Question 1

Scarlett recently began running her husband's lumber mill. Last month, the mill made a revenue of $5,000 and paid $3,400 in out-of-pocket costs. The lumber mill made an economic profit of $1,600 last month.

Accepted Answer

A) True 
 B)False

Question 2

An example of an implicit cost of production is:

Accepted Answer

A)  the cost of leather used in manufacturing furniture.
B)  the cost of space in someone's home that is used as his or her home office
C)  the wage paid to a high school student who works in a fast-food restaurant
D)  the cost of milk bought by household consumers
E)  the wage of a high school teacher who provides tuitions to his students after school hours.

Question 3

The figure below shows the cost curves faced by an industry. Based on the figure, B represents _____.Figure 6-3

Accepted Answer

A)  the total fixed cost curve
B)  the marginal cost curve
C)  the average fixed cost curve
D)  the average fixed cost curve.
E)  the average variable cost curve

Question 4

A difference between the long run and the short run is that:

Accepted Answer

A)  a firm is unable to vary some of its factors of production in the short run, while all the factors of production are variable in the long run.
B)  a firm is able to expand output by utilizing additional workers, raw materials, and physical capital in the short run, while it is impossible to hire additional workers or add raw materials to expand output in the long run.
C)  the short run is generally a period of one year, while the long run is a fixed period of 5 years for all firms across industries.
D)  the short run is of sufficient length to allow a firm to transform economic losses into economic profits, while the long run is too short to turn economic losses into economic profits.
E)  sunk costs are incurred in the short run, while they are not incurred in the long run.

Question 5

If Randy's fixed cost totals $800 and the variable cost per unit is $10 for 100 units, his average total cost equals _____.​

Accepted Answer

A)  $8.10
B)  $18.00
C)  $90.00
D)  $91.00
E)  $81.00

Question 6

The change in total cost resulting from a one-unit increase in production is called:

Accepted Answer

A)  total fixed cost
B)  average variable cost.
C)  marginal cost.
D)  external cost.
E)  social cost.

Question 7

An economic profit of zero indicates a satisfactory situation for a firm.

Accepted Answer

A) True 
 B)False

Question 8

The figure below shows how the quantity of bicycles produced per week varies with the number of workers employed per week. Based on the figure, marginal product diminishes when the _____ is hiredFigure 6-1

Accepted Answer

A)  first worker
B)  second worker
C)  third worker
D)  fourth worker
E)  fifth worker

Question 9

When a firm makes zero economic profit, it means that:​

Accepted Answer

A)  When a firm makes zero economic profit, it means that:
B)  the firm is covering the total opportunity costs of its resources.
C)  the firm is covering its entire explicit costs but not its explicit costs.
D)  the firm is not covering its opportunity costs and therefore is running at a loss.
E)  the firm's social marginal benefit is greater than its social marginal cost.

Question 10

When economies of scale exist, an increase in the level of output will lead to:

Accepted Answer

A)  a decrease in cost per unit
B)  an increase in cost per unit.
C)  a decrease in total cost.
D)  a decrease in profit per unit.
E)  a decrease in total revenue.

Question 11

The per-unit cost of total output is known as _____.​

Accepted Answer

A)  average total cost
B)  external cost
C)  social marginal cost
D)  total fixed cost
E)  private marginal cost

Question 12

When economic profits in an industry are zero and implicit costs are positive, _____.

Accepted Answer

A)  accounting profits will be greater than zero
B)  the firm will be running at a loss
C)  accounting profits will be negative
D)  the firm's revenue will not be enough to compensate for its losses, and it will to go out of business
E)  accounting profits will be equal to economic profits

Question 13

David was taken to a concert by his friend who promised it would be very good. David paid for his own ticket. However, David did not like the concert and left before it ended. Therefore, David incurred a(n)  _____ in buying the ticket

Accepted Answer

A)  private cost
B)  explicit cost
C)  explicit cost.
D)  implicit cost
E)  sunk cost

Question 14

When long-run average total cost does not change as output varies, firms experience constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 15

The table below shows how a factory's output varies with the number of workers employed each week. Based on the table, the marginal product of the fifth worker hired is:Table 6-3

Accepted Answer

A)  112 units of output
B)  94 units of output.
C)  20 units of output.
D)  18 units of output.
E)  30 units of output.

