Question 1

An explicit cost is:

Accepted Answer

A)   omitted when accounting profits are calculated.
B)   a money payment made for resources not owned by the firm itself.
C)   an implicit cost to the resource owner who receives that payment.
D)   always in excess of a resource's opportunity cost.E) A) and D)
F) B) and C)

Question 2

Refer to the above data.The total variable cost of producing 5 units is:

Accepted Answer

A)   $61.
B)   $48.
C)   $37.
D)   $24.Fixed cost is $24,the cost of zero units of output.At 5 units of output,total costs are $61,so variable costs are $37 .E) None of the above
F) A) and B)

Question 3

The above diagram suggests that:

Accepted Answer

A)   when marginal product is zero,total product is at a minimum.
B)   when marginal product lies above average product,average product is rising.
C)   when marginal product lies below average product,average product is rising.
D)   when total product is at a maximum,so are marginal product and average product.E) A) and D)
F) B) and D)

Question 4

The short run is a period of time during which all costs are fixed costs.

Accepted Answer

A) True 
 B)False

Question 5

Implicit costs are:

Accepted Answer

A)   regarded as costs by accountants but not by economists.
B)   payments that a firm makes to other firms or individuals who supply resources to it.
C)   nonexpenditure costs.
D)   costs that vary proportionately with output.E) C) and D)
F) B) and D)

Question 6

Normal profit is:

Accepted Answer

A)   determined by subtracting implicit costs from total revenue.
B)   determined by subtracting explicit costs from total revenue.
C)   the return to the entrepreneur when economic profits are zero.
D)   the average profitability of an industry over the preceding 10 years.E) All of the above
F) None of the above

Question 7

Which of the following is correct as it relates to cost curves?

Accepted Answer

A)   Average variable cost intersects marginal cost at the latter's minimum point.
B)   Marginal cost intersects average total cost at the latter's minimum point.
C)   Average fixed cost intersects marginal cost at the latter's minimum point.
D)   Marginal cost intersects average fixed cost at the latter's minimum point.E) C) and D)
F) All of the above

Question 8

Which of the following is most likely to be a variable cost?

Accepted Answer

A)   Fuel and power payments
B)   Interest on business loans
C)   Rental payments on IBM equipment
D)   Real estate taxesE) A) and D)
F) None of the above

Question 9

The law of diminishing returns explains diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 10

Marginal product:

Accepted Answer

A)   diminishes at all levels of production.
B)   may initially increase,then diminish,but never become negative.
C)   may initially increase,then diminish,and ultimately become negative.
D)   is always less than average product.E) C) and D)
F) A) and C)

Question 11

Suppose you own $50,000 of personal property,$5,000 of stock in General Statics Corporation,a $10,000 savings account,and $20,000 of government bonds.If General Statics goes bankrupt,the most you could lose is:

Accepted Answer

A)   $50,000.
B)   $5,000.
C)   $35,000.
D)   $85,000.E) B) and C)
F) None of the above

Question 12

Refer to the above data.The marginal product of the sixth worker is:

Accepted Answer

A)   180 units of output.
B)   30 units of output.
C)   15 units of output.
D)   negative.The sixth worker added 15 (180 - 165) units to output.This is her marginal product.E) A) and B)
F) B) and C)

Question 13

Refer to the above diagram.The vertical distance between ATC and AVC reflects:

Accepted Answer

A)   the law of diminishing returns.
B)   the average fixed cost at each level of output.
C)   marginal cost at each level of output.
D)   the presence of economies of scale.E) A) and D)
F) All of the above

Question 14

A bond purchaser is lending money to a corporation.

Accepted Answer

A) True 
 B)False

Question 15

A Macy's or JCPenney store is an example of:

Accepted Answer

A)   a conglomerate.
B)   a vertically integrated firm.
C)   a multiplant firm.
D)   an industry.E) A) and B)
F) All of the above

Question 16

The amount of calendar time associated with the long run:

Accepted Answer

A)   is less than that associated with the immediate market period.
B)   varies from industry to industry.
C)   is the same for all firms.
D)   is one year by definition.E) None of the above
F) A) and B)

Question 17

A firm's economic profit is usually higher than its accounting profit.

Accepted Answer

A) True 
 B)False

Question 18

Minimum efficient scale varies by industry.

Accepted Answer

A) True 
 B)False

Question 19

Economic cost can best be defined as:

Accepted Answer

A)   any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers.
B)   any contractual obligation to labor or material suppliers.
C)   compensations that must be received by resource owners to ensure their continued supply.
D)   all costs exclusive of payments to fixed factors of production.E) B) and C)
F) B) and D)

Question 20

Fixed cost is:

Accepted Answer

A)   the cost of producing one more unit of capital,say,machinery.
B)   any cost that does not change when the firm changes its output.
C)   average cost multiplied by the firm's output.
D)   usually zero in the short run.E) A) and C)
F) C) and D)

Exam 6: Businesses and Their Costs

The above diagram suggests that:

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Refer to the above data.The total variable cost of producing 5 units is:

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A Macy's or JCPenney store is an example of:

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Suppose you own $50,000 of personal property,$5,000 of stock in General Statics Corporation,a $10,000 savings account,and $20,000 of government bonds.If General Statics goes bankrupt,the most you could lose is:

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Which of the following is correct as it relates to cost curves?

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Refer to the above diagram.The vertical distance between ATC and AVC reflects:

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A bond purchaser is lending money to a corporation.

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Fixed cost is:

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Economic cost can best be defined as:

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The short run is a period of time during which all costs are fixed costs.

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Implicit costs are:

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A firm's economic profit is usually higher than its accounting profit.

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The law of diminishing returns explains diseconomies of scale.

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Normal profit is:

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The amount of calendar time associated with the long run:

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Refer to the above data.The marginal product of the sixth worker is:

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Minimum efficient scale varies by industry.

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Which of the following is most likely to be a variable cost?

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An explicit cost is:

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Marginal product:

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