Question 1

As output increases

Accepted Answer

A)  average variable cost becomes smaller and smaller.
B)  the difference between average total cost and average variable cost decreases.
C)  marginal cost increases continuously.
D)  the difference between average total cost and average variable cost becomes greater and greater.E) B) and C)
F) A) and D)

Question 2

Diseconomies of scale occur when

Accepted Answer

A)  long-run average costs rise as a firm increases its output.
B)  long-run average costs fall as a firm expands its plant size.
C)  short-run average costs rise as a firm expands its plant size.
D)  long-run labor costs rise as a firm increases its output.E) A) and D)
F) None of the above

Question 3

Which of the following statements is true?

Accepted Answer

A)  As output increases, average fixed cost becomes smaller and smaller.
B)  Average fixed cost does not change as output increases.
C)  The marginal cost curve intersects the average fixed cost curve at its minimum point.
D)  When marginal cost is greater than average fixed cost, average fixed cost increases.E) C) and D)
F) None of the above

Question 4

Which of the following statements is false?

Accepted Answer

A)  An explicit cost is a nonmonetary opportunity cost.
B)  In the short run: total cost = fixed cost + variable cost.
C)  Variable costs are costs that change as output changes.
D)  In the long run there are no fixed costs.E) C) and D)
F) A) and B)

Question 5

Which of the following is a fixed cost?

Accepted Answer

A)  payment to hire a security worker to guard the gate to the factory around the clock
B)  wages to hire assembly line workers
C)  payments to an electric utility
D)  costs of raw materialsE) A) and B)
F) All of the above

Question 6

If marginal cost is above the average variable cost, then average variable cost is decreasing.

Accepted Answer

A) True 
 B)False

Question 7

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

Accepted Answer

A)  $65
B)  $50
C)  $15
D)  It is impossible to determine without additional information.E) None of the above
F) All of the above

Question 8

Marginal cost is the

Accepted Answer

A)  change in average cost when an additional unit of output is produced.
B)  the additional output when total cost is increased by one dollar.
C)  additional cost of producing an additional unit of output.
D)  change in the price of inputs if a firm buys more inputs to produce an additional unit of output.E) None of the above
F) A) and B)

Question 9

If a firm is producing no output in the short run, then its total costs are zero.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true?

Accepted Answer

A)  The average product of labor is at its maximum when the average product of labor equals the marginal product of labor.
B)  The average product of labor is at its minimum when the average product of labor equals the marginal product of labor.
C)  The average product of labor tells us how much output changes as the quantity of workers hired changes.
D)  Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing.E) A) and B)
F) A) and C)

Question 11

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Accepted Answer

Explicit costs are costs that involve sp...

Question 12

The slope of an isocost line ________ and equals the negative of ________.

Accepted Answer

A)  increases as we move down the line; the ratio of input prices
B)  decreases as we move down the line; the ratio of the marginal products
C)  is constant; the ratio of input prices
D)  is constant; the ratio of the marginal productsE) A) and B)
F) A) and C)

Question 13

A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called

Accepted Answer

A)  an isoquant.
B)  an isocost line
C)  a budget line.
D)  an optimal input combination curve.E) None of the above
F) B) and C)

Question 14

Average total cost is equal to

Accepted Answer

A)  average fixed cost minus average variable cost.
B)  total cost divided by the level of output.
C)  marginal cost plus variable cost.
D)  total cost divided by the number of workers.E) A) and B)
F) A) and C)

Question 15

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Accepted Answer

A)  investment in human capital.
B)  economies of scale.
C)  positive technological change.
D)  inspired management.E) B) and D)
F) C) and D)

Question 16

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Accepted Answer

A) True 
 B)False

Question 17

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

Accepted Answer

A)  is a long-run implicit cost.
B)  is a fixed cost.
C)  is a short-run implicit cost.
D)  is a variable cost.E) B) and C)
F) C) and D)

Question 18

The processes a firm uses to turn inputs into outputs of goods and services is called

Accepted Answer

A)  technology.
B)  technological change.
C)  marginal analysis.
D)  positive economic analysis.E) B) and D)
F) C) and D)

Question 19

Sally quit her job as an auto mechanic earning $50,000 per year to start her own business.To save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year.She also invested her $20,000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.
Total revenue $120,000
Cost of labor 40,000
Cost of materials 15,000
Equipment rental 5,000
a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because "right now I don't pay any rent and it will cost me $10,000 a year to rent near town." Do you agree with her reasoning?

Accepted Answer

a.$121,000 = 40,000 (labor)+ 15,000 (mat...

Question 20

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Accepted Answer

A) True 
 B)False

Exam 11: Technology, Production, and Costs

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

Correct Answer
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Marginal cost is the

Correct Answer
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A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Correct Answer
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Which of the following is a fixed cost?

Correct Answer
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Which of the following statements is false?

Correct Answer
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Correct Answer
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a.$121,000 = 40,000 (labor)+ 15,000 (mat...
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The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Correct Answer
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If marginal cost is above the average variable cost, then average variable cost is decreasing.

Correct Answer
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The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Correct Answer
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The processes a firm uses to turn inputs into outputs of goods and services is called

Correct Answer
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If a firm is producing no output in the short run, then its total costs are zero.

Correct Answer
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What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Correct Answer
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Explicit costs are costs that involve sp...
View Answer

A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called

Correct Answer
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Which of the following statements is true?

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Average total cost is equal to

Correct Answer
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Which of the following statements is true?

Correct Answer
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If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

Correct Answer
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The slope of an isocost line and equals the negative of .

Correct Answer
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As output increases

Correct Answer
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Diseconomies of scale occur when

Correct Answer
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Exam 11: Technology, Production, and Costs

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

Correct AnswerverifiedShow Answer

Marginal cost is the

Correct AnswerverifiedShow Answer

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Correct AnswerverifiedShow Answer

Which of the following is a fixed cost?

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.$121,000 = 40,000 (labor)+ 15,000 (mat...View AnswerShow Answer

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Correct AnswerverifiedShow Answer

If marginal cost is above the average variable cost, then average variable cost is decreasing.

Correct AnswerverifiedShow Answer

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Correct AnswerverifiedShow Answer

The processes a firm uses to turn inputs into outputs of goods and services is called

Correct AnswerverifiedShow Answer

If a firm is producing no output in the short run, then its total costs are zero.

Correct AnswerverifiedShow Answer

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Correct AnswerverifiedExplicit costs are costs that involve sp...View AnswerShow Answer

A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Average total cost is equal to

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

Correct AnswerverifiedShow Answer

The slope of an isocost line ________ and equals the negative of ________.

Correct AnswerverifiedShow Answer

As output increases

Correct AnswerverifiedShow Answer

Diseconomies of scale occur when

Correct AnswerverifiedShow Answer

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a.$121,000 = 40,000 (labor)+ 15,000 (mat...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Explicit costs are costs that involve sp...
View Answer

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Correct Answer
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The slope of an isocost line and equals the negative of .

Correct Answer
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Correct Answer
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Correct Answer
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