.
B)   $13.33.
C)   $9.
D)   $22.33.
E)   $40. F) None of the above
G) C) and E)

Exam 7: Production Costs

For a typical firm, the long-run average total cost curve:

Correct Answer
verified

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

Correct Answer
verified

Correct Answer
verified

The long run is a period of time:

Correct Answer
verified

The total fixed cost curve:

Correct Answer
verified

Payments to nonowners of a firm are called:

Correct Answer
verified

Correct Answer
verified

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

Correct Answer
verified

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

Correct Answer
verified

In the long run, total fixed cost:

Correct Answer
verified

Exhibit 7-17 Long-run average cost curve -In Exhibit 7-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

Correct Answer
verified

Which of the following is an example of a fixed input?

Correct Answer
verified

Exhibit 7-14 Cost curves -In Exhibit 7-14, constant returns to scale only exist for output levels between:

Correct Answer
verified

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing a sixth unit is $5.

Correct Answer
verified

Explicit costs would include:

Correct Answer
verified

Which of the following best describes the law of diminishing returns?

Correct Answer
verified

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Correct Answer
verified

The law of diminishing marginal returns implies that, in the short run:

Correct Answer
verified

The minimum point on the marginal cost curve corresponds to the:

Correct Answer
verified

Correct Answer
verified

Exam 7: Production Costs

For a typical firm, the long-run average total cost curve:

Correct AnswerverifiedShow Answer

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The long run is a period of time:

Correct AnswerverifiedShow Answer

The total fixed cost curve:

Correct AnswerverifiedShow Answer

Payments to nonowners of a firm are called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of: ​

Correct AnswerverifiedShow Answer

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

Correct AnswerverifiedShow Answer

In the long run, total fixed cost:

Correct AnswerverifiedShow Answer

Exhibit 7-17 Long-run average cost curve -In Exhibit 7-17, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week?

Correct AnswerverifiedShow Answer

Which of the following is an example of a fixed input?

Correct AnswerverifiedShow Answer

Exhibit 7-14 Cost curves -In Exhibit 7-14, constant returns to scale only exist for output levels between:

Correct AnswerverifiedShow Answer

If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing a sixth unit is $5.

Correct AnswerverifiedShow Answer

Explicit costs would include:

Correct AnswerverifiedShow Answer

Which of the following best describes the law of diminishing returns?

Correct AnswerverifiedShow Answer

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Correct AnswerverifiedShow Answer

The law of diminishing marginal returns implies that, in the short run:

Correct AnswerverifiedShow Answer

The minimum point on the marginal cost curve corresponds to the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified