Question 1

Jerry's ice-cream parlor is hosting Andrew's birthday party in one week.Overall,25 to 30 people will attend the party and Andrew's costs are as follows: $200 for rent,$150 for the cake,$3 per person for customized invitations,$15 per person for the meal,$50 for decorations,and $8 per person for party favors.For simplicity,assume that Andrew is considered one of the guests and he receives an invitation too.Assuming that 25 people attend the party,the total cost of the party is:

Accepted Answer

A)   $400
B)   $1,050
C)   $650
D)   $350
E)   $426F) C) and E)
G) D) and E)

Question 2

Which of the following is a short-run adjustment?

Accepted Answer

A)   Toyota builds an automobile plant in Kentucky.
B)   Faced with increasing enrollment,a private college builds a new School of Business building.
C)   Because of staggering losses,three insurance companies exit the industry.
D)   People's Bank hires two new tellers to meet increased demand for customer services.
E)   Shaveco enters the razor blade market with a new product,produced in the United States.F) D) and E)
G) A) and B)

Question 3

Exhibit 7-4
 
-In Exhibit 7-4,marginal returns increase with the hiring of up to _____ worker(s) .

Accepted Answer

A)   one
B)   two
C)   three
D)   four
E)   fiveF) C) and E)
G) A) and B)

Question 4

Exhibit 7-3
 
-In Exhibit 7-3,the marginal product of the third worker is

Accepted Answer

A)   20
B)   100/3
C)   60
D)   50
E)   140F) B) and D)
G) B) and C)

Question 5

The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the

Accepted Answer

A)   total cost curve
B)   short-run average total cost curve
C)   average variable cost curve
D)   long-run average cost curve
E)   marginal cost curveF) A) and B)
G) B) and E)

Question 6

Which of the following is not an explicit cost?

Accepted Answer

A)   salaries
B)   sales taxes
C)   the cost of utilities,such as gas and electricity
D)   insurance premiums
E)   the value of a firm owner's timeF) B) and E)
G) A) and B)

Question 7

The length of time that represents the long run

Accepted Answer

A)   is greater than one year
B)   is greater than six months
C)   is longer in service industries than in manufacturing
D)   is the same for all industries
E)   varies from industry to industryF) A) and E)
G) None of the above

Question 8

Which of the following probably has the shortest long run?

Accepted Answer

A)   a law firm
B)   a steel mill
C)   an automobile plant
D)   a tire factory
E)   an aircraft engine factoryF) A) and E)
G) B) and D)

Question 9

Someone once said that Chevrolet is so large that if it shakes its tail,its takes two years for its head to notice it.This is an example of

Accepted Answer

A)   profit centers
B)   economies of scale
C)   diseconomies of scale
D)   diminishing marginal returns
E)   diminishing marginal costF) A) and B)
G) All of the above

Question 10

If a firm experiencing "economies of scale" decreases its output,its long-run average cost will decrease.

Accepted Answer

A) True 
 B)False

Question 11

The additional output obtained by adding another unit of labor to the production process is called

Accepted Answer

A)   the marginal cost of labor
B)   the average output of labor
C)   a variable cost
D)   the marginal product of labor
E)   the marginal utility of laborF) C) and D)
G) C) and E)

Question 12

The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1,400.The company can also produce 1,000 water pistols for a total cost of $3,000,but it would have costs of $200 even if it produced no water pistols.Which of the following is true?

Accepted Answer

A)   Total cost is increasing at a decreasing rate.
B)   Total cost is increasing at a constant rate.
C)   Marginal cost is positive and increasing as output increases.
D)   Variable cost is positive and decreasing as output increases.
E)   Fixed cost is positive and decreasing as output increases.F) A) and E)
G) A) and B)

Question 13

The shape of short-run variable cost curve is determined by

Accepted Answer

A)   the firm's effort to minimize cost
B)   the firm's effort to maximize profit
C)   competition in the industry
D)   the marginal productivity of the variable inputs the firm uses
E)   the money the firm spendsF) D) and E)
G) A) and B)

Question 14

Suppose a professor gives up her teaching job to devote her time to writing textbooks.If salaries of professors rise,

Accepted Answer

A)   her accounting profit will rise
B)   her accounting profit will fall
C)   her explicit costs will rise
D)   her economic profit from textbooks will fall
E)   her economic profit from textbooks will riseF) A) and E)
G) A) and C)

Question 15

In recent years,the number of farms has fallen while the average farm size has increased.What concept may explain this phenomenon?

