Question 1

The law of diminishing marginal returns states that as ever larger amounts of a variable input are combined with

Accepted Answer

A)  fixed inputs, the marginal physical product of the variable input rises.
B)  other variable inputs, the marginal physical product of the variable input declines.
C)  fixed inputs, eventually the marginal physical product of the variable input declines.
D)  other variable inputs, eventually the marginal physical product of the variable input declines.

Question 2

Exhibit 21-5 ​

Refer to Exhibit 21-5. Economies of scale are present between

Accepted Answer

A)  points A and B.
B)  points A and C.
C)  points B and C.
D)  points B and D.
E)  points C and D.

Question 3

Which of the following statements is true?

Accepted Answer

A)  The short run is always somewhere between six and twelve months.
B)  In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.
C)  The long run is any period of time over one year.
D)  In the short run, there are variable costs but no fixed costs.

Question 4

Exhibit 21-2  Refer to Exhibit 21-2. The dollar amounts that go in blanks (C) and (D) , respectively, are

Accepted Answer

A)  $10.00 and $1.00.
B)  $30.00 and $34.00.
C)  $3.00 and $4.00.
D)  $6.67 and $10.00.
E)  $1.00 and $1.50.

Question 5

There is a monitorless team (firm) of 10 persons. The 10 persons agree to work together and split the revenue (they earn) equally. In this setting, the cost of shirking to an individual is

Accepted Answer

A)  higher than it would be if the individual worked alone.
B)  the same as it would be if the individual worked alone.
C)  lower than it would be if the individual worked alone.
D)  necessarily greater than the benefits of shirking.
E)  necessarily less than the benefits of shirking.

Question 6

Economists predict that the __________ the cost of shirking to an individual, __________ shirking that the individual will undertake, ceteris paribus .

Accepted Answer

A)  lower; there will be no impact on the
B)  higher; the less
C)  lower; the more
D)  higher; the more

Question 7

If the wage rate is constant and diminishing marginal returns have already set in, then

Accepted Answer

A)  the wage rate must increase.
B)  marginal cost increases.
C)  marginal cost decreases.
D)  the wage rate must decrease.

Question 8

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.

Question 9

A rising marginal cost curve is a reflection of a

Accepted Answer

A)  rising marginal physical product curve.
B)  falling marginal physical product curve.
C)  falling average fixed cost curve.
D)  rising average variable cost curve.

Question 10

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; lower

Question 11

Suppose a given marginal cost curve starts out downward sloping and at some level of output turns upward and becomes upward sloping. The point at which it turns upward is the point at which

Accepted Answer

A)  marginal physical product increases.
B)  total cost rises.
C)  average fixed cost declines.
D)  average variable cost is below marginal cost.
E)  diminishing marginal returns set in.

Question 12

Economies of scale, constant returns to scale and diseconomies of scale account for the shape of the __________ cost curve.

Accepted Answer

A)  average variable
B)  average fixed
C)  long-run average total
D)  short-run average total
E)  marginal

Question 13

Exhibit 21-7  Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is

Accepted Answer

A)  $85.00.
B)  $12.14.
C)  $21.00.
D)  $5.00.

Question 14

One of the roles of the monitor in a firm is to reduce shirking.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 21-4 ​

Refer to Exhibit 21-4. Curve A is a(n) __________ cost curve.

Accepted Answer

A)  marginal
B)  average variable
C)  average total
D)  average fixed

Question 16

One of the reasons why economies of scale exist is that the opportunity for labor specialization tends to increase as the size of the firm grows.

Accepted Answer

A) True 
 B)False

Question 17

Situation 21-1 Diane's Donuts will begin selling donuts next week. Diane figures that the average variable cost to make each donut will be constant at $0.30. She has already paid $20,000 for the donut-making machinery and one year's rent.
Refer to Situation 21-l. What will Diane's total costs be if she sells 2,500 donuts in her first week and then goes out of business?

Accepted Answer

A)  $20,750
B)  $10,950
C)  $20,880
D)  $30,500

Question 18

Exhibit 21-11  Refer to Exhibit 21-11. Average variable 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.

