Question 1

Which of the following would most likely cause a firm's cost curve to shift downward?

Accepted Answer

A)   an increase in resource prices
B)   an increase in government regulations
C)   a decrease in taxes
D)   an increase in demand for the firm's productE) A) and C)
F) B) and D)

Question 2

Use the figure to answer the following question(s) .
Figure 8-10

In Figure 8-10, which output would minimize the firm's average total cost of production?

Accepted Answer

A)   4
B)   6
C)   8
D)   10E) A) and B)
F) A) and C)

Question 3

Use the figure to answer the following question(s) .
Figure 8-1

At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

Accepted Answer

A)   3
B)   4
C)   5
D)   6E) A) and C)
F) None of the above

Question 4

The firm's average total costs will be a minimum at the output level where the

Accepted Answer

A)   firm just begins to confront diminishing returns to the variable factors.
B)   marginal costs are a minimum.
C)   firm's average fixed costs are at their minimum.
D)   marginal cost curve crosses the firm's average total cost curve.E) A) and B)
F) B) and D)

Question 5

The average variable cost curve and average total cost curve become closer together as output increases because

Accepted Answer

A)   the marginal cost curve intersects the average total cost curve at its minimum.
B)   average fixed cost remains constant as output rises.
C)   average fixed cost, which is the difference between them, declines with output.
D)   output is rising more rapidly than inputs are being increased.E) A) and D)
F) B) and C)

Question 6

Use the figure to answer the following question(s) .
Figure 8-4

Using Figure 8-4, calculate the firm's total cost of producing four units of output.

Accepted Answer

A)   $4
B)   $8
C)   $12
D)   $16E) C) and D)
F) A) and B)

Question 7

Which of the following will become smaller and smaller as the firm expands output?

Accepted Answer

A)   average total cost
B)   average fixed cost
C)   marginal cost
D)   total fixed costE) C) and D)
F) B) and D)

Question 8

Which of the following is an implication of the law of diminishing returns?

Accepted Answer

A)   Total output will decline as more workers are hired.
B)   In the long run, average total cost will eventually decline as output is expanded.
C)   In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.
D)   A doubling of all inputs will lead to more than a doubling of output.E) A) and B)
F) None of the above

Question 9

The short-run average total cost (ATC)  curve of a firm will tend to be U-shaped because

Accepted Answer

A)   larger firms always have lower per-unit costs than smaller firms.
B)   at low levels of output, AFC will be high, while at high levels of output, MC will be high as the result of diminishing returns.
C)   diminishing returns will be present when output is small, and high AFC will push per-unit cost to high levels when output is large.
D)   diseconomies of scale will be present at both small and large output rates.E) All of the above
F) A) and B)

Question 10

Which of the following represents a long-run adjustment?

Accepted Answer

A)   the hiring of four additional cashiers by a supermarket
B)   a cutback on purchases of coke and iron ore by a steel manufacturer
C)   construction of a new assembly-line plant by a car manufacturer
D)   the extra dose of fertilizer used by a farmer on his wheat cropE) A) and B)
F) All of the above

Question 11

Figure 8-12 1 to ATC 2? A)  an increase in demand for plastic chairs B)  an increase in the market price of plastic chairs C)  an increase in the price of the plastic used to produce the chairs D)  a reduction in corporate income taxes" class="answers-bank-image d-inline" rel="preload" >
In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC 1 to ATC 2?

Accepted Answer

A)   an increase in demand for plastic chairs
B)   an increase in the market price of plastic chairs
C)   an increase in the price of the plastic used to produce the chairs
D)   a reduction in corporate income taxesE) All of the above
F) C) and D)

Question 12

Libby has a business using no owned capital and makes an accounting profit of $52,000 a year. Libby could have worked for Verizon Wireless with a pay of $35,000 a year, but she would not have had time to run her business. The economic profit from Libby's business per year is

Accepted Answer

A)   $87,000.
B)   $35,000.
C)   $17,000.
D)   − $17,000.E) None of the above
F) C) and D)

Question 13

A homeowner will be away from her house for six months. The monthly mortgage payment on the house is $1,000. The owner's cost of utilities is $100 if the house is unoccupied but $300 if the owner rents it out. If the owner wishes to minimize her losses from the house while away, she should rent the house for as much as the market will bear, as long as monthly rent is greater than which of the following? (Assume wear and tear to be zero regardless of whether the house is occupied.)

Accepted Answer

A)   $200
B)   $300
C)   $1,100
D)   $1,300E) A) and B)
F) A) and C)

Question 14

A business owned by a single individual who is fully liable for its debts is called

Accepted Answer

A)   a corporation.
B)   a proprietorship.
C)   a partnership.
D)   an agency.E) None of the above
F) A) and C)

Question 15

Use the figure to answer the following question(s) .
Figure 8-3

The average variable cost (AVC)  and average total cost (ATC)  for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Accepted Answer

A)   2
B)   3
C)   4
D)   5E) B) and D)
F) A) and C)

Question 16

Use the table below to answer the following question.

