Question 1

Imagine Tom's annual salary as an assistant store manager is $30,000. He also owns a building that he rents out, earning $10,000 annually, and he has financial assets that 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 in the building he owns. 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. Which of the following statements is true?

Accepted Answer

A)  Tom has an opportunity cost of $41,000.
B)  Tom earns an accounting profit of $35,000.
C)  Tom experiences an economic loss of $6,000.
D)  All of these are correct.E) B) and D)
F) None of the above

Question 2

When the slope of the total production curve steepens:

Accepted Answer

A)  marginal product must be increasing.
B)  marginal product must be decreasing.
C)  diminishing marginal product must hold.
D)  None of these are correct.E) A) and B)
F) All of the above

Question 3

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

Accepted Answer

A)  the input-output relationship.
B)  the production function.
C)  marginal product.
D)  resource product.E) A) and C)
F) A) and B)

Question 4

The fixed cost curve:

Accepted Answer

A)  is steep when output levels are low, and then flattens as output increases.
B)  is flatter when output levels are low, and then gets steeper as output increases.
C)  is a constant, flat line.
D)  is a constant, vertical line.E) A) and B)
F) C) and D)

Question 5

The table shows costs for an individual firm. The total cost of producing the 6th unit is:

Accepted Answer

A)  $240.
B)  $250.
C)  $100.
D)  $140.E) A) and C)
F) B) and C)

Question 6

When the slope of the total production curve begins to flatten:

Accepted Answer

A)  marginal product must be decreasing.
B)  diminishing marginal product must be occurring.
C)  additional inputs add less to total production than the inputs added before.
D)  All of these are correct.E) A) and B)
F) A) and C)

Question 7

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) B) and C)
F) A) and B)

Question 8

In the short run:

Accepted Answer

A)  a firm cannot increase or decrease at least one of its inputs.
B)  output cannot be changed.
C)  the price of output is fixed.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 9

Imagine Tom's annual salary as an assistant store manager is $30,000. He also owns a building that he rents out, earning $10,000 annually, and he has financial assets that 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 in the building he owns. 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 is Tom's economic profit?

Accepted Answer

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

Question 10

When a company's economic profit is negative, what will the accounting profit be?

Accepted Answer

A)  Positive
B)  Negative
C)  Zero
D)  It could be positive, negative, or zero.E) B) and D)
F) None of the above

Question 11

Explicit costs can include:

Accepted Answer

A)  out-of-pocket costs.
B)  fixed costs.
C)  variable costs.
D)  All of these can be included in explicit costs.E) None of the above
F) All of the above

Question 12

If a sandwich shop produces zero sandwiches, which of the following costs will it still incur?

Accepted Answer

A)  Employee wages
B)  Sandwich ingredients
C)  The rented storefront
D)  None of these costs will be incurred if the shop no longer makes sandwiches.E) A) and B)
F) All of the above

Question 13

Suppose that an accounting firm with 10 employees hires another accountant. By doing so, it goes from serving 30 customers each week to serving 32 customers each week. What is the marginal product of labor for the new accountant?

Accepted Answer

A)  32
B)  2
C)  62
D)  10E) All of the above
F) B) and C)

Question 14

Total costs:

Accepted Answer

A)  are fixed costs plus variable costs.
B)  include explicit and implicit costs.
C)  increase as the firm increases output.
D)  All of these describe total costs.E) B) and D)
F) A) and B)

Question 15

Average variable costs _____ as output increases.

Accepted Answer

A)  always trend upward
B)  always trend downward
C)  decrease first, then increase
D)  increase first, then decreaseE) None of the above
F) A) and B)

Question 16

The table above shows the total production of sandwiches in a sandwich shop in one hour given various numbers of employees. What is the marginal product of labor for the third worker?

