Question 1

Economists assume the central goal of any business is to:

Accepted Answer

A)  minimize total costs.
B)  maximize sales.
C)  maximize profit.
D)  maximize market share.E) B) and C)
F) A) and B)

Question 2

When a firm doubles its inputs,its output:

Accepted Answer

A)  will double.
B)  will less than double.
C)  will more than double.
D)  All of these are possible.E) None of the above
F) A) and B)

Question 3

An example of a one-time expense for a shoe factory would be buying:

Accepted Answer

A)  a sewing machine,and would be included in total cost.
B)  a sewing machine,and would be excluded from total cost.
C)  leather to make the shoes,and would be included in total cost.
D)  leather to make the shoes,and would be excluded from total cost.E) None of the above
F) A) and D)

Question 4

Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

Accepted Answer

A)  explicit cost of $4,500.
B)  implicit cost of $4,500.
C)  explicit cost of $0.
D)  This is neither an implicit or explicit cost;it is a fixed cost of $4,500.E) C) and D)
F) B) and D)

Question 5

Constant returns to scale refers to returns that occur when:

Accepted Answer

A)  an increase in the quantity of output decreases average total cost in the long run.
B)  an increase in the quantity of output increases average total cost in the long run.
C)  average total cost does not depend on the quantity of output in the long run.
D)  None of these is true.E) All of the above
F) None of the above

Question 6

When marginal product is __________ average product,then average product must be ______________.

Accepted Answer

A)  is greater than;increasing
B)  is greater than;decreasing
C)  is less than;increasing
D)  Any of these is possible.E) A) and B)
F) None of the above

Question 7

Doug wants to start up his own business,and needs $25,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 3 percent,or he can take out a loan for $25,000 and pay 5 percent interest.Doug should compare:

Accepted Answer

A)  the implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings.
B)  the implicit cost of $750 to the explicit cost of $1,250 and choose to borrow the money.
C)  the explicit cost of $750 to the implicit cost of $1,250 and choose to use his savings.
D)  the explicit cost of $25,750 to the explicit cost of $26,250 and choose to borrow the money.E) B) and D)
F) A) and D)

Question 8

Which of the following would be considered an ongoing expense?

Accepted Answer

A)  Employee salaries
B)  Raw materials
C)  Advertising
D)  All of these could be considered ongoing expenses.E) B) and D)
F) None of the above

Question 9

Suppose Winston's annual salary as an accountant is $60,000,and his financial assets generate $4,000 per year in interest.One day,after deciding to be his own boss,he quits his job and uses his financial assets to establish a consulting business,which he runs out of his home.To run the business,he outlays $8,000 in cash to cover all the costs involved with running the business,and earns revenues of $150,000.What costs would be considered when calculating accounting profit?

Accepted Answer

A)  The opportunity cost of his job and interest forgone of $64,000,and the explicit cost of $8,000
B)  The implicit cost of the interest forgone of $4,000 and the explicit cost of $8,000
C)  The explicit cost of $8,000
D)  The implicit cost of his job of $60,000 and the opportunity cost of forgone interest of $4,000E) C) and D)
F) B) and C)

Question 10

Suppose Bev's Bags makes two kinds of handbags-large and small.Bev rents an industrial space where she keeps the fabric,the industrial sewing machine,her measuring board and cutting shears,extra needles,thread and buttons,and labels.If Bev were to produce no bags,which of the following is true regarding Bev's costs?

Accepted Answer

A)  The variable cost of fabric would drop to zero.
B)  The fixed cost of thread would stay the same.
C)  The variable cost of cutting shears would drop to zero.
D)  All of these are true.E) A) and D)
F) A) and C)

Question 11

Costs that are "fixed":

Accepted Answer

A)  depend on what timescale you are thinking.
B)  are those that will never change.
C)  vary with output,but not with resource prices.
D)  None of these is true.E) A) and B)
F) A) and C)

Question 12

Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.What are Tom's economic profits?

Accepted Answer

A)  $35,000
B)  $50,000
C)  $24,000
D)  -$6,000E) C) and D)
F) A) and B)

Question 13

A firm can move along its long-run ATC:

Accepted Answer

A)  to capture lower costs per unit.
B)  by changing its firm size.
C)  only when it's no longer constrained by a fixed input.
D)  All of these are true.E) A) and B)
F) C) and D)

Question 14

The long-run relationship between the quantity of output and the average total cost is:

Accepted Answer

A)  marginal cost.
B)  the production function.
C)  returns to scale.
D)  profit maximizing level of output.E) A) and B)
F) All of the above

Question 15

Suppose Chip's Chips produces bags of potato chips.An example of a variable cost for this firm would be:

Accepted Answer

A)  the potato peeling machine.
B)  the factory building.
C)  the deep fryer.
D)  None of these is an example of a variable cost.E) B) and D)
F) A) and D)

Question 16

Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.What are Tom's accounting profits?