Question 16

The table below shows the number of oranges picked by different pickers. Based on the table, the total output of labor diminishes with the addition of the _____ picker.Table 6-2  ​

Accepted Answer

A)  fifth
B)  seventh
C)  eighth
D)  ninth​
E)  fourth

Question 17

Lintell Inc. earned a total revenue of $10 million for the financial year 2013-14. The company incurred a total cost of $6.9 million. Lintell Inc. earned a profit of:​

Accepted Answer

A)  $3.1 million
B)  $3.9 million.
C)  $4.5 million.
D)  $6 million.
E)  $5.3 million.

Question 18

An implicit cost is:

Accepted Answer

A)  an opportunity cost to a firm.
B)  an out-of-pocket expense for a firm.
C)  always included by an accountant while calculating profits
D)  a cost that does not affect future business decisions.
E)  always larger than explicit costs.

Question 19

The long run:

Accepted Answer

A)  is a period long enough for every input except plant size to be varied.
B)  is a period in which there are no fixed costs.
C)  is typically a period of two years
D)  is fixed for all firms across all industries.
E)  is a period in which output cannot be varied.

Question 20

Economic profits are calculated after taking into account:​

Accepted Answer

A)  explicit costs but not implicit costs.
B)  implicit costs but not explicit costs.
C)  both implicit and explicit costs.
D)  only sunk costs.
E)  only external costs.

Exam 6: Production and Costs

The table below shows the number of oranges picked by different pickers. Based on the table, the total output of labor diminishes with the addition of the _____ picker.Table 6-2 ​

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The figure below shows the cost curves faced by an industry. Based on the figure, B represents _____.Figure 6-3

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The long run:

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Lintell Inc. earned a total revenue of $10 million for the financial year 2013-14. The company incurred a total cost of $6.9 million. Lintell Inc. earned a profit of:​

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Scarlett recently began running her husband's lumber mill. Last month, the mill made a revenue of $5,000 and paid $3,400 in out-of-pocket costs. The lumber mill made an economic profit of $1,600 last month.

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When a firm makes zero economic profit, it means that:​

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When economies of scale exist, an increase in the level of output will lead to:

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If Randy's fixed cost totals $800 and the variable cost per unit is $10 for 100 units, his average total cost equals _____.​

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When economic profits in an industry are zero and implicit costs are positive, _____.

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The change in total cost resulting from a one-unit increase in production is called:

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The table below shows how a factory's output varies with the number of workers employed each week. Based on the table, the marginal product of the fifth worker hired is:Table 6-3

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An implicit cost is:

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The per-unit cost of total output is known as _____.​

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When long-run average total cost does not change as output varies, firms experience constant returns to scale.

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Economic profits are calculated after taking into account:​

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A difference between the long run and the short run is that:

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The figure below shows how the quantity of bicycles produced per week varies with the number of workers employed per week. Based on the figure, marginal product diminishes when the _____ is hiredFigure 6-1

Correct AnswerverifiedShow Answer

An economic profit of zero indicates a satisfactory situation for a firm.

Correct AnswerverifiedShow Answer

An example of an implicit cost of production is:

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David was taken to a concert by his friend who promised it would be very good. David paid for his own ticket. However, David did not like the concert and left before it ended. Therefore, David incurred a(n) _____ in buying the ticket

Correct AnswerverifiedShow Answer

The table below shows the number of oranges picked by different pickers. Based on the table, the total output of labor diminishes with the addition of the _____ picker.Table 6-2

Correct Answer
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Lintell Inc. earned a total revenue of $10 million for the financial year 2013-14. The company incurred a total cost of $6.9 million. Lintell Inc. earned a profit of:

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When a firm makes zero economic profit, it means that:

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If Randy's fixed cost totals $800 and the variable cost per unit is $10 for 100 units, his average total cost equals _____.

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The per-unit cost of total output is known as _____.

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Economic profits are calculated after taking into account:

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