Accepted Answer

A)  40
B)  50
C)  10
D)  12E) A) and B)
F) None of the above

Question 17

Suppose Sam's Shoe Co. makes one kind of shoe. An example of a fixed cost for this company would be:

Accepted Answer

A)  the lease for the factory building.
B)  the leather needed to make the shoes.
C)  sewing machine needles that need to be replaced every 1,000 pairs.
D)  All of these are examples of fixed costs.E) B) and D)
F) A) and B)

Question 18

The table shows costs for an individual firm. Which of the following statements is true?Average total cost is falling until the third unit produces and increasing after the fourth unit produced.Marginal cost is always greater than average total cost.The fixed cost is $12.Marginal cost begins rising after the second unit produced.

Accepted Answer

A)  I, II, and III only
B)  I and III only
C)  II and IV only
D)  I onlyE) B) and D)
F) B) and C)

Question 19

A college student is thinking about running an ice cream truck over the summer. Which of the following would likely be included in the total cost of the business?

Accepted Answer

A)  The cost of ice cream cones
B)  The cost of the truck
C)  The opportunity cost of the student's time
D)  All of these would be included in total cost.E) All of the above
F) A) and B)

Question 20

Suppose Larry's Lariats produces lassos in a factory, using nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length and seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. Which of the following expenses would be considered a variable cost for this company?

Accepted Answer

A)  The cost of the factory
B)  Employee wages
C)  The rope-cutting machine
D)  All of these expenses are variable costs.E) A) and B)
F) All of the above

Exam 12: The Costs of Production

A college student is thinking about running an ice cream truck over the summer. Which of the following would likely be included in the total cost of the business?

Correct Answer
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In the short run:

Correct Answer
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Correct Answer
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Correct Answer
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When the slope of the total production curve begins to flatten:

Correct Answer
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Total costs:

Correct Answer
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If a sandwich shop produces zero sandwiches, which of the following costs will it still incur?

Correct Answer
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The table shows costs for an individual firm. The total cost of producing the 6th unit is:

Correct Answer
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Suppose that an accounting firm with 10 employees hires another accountant. By doing so, it goes from serving 30 customers each week to serving 32 customers each week. What is the marginal product of labor for the new accountant?

Correct Answer
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Explicit costs can include:

Correct Answer
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Suppose Sam's Shoe Co. makes one kind of shoe. An example of a fixed cost for this company would be:

Correct Answer
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Correct Answer
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The table above shows the total production of sandwiches in a sandwich shop in one hour given various numbers of employees. What is the marginal product of labor for the third worker?

Correct Answer
verified

Average variable costs _____ as output increases.

Correct Answer
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When the slope of the total production curve steepens:

Correct Answer
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The fixed cost curve:

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

Correct Answer
verified

When a company's economic profit is negative, what will the accounting profit be?

Correct Answer
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Average total cost:

Correct Answer
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Correct Answer
verified

Exam 12: The Costs of Production

A college student is thinking about running an ice cream truck over the summer. Which of the following would likely be included in the total cost of the business?

Correct AnswerverifiedShow Answer

In the short run:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the slope of the total production curve begins to flatten:

Correct AnswerverifiedShow Answer

Total costs:

Correct AnswerverifiedShow Answer

If a sandwich shop produces zero sandwiches, which of the following costs will it still incur?

Correct AnswerverifiedShow Answer

The table shows costs for an individual firm. The total cost of producing the 6th unit is:

Correct AnswerverifiedShow Answer

Suppose that an accounting firm with 10 employees hires another accountant. By doing so, it goes from serving 30 customers each week to serving 32 customers each week. What is the marginal product of labor for the new accountant?

Correct AnswerverifiedShow Answer

Explicit costs can include:

Correct AnswerverifiedShow Answer

Suppose Sam's Shoe Co. makes one kind of shoe. An example of a fixed cost for this company would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The table above shows the total production of sandwiches in a sandwich shop in one hour given various numbers of employees. What is the marginal product of labor for the third worker?

Correct AnswerverifiedShow Answer

Average variable costs _____ as output increases.

Correct AnswerverifiedShow Answer

When the slope of the total production curve steepens:

Correct AnswerverifiedShow Answer

The fixed cost curve:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a company's economic profit is negative, what will the accounting profit be?

Correct AnswerverifiedShow Answer

Average total cost:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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