Accepted Answer

A)  $35,000
B)  $50,000
C)  $24,000
D)  -$6,000E) B) and C)
F) All of the above

Question 17

Average total cost:

Accepted Answer

A)  decreases when output levels are low,then increases as output increases.
B)  increases when output levels are low,then decreases as output decreases.
C)  is minimized when it equals average variable cost.
D)  is maximized when it equals marginal cost.E) None of the above
F) C) and D)

Question 18

Total revenue can be defined as:

Accepted Answer

A)  the amount that a firm receives from the sale of goods and services.
B)  the amount that a firm spends on all inputs that go into making a good or service.
C)  the sum of total costs and total sales.
D)  the amount that an individual can spend on disposable goods and services.E) A) and D)
F) A) and C)

Question 19

Assume a company is at a point in production where marginal product is above average product.Which of the following must be true?

Accepted Answer

A)  Diminishing marginal product must not have set in yet.
B)  Marginal product must be rising.
C)  Average product must be rising.
D)  All of these are true.E) A) and C)
F) C) and D)

Question 20

The increase in output that is generated by an additional unit of input is call the:

Accepted Answer

A)  marginal product.
B)  input-output relationship.
C)  production function.
D)  resource product.E) A) and D)
F) None of the above

Exam 12: The Costs of Production

Doug wants to start up his own business,and needs $25,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 3 percent,or he can take out a loan for $25,000 and pay 5 percent interest.Doug should compare:

Correct Answer
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Assume a company is at a point in production where marginal product is above average product.Which of the following must be true?

Correct Answer
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When a firm doubles its inputs,its output:

Correct Answer
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Correct Answer
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The increase in output that is generated by an additional unit of input is call the:

Correct Answer
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Correct Answer
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A firm can move along its long-run ATC:

Correct Answer
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An example of a one-time expense for a shoe factory would be buying:

Correct Answer
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Average total cost:

Correct Answer
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Correct Answer
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Correct Answer
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Total revenue can be defined as:

Correct Answer
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Suppose Chip's Chips produces bags of potato chips.An example of a variable cost for this firm would be:

Correct Answer
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Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

Correct Answer
verified

Economists assume the central goal of any business is to:

Correct Answer
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When marginal product is average product,then average product must be ____.

Correct Answer
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Constant returns to scale refers to returns that occur when:

Correct Answer
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Costs that are "fixed":

Correct Answer
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The long-run relationship between the quantity of output and the average total cost is:

Correct Answer
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Which of the following would be considered an ongoing expense?

Correct Answer
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Exam 12: The Costs of Production

Doug wants to start up his own business,and needs $25,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 3 percent,or he can take out a loan for $25,000 and pay 5 percent interest.Doug should compare:

Correct AnswerverifiedShow Answer

Assume a company is at a point in production where marginal product is above average product.Which of the following must be true?

Correct AnswerverifiedShow Answer

When a firm doubles its inputs,its output:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The increase in output that is generated by an additional unit of input is call the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm can move along its long-run ATC:

Correct AnswerverifiedShow Answer

An example of a one-time expense for a shoe factory would be buying:

Correct AnswerverifiedShow Answer

Average total cost:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Total revenue can be defined as:

Correct AnswerverifiedShow Answer

Suppose Chip's Chips produces bags of potato chips.An example of a variable cost for this firm would be:

Correct AnswerverifiedShow Answer

Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

Correct AnswerverifiedShow Answer

Economists assume the central goal of any business is to:

Correct AnswerverifiedShow Answer

When marginal product is __________ average product,then average product must be ______________.

Correct AnswerverifiedShow Answer

Constant returns to scale refers to returns that occur when:

Correct AnswerverifiedShow Answer

Costs that are "fixed":

Correct AnswerverifiedShow Answer

The long-run relationship between the quantity of output and the average total cost is:

Correct AnswerverifiedShow Answer

Which of the following would be considered an ongoing expense?

Correct AnswerverifiedShow Answer

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When marginal product is average product,then average product must be ____.

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