Question 1

Which of the following is a short-run adjustment?

Accepted Answer

A)   A local bakery hires two additional bakers.
B)   Six new firms enter the plastics industry.
C)   The number of farms in the United States declines by 5 percent.
D)   BMW constructs a new assembly plant in South Carolina.E) B) and C)
F) None of the above

Question 2

Diseconomies of scale arise primarily because

Accepted Answer

A)   the short-run average total cost curve rises when marginal product is increasing.
B)   of the difficulties involved in managing and coordinating a large business enterprise.
C)   firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available.
D)   beyond some point, marginal product declines as additional units of a variable resource (labor)  are added to a fixed resource (capital) .E) B) and C)
F) A) and C)

Question 3

Chris is preparing for a comprehensive course exam by reading a textbook with chapters of equal length and difficulty. The number of chapters she can comprehend and master when studying is: (1)  hour one, 1.5 chapters; (2)  hour two, 2.0 chapters; (3)  hour three, 1.5 chapters; (4)  hour four, 1 chapter; (5)  hour five, 0 chapters. Diminishing marginal returns to studying sets in for Chris after hour

Accepted Answer

A)   one.
B)   two.
C)   four.
D)   five.E) B) and D)
F) All of the above

Question 4

Use the following data to answer the question.   Inputs of Labor  Total Product 0018218325430533634732\begin{array} { | c | c | } \hline 	ext { Inputs of Labor } & 	ext { Total Product } \\hline 0 & 0 \\hline 1 & 8 \\hline 2 & 18 \\hline 3 & 25 \\hline 4 & 30 \\hline 5 & 33 \\hline 6 & 34 \\hline 7 & 32 \\hline\end{array} Inputs of Labor 01234567​ Total Product 08182530333432​​  The average product (AP)  when two units of labor are hired is

Accepted Answer

A)   8.
B)   9.
C)   10.
D)   18. E) None of the above
F) B) and D)

Question 5

Economic profits are

Accepted Answer

A)   always larger than accounting profits.
B)   the sum of accounting profits and implicit costs.
C)   equal to the difference between total revenues and implicit costs.
D)   equal to the difference between accounting profits and implicit costs.E) A) and B)
F) All of the above

Question 6

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

Accepted Answer

A)   profits were $100,000 and its economic profits were $0.
B)   losses were $500,000 and its economic losses were $0.
C)   profits were $500,000 and its economic profits were $1 million.
D)   profits were $0 and its economic losses were $500,000.E) None of the above
F) A) and B)

Question 7

Use the following data to answer the question.   Inputs of Labor  Total Product 0018218325430533634732\begin{array} { | c | c | } \hline 	ext { Inputs of Labor } & 	ext { Total Product } \\hline 0 & 0 \\hline 1 & 8 \\hline 2 & 18 \\hline 3 & 25 \\hline 4 & 30 \\hline 5 & 33 \\hline 6 & 34 \\hline 7 & 32 \\hline\end{array} Inputs of Labor 01234567​ Total Product 08182530333432​​  Marginal product becomes negative with the hiring of the unit of labor.

Accepted Answer

A)   third
B)   fourth
C)   sixth
D)   seventh E) All of the above
F) C) and D)

Question 8

Diseconomies of scale are caused by the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 9

As output increases, average fixed costs

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   first increase and then decrease.E) None of the above
F) All of the above

Question 10

The question is based on the following table, which provides information on the production of a product that requires one variable input.  With the addition of the second unit of input, the marginal product is

Accepted Answer

A)   15 and the average product is 20.
B)   25 and the average product is 10.
C)   15 and the average product is 10.
D)   10 and the average product is 15.E) A) and B)
F) B) and D)

Question 11

Assume a firm closes down in the short run and produces no output. Under these conditions,

Accepted Answer

A)   TVC is positive, but TFC and TC are zero.
B)   TFC is positive, but TVC and TC are zero.
C)   TFC and TC are positive, but TVC is zero.
D)   TFC, TVC, and TC will all be positive.E) None of the above
F) C) and D)

Question 12

If the price of labor or some other variable resource decreased, the

Accepted Answer

A)   AVC curve would shift upward.
B)   AFC curve would shift downward.
C)   AFC curve would shift upward.
D)   MC curve would shift downward.E) A) and C)
F) None of the above

Question 13

The law of diminishing returns only applies in cases where

Accepted Answer

A)   there is increasing scarcity of factors of production.
B)   the price of extra units of a factor is increasing.
C)   there is at least one fixed factor of production.
D)   capital is a variable input.E) A) and B)
F) All of the above