Question 19

Economic profit is the difference between total revenue and

Accepted Answer

A)  explicit costs.
B)  implicit costs.
C)  sunk costs.
D)  the sum of explicit and implicit costs.

Question 20

Situation 21-4
Joe is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. During the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year.Refer to Situation 21-4.  What are Joe's economic profits?

Accepted Answer

A)  $0
B)  $25,000
C)  -$25,000
D)  $40,000
E)  $75,000

Exam 8: Production and Costs

Exhibit 21-7 Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is

Correct Answer
verified

Correct Answer
verified

One of the reasons why economies of scale exist is that the opportunity for labor specialization tends to increase as the size of the firm grows.

Correct Answer
verified

There is a monitorless team (firm) of 10 persons. The 10 persons agree to work together and split the revenue (they earn) equally. In this setting, the cost of shirking to an individual is

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Economies of scale are said to exist when

Correct Answer
verified

Exhibit 21-4 Refer to Exhibit 21-4. Curve A is a(n) __________ cost curve.

Correct Answer
verified

One of the roles of the monitor in a firm is to reduce shirking.

Correct Answer
verified

Economies of scale, constant returns to scale and diseconomies of scale account for the shape of the __________ cost curve.

Correct Answer
verified

Exhibit 21-5 Refer to Exhibit 21-5. Economies of scale are present between

Correct Answer
verified

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

Correct Answer
verified

Exhibit 21-2 Refer to Exhibit 21-2. The dollar amounts that go in blanks (C) and (D) , respectively, are

Correct Answer
verified

Correct Answer
verified

Suppose a given marginal cost curve starts out downward sloping and at some level of output turns upward and becomes upward sloping. The point at which it turns upward is the point at which

Correct Answer
verified

The law of diminishing marginal returns states that as ever larger amounts of a variable input are combined with

Correct Answer
verified

Economists predict that the the cost of shirking to an individual, shirking that the individual will undertake, ceteris paribus .

Correct Answer
verified

A rising marginal cost curve is a reflection of a

Correct Answer
verified

Economic profit is the difference between total revenue and

Correct Answer
verified

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

Correct Answer
verified

If the wage rate is constant and diminishing marginal returns have already set in, then

Correct Answer
verified

Exam 8: Production and Costs

Exhibit 21-7 Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the reasons why economies of scale exist is that the opportunity for labor specialization tends to increase as the size of the firm grows.

Correct AnswerverifiedShow Answer

There is a monitorless team (firm) of 10 persons. The 10 persons agree to work together and split the revenue (they earn) equally. In this setting, the cost of shirking to an individual is

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Economies of scale are said to exist when

Correct AnswerverifiedShow Answer

Exhibit 21-4 ​ Refer to Exhibit 21-4. Curve A is a(n) __________ cost curve.

Correct AnswerverifiedShow Answer

One of the roles of the monitor in a firm is to reduce shirking.

Correct AnswerverifiedShow Answer

Economies of scale, constant returns to scale and diseconomies of scale account for the shape of the __________ cost curve.

Correct AnswerverifiedShow Answer

Exhibit 21-5 ​ Refer to Exhibit 21-5. Economies of scale are present between

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Exhibit 21-2 Refer to Exhibit 21-2. The dollar amounts that go in blanks (C) and (D) , respectively, are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a given marginal cost curve starts out downward sloping and at some level of output turns upward and becomes upward sloping. The point at which it turns upward is the point at which

Correct AnswerverifiedShow Answer

The law of diminishing marginal returns states that as ever larger amounts of a variable input are combined with

Correct AnswerverifiedShow Answer

Economists predict that the __________ the cost of shirking to an individual, __________ shirking that the individual will undertake, ceteris paribus .

Correct AnswerverifiedShow Answer

A rising marginal cost curve is a reflection of a

Correct AnswerverifiedShow Answer

Economic profit is the difference between total revenue and

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the wage rate is constant and diminishing marginal returns have already set in, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 21-4 Refer to Exhibit 21-4. Curve A is a(n) __________ cost curve.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 21-5 Refer to Exhibit 21-5. Economies of scale are present between

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Economists predict that the the cost of shirking to an individual, shirking that the individual will undertake, ceteris paribus .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified