Question 1

The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Accepted Answer

A)  total variable cost rises as output rises.
B)  of the law of diminishing marginal returns.
C)  total fixed cost does not change as output changes.
D)  total cost does not change as output changes.E) B) and C)
F) All of the above

Question 2

Exhibit 21-8  Exhibit 21-8 shows how output varies with the only variable input used in its production. Marginal physical product of the fifth unit of labor is

Accepted Answer

A)  0.
B)  20.
C)  50.
D)  172.E) B) and D)
F) B) and C)

Question 3

The long-run average total cost (LRATC) curve shows the

Accepted Answer

A)  lowest average variable cost at which the firm can produce any given level of output.
B)  lowest unit cost at which the firm can produce any given level of output.
C)  highest average fixed cost at which the firm can produce any given level of output.
D)  lowest marginal cost at which the firm can produce any given level of output.E) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A)  firms earn losses in the long run, but not in the short run.
B)  the long run always refers to a time period of one year or longer.
C)  in the long run, only one input can be fixed.
D)  in the short run, one or more inputs are fixed.E) A) and B)
F) C) and D)

Question 5

Which of the following statements is true?

Accepted Answer

A)  The marginal cost curve has an upward-sloping portion to it because of the law of diminishing marginal returns.
B)  The marginal cost curve cuts the ATC curve at its highest point.
C)  When marginal cost is rising, so must average total cost be rising.
D)  A decline in marginal cost causes the MPP (of the variable input) to decline.E) A) and D)
F) A) and B)

Question 6

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

Accepted Answer

A)  $30.00 and $40.00.
B)  $3.33 and $2.50.
C)  $1.00 and $0.75.
D)  $10.00 and $10.00.
E)  $6.67 and $5.00.F) D) and E)
G) All of the above

Question 7

Exhibit 21-14 
Assume that labor is the only variable input and that each additional laborer is paid $600.
Refer to Exhibit 21-14. What is the marginal cost of producing this good with 1 and 2 laborers working [blanks (E) and (F) ], respectively?

Accepted Answer

A)  $600; $300
B)  $60; $30
C)  $8; $12
D)  $6; $8E) C) and D)
F) All of the above

Question 8

Exhibit 21-7  Refer to Exhibit 21-7. The average total cost of producing 4 units of output is

Accepted Answer

A)  $11.25.
B)  $5.00.
C)  $3.50.
D)  $27.50.
E)  There is not enough information to answer this question.F) B) and C)
G) A) and E)

Question 9

Exhibit 21-9 ​
1 and ATC1 represent the initial cost curves of an aluminum can producer. In which of the following cases is it most likely that the curves will shift rightward from  MC1, and ATC1 to MC3 and ATC3? A) A new tax of $0.03 per can is imposed on the producer. B) There is an increase in energy costs. C) A new supplier offers to supply aluminum to the firm at a lower price. D) Technology declines in the production of aluminum cans." class="answers-bank-image d-inline" rel="preload" >
Refer to Exhibit 21-9. Let MC1 and ATC1 represent the initial cost curves of an aluminum can producer. In which of the following cases is it most likely that the curves will shift rightward from  MC1, and ATC1 to MC3 and ATC3?

Accepted Answer

A)  A new tax of $0.03 per can is imposed on the producer.
B)  There is an increase in energy costs.
C)  A new supplier offers to supply aluminum to the firm at a lower price.
D)  Technology declines in the production of aluminum cans.E) None of the above
F) All of the above

Question 10

Exhibit 21-3  Refer to Exhibit 21-3. The marginal cost figures in blanks (I) and (J) , respectively, are

Accepted Answer

A)  $5.33 and $10.00.
B)  $1.33 and $2.00.
C)  $1.33 and $1.43.
D)  $13.33 and $20.E) None of the above
F) A) and C)

Question 11

Exhibit 21-3  Refer to Exhibit 21-3. The total cost of producing 45 units of output is

Accepted Answer

A)  $1,100.
B)  $950.
C)  $1,050.
D)  $900.
E)  $1,000.F) A) and D)
G) A) and E)

Question 12

Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.

Accepted Answer

A)  long run; short run
B)  short run; long run
C)  industry; firm
D)  firm; industry
E)  firm in the short run; industry in the long runF) A) and C)
G) B) and E)

Question 13

Cy recently went into the business of producing and selling cardboard boxes. For this business, which of the following is most likely to be a fixed cost?

Accepted Answer

A)  fire insurance
B)  labor costs
C)  paper costs
D)  adhesive costsE) A) and B)
F) A) and C)

Question 14

Accounting profit is always greater than or equal to economic profit.

Accepted Answer

A) True 
 B)False

Question 15

If AFC is $8 at a quantity of output of 1,000 units, and ATC is $12 at the same level of output, it follows that

Accepted Answer

A)  marginal cost is $10.
B)  AVC is $4,000.
C)  total cost is $4,000.
D)  marginal cost is $1,000.
E)  AVC is $4.F) D) and E)
G) A) and E)

Question 16

Which of the following is true of average fixed costs in the long run?

Accepted Answer

A)  Average fixed costs start increasing.
B)  Average fixed costs are above average variable costs.
C)  There are no fixed costs in the long run, so there are also no average fixed costs in the long run.
D)  Average fixed costs intersect the marginal cost curve at its minimum point.E) B) and D)
F) A) and D)

Question 17

If the owner of a firm earns zero economic profit, he or she has earned total revenue equal to his or her

Accepted Answer

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

Question 18

Exhibit 21-3  Refer to Exhibit 21-3. What is the average total cost of producing 60 units of output?

Accepted Answer

A)  $21.67
B)  $1.33
C)  $24.17
D)  $12.50E) A) and D)
F) C) and D)

Question 19

Which of these statements is false ?

Accepted Answer

A)  There are no fixed costs in the long run.
B)  Total costs are equal to total fixed costs plus total variable costs.
C)  In the short run, all inputs are fixed inputs.
D)  A fixed cost is a cost that does not change as output changes.E) None of the above
F) B) and D)

Question 20

Which of the following is the best example of market coordination ?

Accepted Answer

A)  Bad weather wipes out half the pineapple crop in Hawaii, the price of pineapples rises, and consumers cut back on their purchases of pineapples.
B)  The government raises taxes on gasoline, which raises the price of gasoline.
C)  The grocery store tells her employees to put the sugar-free cereals on the top shelf where adults can find them more easily.
D)  The government subsidizes tobacco farmers, which allows the farmers to grow more tobacco.E) A) and D)
F) A) and C)

Exam 8: Production and Costs

Which of the following is the best example of market coordination ?

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Exhibit 21-9 ​ Refer to Exhibit 21-9. Let MC1 and ATC1 represent the initial cost curves of an aluminum can producer. In which of the following cases is it most likely that the curves will shift rightward from MC1, and ATC1 to MC3 and ATC3?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

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Exhibit 21-8 Exhibit 21-8 shows how output varies with the only variable input used in its production. Marginal physical product of the fifth unit of labor is

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Exhibit 21-7 Refer to Exhibit 21-7. The average total cost of producing 4 units of output is

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Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.

Correct AnswerverifiedShow Answer

If the owner of a firm earns zero economic profit, he or she has earned total revenue equal to his or her

Correct AnswerverifiedShow Answer

Cy recently went into the business of producing and selling cardboard boxes. For this business, which of the following is most likely to be a fixed cost?

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The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Correct AnswerverifiedShow Answer

Exhibit 21-3 Refer to Exhibit 21-3. What is the average total cost of producing 60 units of output?

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

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Which of the following is true of average fixed costs in the long run?

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Exhibit 21-3 Refer to Exhibit 21-3. The total cost of producing 45 units of output is

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Exhibit 21-3 Refer to Exhibit 21-3. The marginal cost figures in blanks (I) and (J) , respectively, are

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Accounting profit is always greater than or equal to economic profit.

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

Correct AnswerverifiedShow Answer

Exhibit 21-14 Assume that labor is the only variable input and that each additional laborer is paid $600. Refer to Exhibit 21-14. What is the marginal cost of producing this good with 1 and 2 laborers working [blanks (E) and (F) ], respectively?

Correct AnswerverifiedShow Answer

If AFC is $8 at a quantity of output of 1,000 units, and ATC is $12 at the same level of output, it follows that

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The long-run average total cost (LRATC) curve shows the

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Which of these statements is false ?

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Exhibit 21-9 Refer to Exhibit 21-9. Let MC₁ and ATC₁ represent the initial cost curves of an aluminum can producer. In which of the following cases is it most likely that the curves will shift rightward from MC₁, and ATC₁ to MC₃ and ATC₃?

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Economies of scale are relevant to the , whereas the law of diminishing marginal returns is relevant to the .

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