Average total cost is at a minimum when the output level is

Accepted Answer

A)   three units.
B)   four units.
C)   five units.
D)   six units.E) A) and B)
F) All of the above

Question 17

The short run is a time period such that

Accepted Answer

A)   the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ.
B)   the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output.
C)   the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory.
D)   new firms may build plants and enter the industry.E) B) and C)
F) A) and B)

Question 18

Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

Accepted Answer

A)   reduce the principal-agent problem.
B)   are intended to reduce the number of employees who are residual claimants.
C)   eliminate shirking problems.
D)   are essentially gifts to employees and do not generate any benefit for the firm's owners.E) A) and C)
F) A) and B)

Question 19

Fixed costs are best defined as

Accepted Answer

A)   costs that do not vary with output.
B)   costs that are at a minimum when output approaches the firm's capacity.
C)   the amount that one more unit of output adds to total costs.
D)   costs that decline as output increases.E) A) and B)
F) A) and C)

Question 20

If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be

Accepted Answer

A)   $20.
B)   $30.
C)   $50.
D)   $70.E) A) and D)
F) None of the above

Exam 8: Costs and the Supply of Goods

Which of the following is an implication of the law of diminishing returns?

Correct Answer
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Use the figure to answer the following question(s) . Figure 8-3 The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Correct Answer
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Use the figure to answer the following question(s) . Figure 8-4 Using Figure 8-4, calculate the firm's total cost of producing four units of output.

Correct Answer
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Which of the following will become smaller and smaller as the firm expands output?

Correct Answer
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A business owned by a single individual who is fully liable for its debts is called

Correct Answer
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Use the figure to answer the following question(s) . Figure 8-1 At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

Correct Answer
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Use the table below to answer the following question. Average total cost is at a minimum when the output level is

Correct Answer
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Figure 8-12 In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC ₁ to ATC ₂?

Correct Answer
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Which of the following would most likely cause a firm's cost curve to shift downward?

Correct Answer
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The average variable cost curve and average total cost curve become closer together as output increases because

Correct Answer
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The short run is a time period such that

Correct Answer
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Fixed costs are best defined as

Correct Answer
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Correct Answer
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Libby has a business using no owned capital and makes an accounting profit of $52,000 a year. Libby could have worked for Verizon Wireless with a pay of $35,000 a year, but she would not have had time to run her business. The economic profit from Libby's business per year is

Correct Answer
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Use the figure to answer the following question(s) . Figure 8-10 In Figure 8-10, which output would minimize the firm's average total cost of production?

Correct Answer
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The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because

Correct Answer
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The firm's average total costs will be a minimum at the output level where the

Correct Answer
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If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be

Correct Answer
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Which of the following represents a long-run adjustment?

Correct Answer
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Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

Correct Answer
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Exam 8: Costs and the Supply of Goods

Which of the following is an implication of the law of diminishing returns?

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 8-3 The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 8-4 Using Figure 8-4, calculate the firm's total cost of producing four units of output.

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Which of the following will become smaller and smaller as the firm expands output?

Correct AnswerverifiedShow Answer

A business owned by a single individual who is fully liable for its debts is called

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 8-1 At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

Correct AnswerverifiedShow Answer

Use the table below to answer the following question. Average total cost is at a minimum when the output level is

Correct AnswerverifiedShow Answer

Figure 8-12 In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC 1 to ATC 2?

Correct AnswerverifiedShow Answer

Which of the following would most likely cause a firm's cost curve to shift downward?

Correct AnswerverifiedShow Answer

The average variable cost curve and average total cost curve become closer together as output increases because

Correct AnswerverifiedShow Answer

The short run is a time period such that

Correct AnswerverifiedShow Answer

Fixed costs are best defined as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Libby has a business using no owned capital and makes an accounting profit of $52,000 a year. Libby could have worked for Verizon Wireless with a pay of $35,000 a year, but she would not have had time to run her business. The economic profit from Libby's business per year is

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 8-10 In Figure 8-10, which output would minimize the firm's average total cost of production?

Correct AnswerverifiedShow Answer

The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because

Correct AnswerverifiedShow Answer

The firm's average total costs will be a minimum at the output level where the

Correct AnswerverifiedShow Answer

If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be

Correct AnswerverifiedShow Answer

Which of the following represents a long-run adjustment?

Correct AnswerverifiedShow Answer

Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

Correct AnswerverifiedShow Answer

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Figure 8-12 In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC ₁ to ATC ₂?

Correct Answer
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