Accepted Answer

A)   diminishing marginal returns
B)   declining productivity
C)   diseconomies of scale
D)   economies of scale
E)   good weather in midwestern statesF) B) and C)
G) None of the above

Question 16

Marge opens an oxygen bar in a building she owns.She used to rent the building to her brother in law for $10,000 a year.To open the oxygen bar,Marge quit her job as a physician assistant,which paid $80,000 a year.As a bar owner,Marge has to pay $40,000 a year wages for her bartender,spend $25,000 a year for supplies,and the utilities bill is $9,500 a year.To cover the start-up costs,she used up all of her savings which earned $4,600 in interest.Total annual revenue at the end of the year is $450,000.Marge's economic profit is:

Accepted Answer

A)   $450,000
B)   $375,500
C)   $74,500
D)   $280,900
E)   $410,000F) A) and E)
G) B) and C)

Question 17

Exhibit 7-6
 
-In Exhibit 7-6,the marginal cost of the 40th unit of output is

Accepted Answer

A)   $20
B)   $35
C)   $200
D)   $350
E)   $1,000F) B) and D)
G) B) and C)

Question 18

As a firm expands into overseas markets,information problems and the complexity of operating within many varied cultures and economies may result in

Accepted Answer

A)   constant returns to scale
B)   diminishing marginal returns
C)   declining long-run marginal cost
D)   diseconomies of scale
E)   economies of scaleF) B) and D)
G) A) and B)

Question 19

Suppose Ben buys out Jerry's ownership in the firm but retains him as a salaried employee.If so,

Accepted Answer

A)   economic profit increases
B)   economic profit decreases
C)   there is no change in economic profit
D)   there is no change in accounting profit
E)   accounting profit increasesF) A) and B)
G) B) and C)

Question 20

Empirical studies of production suggest that the long-run average cost curve

Accepted Answer

A)   is U-shaped
B)   has an inverted L shape
C)   is L-shaped
D)   is horizontal
E)   shows diminishing marginal returnsF) C) and D)
G) B) and E)

Exam 7: Production and Cost in the Firm

Empirical studies of production suggest that the long-run average cost curve

Correct Answer
verified

Suppose a professor gives up her teaching job to devote her time to writing textbooks.If salaries of professors rise,

Correct Answer
verified

Correct Answer
verified

The additional output obtained by adding another unit of labor to the production process is called

Correct Answer
verified

If a firm experiencing "economies of scale" decreases its output,its long-run average cost will decrease.

Correct Answer
verified

Which of the following is not an explicit cost?

Correct Answer
verified

Which of the following is a short-run adjustment?

Correct Answer
verified

Exhibit 7-4 -In Exhibit 7-4,marginal returns increase with the hiring of up to _____ worker(s) .

Correct Answer
verified

Exhibit 7-3 -In Exhibit 7-3,the marginal product of the third worker is

Correct Answer
verified

Correct Answer
verified

In recent years,the number of farms has fallen while the average farm size has increased.What concept may explain this phenomenon?

Correct Answer
verified

Suppose Ben buys out Jerry's ownership in the firm but retains him as a salaried employee.If so,

Correct Answer
verified

Exhibit 7-6 -In Exhibit 7-6,the marginal cost of the 40th unit of output is

Correct Answer
verified

The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the

Correct Answer
verified

The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1,400.The company can also produce 1,000 water pistols for a total cost of $3,000,but it would have costs of $200 even if it produced no water pistols.Which of the following is true?

Correct Answer
verified

As a firm expands into overseas markets,information problems and the complexity of operating within many varied cultures and economies may result in

Correct Answer
verified

Someone once said that Chevrolet is so large that if it shakes its tail,its takes two years for its head to notice it.This is an example of

Correct Answer
verified

The shape of short-run variable cost curve is determined by

Correct Answer
verified

Which of the following probably has the shortest long run?

Correct Answer
verified

The length of time that represents the long run

Correct Answer
verified

Exam 7: Production and Cost in the Firm

Empirical studies of production suggest that the long-run average cost curve

Correct AnswerverifiedShow Answer

Suppose a professor gives up her teaching job to devote her time to writing textbooks.If salaries of professors rise,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The additional output obtained by adding another unit of labor to the production process is called

Correct AnswerverifiedShow Answer

If a firm experiencing "economies of scale" decreases its output,its long-run average cost will decrease.

Correct AnswerverifiedShow Answer

Which of the following is not an explicit cost?

Correct AnswerverifiedShow Answer

Which of the following is a short-run adjustment?

Correct AnswerverifiedShow Answer

Exhibit 7-4 -In Exhibit 7-4,marginal returns increase with the hiring of up to _____ worker(s) .

Correct AnswerverifiedShow Answer

Exhibit 7-3 -In Exhibit 7-3,the marginal product of the third worker is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In recent years,the number of farms has fallen while the average farm size has increased.What concept may explain this phenomenon?

Correct AnswerverifiedShow Answer

Suppose Ben buys out Jerry's ownership in the firm but retains him as a salaried employee.If so,

Correct AnswerverifiedShow Answer

Exhibit 7-6 -In Exhibit 7-6,the marginal cost of the 40th unit of output is

Correct AnswerverifiedShow Answer

The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the

Correct AnswerverifiedShow Answer

The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1,400.The company can also produce 1,000 water pistols for a total cost of $3,000,but it would have costs of $200 even if it produced no water pistols.Which of the following is true?

Correct AnswerverifiedShow Answer

As a firm expands into overseas markets,information problems and the complexity of operating within many varied cultures and economies may result in

Correct AnswerverifiedShow Answer

Someone once said that Chevrolet is so large that if it shakes its tail,its takes two years for its head to notice it.This is an example of

Correct AnswerverifiedShow Answer

The shape of short-run variable cost curve is determined by

Correct AnswerverifiedShow Answer

Which of the following probably has the shortest long run?

Correct AnswerverifiedShow Answer

The length of time that represents the long run

Correct AnswerverifiedShow Answer

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