Question 14

When marginal cost is increasing,

Accepted Answer

A)   total cost must be increasing.
B)   average total cost must be increasing.
C)   average total cost must be decreasing.
D)   average fixed cost might be increasing or decreasing.E) A) and D)
F) None of the above

Question 15

A natural monopoly is characterized by

Accepted Answer

A)   collusion with other competitors to divide up the market.
B)   a decreasing average-cost curve extending beyond the market's size.
C)   a firm protected from competition by a government regulation.
D)   a firm having control over the entire supply of a basic input in the production process.E) B) and D)
F) B) and C)

Question 16

(Consider This)  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) None of the above
F) B) and C)

Question 17

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

Accepted Answer

A)   200 units.
B)   400 units.
C)   800 units.
D)   1,600 units.E) None of the above
F) C) and D)

Question 18

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non labor resources are fixed.   Nuriber of Warkers  Units of Output 001402903126415051656180\begin{array} { |c | c| } \hline 	ext { Nuriber of Warkers } & 	ext { Units of Output } \\hline 0 & 0 \\hline 1 & 40 \\hline 2 & 90 \\hline 3 & 126 \\hline 4 & 150 \\hline 5 & 165 \\hline 6 & 180 \\hline\end{array} Nuriber of Warkers 0123456​ Units of Output 04090126150165180​​  The marginal product of the sixth worker is

Accepted Answer

A)   180 units of output.
B)   30 units of output.
C)   15 units of output.
D)   negative. E) B) and C)
F) All of the above

Question 19

Answer the question on the basis of the following information.   Nurrber of  T otal Product  Margirial Product  Workers 00−⋯18821032543053634\begin{array}{|c|c|c|}\hline 	ext { Nurrber of } & 	ext { T otal Product } & 	ext { Margirial Product } \\hline 	ext { Workers } & &  \\hline 0 & 0 & -\cdots \\hline 1 & 8 & 8 \\hline 2 & & 10 \\hline 3 & 25 & \\hline 4 & 30 & \\hline 5 & & 3 \\hline 6 & 34 & \\hline\end{array} Nurrber of  Workers 0123456​ T otal Product 08253034​ Margirial Product −⋯8103​​  The marginal product of the fourth worker

Accepted Answer

A)   is 5.
B)   is 7. 
C)    is 71/2.
D)   cannot be calculated from the information given. E) B) and C)
F) A) and D)

Question 20

If long-run average total cost decreases as output increases, this is due to

Accepted Answer

A)   declining average fixed costs.
B)   the law of diminishing returns.
C)   economies of scale.
D)   externalities.E) None of the above
F) C) and D)

Exam 9: Businesses and the Costs of Production

As output increases, average fixed costs

Correct Answer
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Diseconomies of scale are caused by the law of diminishing marginal returns.

Correct Answer
verified

Correct Answer
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Economic profits are

Correct Answer
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Diseconomies of scale arise primarily because

Correct Answer
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Assume a firm closes down in the short run and produces no output. Under these conditions,

Correct Answer
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If the price of labor or some other variable resource decreased, the

Correct Answer
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Correct Answer
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Which of the following is a short-run adjustment?

Correct Answer
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Correct Answer
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A natural monopoly is characterized by

Correct Answer
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When marginal cost is increasing,

Correct Answer
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The law of diminishing returns only applies in cases where

Correct Answer
verified

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If long-run average total cost decreases as output increases, this is due to

Correct Answer
verified

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

Correct Answer
verified

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

Correct Answer
verified

The question is based on the following table, which provides information on the production of a product that requires one variable input. With the addition of the second unit of input, the marginal product is

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

As output increases, average fixed costs

Correct AnswerverifiedShow Answer

Diseconomies of scale are caused by the law of diminishing marginal returns.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economic profits are

Correct AnswerverifiedShow Answer

Diseconomies of scale arise primarily because

Correct AnswerverifiedShow Answer

Assume a firm closes down in the short run and produces no output. Under these conditions,

Correct AnswerverifiedShow Answer

If the price of labor or some other variable resource decreased, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a short-run adjustment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A natural monopoly is characterized by

Correct AnswerverifiedShow Answer

When marginal cost is increasing,

Correct AnswerverifiedShow Answer

The law of diminishing returns only applies in cases where

Correct AnswerverifiedShow Answer

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If long-run average total cost decreases as output increases, this is due to

Correct AnswerverifiedShow Answer

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The question is based on the following table, which provides information on the production of a product that requires one variable input. With the addition of the second unit of input, the marginal product is

Correct AnswerverifiedShow Answer

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