Question 1

Exhibit 6-10 Short-run cost schedule for book publisher's hourly production   Total  Output  Total  Variable Cost  Total  Cost  0 cases of books $0$2001100300215035032504504450650\begin{array} { | c | c | r | } \hline \begin{array} { c } 	ext { Total } \	ext { Output }\end{array} & \begin{array} { c } 	ext { Total } \	ext { Variable Cost }\end{array} & \begin{array} { c } 	ext { Total } \	ext { Cost }\end{array} \\hline 	ext { 0 cases of books } &\$0 & \$ 200 \1 & 100 & 300 \2 & 150 & 350 \3 & 250 & 450 \4 & 450 & 650 \\hline\end{array} Total  Output ​ 0 cases of books 1234​ Total  Variable Cost ​$0100150250450​ Total  Cost ​$200300350450650​​  In Exhibit 6-10, the marginal cost of increasing production from 2 to 3 cases of books is:

Accepted Answer

A)   higher than the marginal cost of increasing production from 1 to 2 cases of books, so the marginal cost curve must be rising in between 2 and 3 cases.
B)   higher than the marginal cost of increasing production from 1 to 2 cases of books, so the average total cost must be rising in between 2 and 3 cases.
C)   lower than the marginal cost of increasing production from 1 to 2 cases of books, so the marginal cost must be greater than average total cost between 2 and 3 cases.
D)   lower than the marginal cost of increasing production from 1 to 2 cases of books, so the average total cost must be rising in between 2 and 3 cases. E) B) and D)
F) All of the above

Question 2

Exhibit 6-15 Long-run average cost

In Exhibit 6-15, diseconomies of scale are shown in the range of:

Accepted Answer

A)   0 to 500 units per week.
B)   500 to 1,000 units per week.
C)   1,000 to 2,000 units per week.
D)   zero per week.E) C) and D)
F) B) and D)

Question 3

Exhibit 6-13 Cost curves

In Exhibit 6-13, AFC is shown by the graph labeled:

Accepted Answer

A)   I.
B)   II.
C)   III.
D)   V.E) B) and C)
F) None of the above

Question 4

A downward-sloping portion of a long-run average total cost curve is the result of:

Accepted Answer

A)   economies of scale.
B)   diseconomies of scale.
C)   diminishing returns.
D)   the existence of fixed resources.E) A) and D)
F) None of the above

Question 5

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Accepted Answer

A)   The tax payments on property owned by the firm.
B)   The wages paid to the 12 employees.
C)   The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees.
D)   The accounting services provided free of charge to the firm by Paul's wife, who is an accountant.E) None of the above
F) A) and B)

Question 6

Economies of scale can be caused by all of the following except :

Accepted Answer

A)   price discounts for large scale purchases.
B)   labor specialization.
C)   use of more productive equipment.
D)   increases in the firm's average total cost.E) A) and B)
F) All of the above

Question 7

Diseconomies of scale exist for all of the following reasons except :

Accepted Answer

A)   bureaucratic inefficiencies.
B)   management problems.
C)   failures in information flows.
D)   firm size is too small.E) B) and C)
F) None of the above

Question 8

In the long run, firms in many industries often experience a falling average total cost curve as a result of:

Accepted Answer

A)   gains through trade.
B)   increasing marginal returns.
C)   economies of scale.
D)   lower fixed costs.E) A) and D)
F) C) and D)

Question 9

Exhibit 6-5 Workers and output data   Laborers  Total  Product 0018220325428529\begin{array} { | c | c | } \hline 	ext { Laborers } & \begin{array} { c } 	ext { Total } \	ext { Product }\end{array} \\hline 0 & 0 \1 & 8 \2 & 20 \3 & 25 \4 & 28 \5 & 29 \\hline\end{array} Laborers 012345​ Total  Product ​0820252829​​  In Exhibit 6-5, the marginal product of the second worker is:

Accepted Answer

A)   8.
B)   10.
C)   12.
D)   20. E) A) and D)
F) A) and B)

Question 10

Exhibit 6-4 A marginal product curve
 
As shown in Exhibit 6-4, the law of diminishing returns applies in the range of:

Accepted Answer

A)   over 1 workers per day.
B)   over 3 workers per day.
C)   between 0 and 3 workers per day.
D)   between 0 and 5 workers per day.E) A) and B)
F) C) and D)

Question 11

Which of the following is most likely to be a fixed cost for a business?

Accepted Answer

A)   expenditures on low-skill labor.
B)   shipping charges for the delivery of products.
C)   materials costs.
D)   property taxes on the firm's buildings.E) None of the above
F) A) and D)

Question 12

Unlike implicit costs, explicit costs:

Accepted Answer

A)   reflect opportunity costs.
B)   include the value of the owner's time.
C)   are not included in the accounting statement of the firm.
D)   are actual cash payments.E) A) and C)
F) C) and D)

Question 13

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?

Accepted Answer

A)   Average total cost is declining.
B)   Average total cost is constant.
C)   Average total cost is rising.
D)   Average total cost is less than average fixed cost.E) A) and B)
F) A) and C)

Question 14

Exhibit 6-13 Cost curves

In Exhibit 6-13, ATC is shown by the graph labeled:

Accepted Answer

A)   I.
B)   II.
C)   III.
D)   V.E) A) and C)
F) C) and D)

Question 15

Exhibit 6-9 Cost schedule for firm X   Output  Quantity  Total Fixed  Cost  Total Variable  Cost 0$100$0110050210084310010841001275100150\begin{array} { | c | c | c | } \hline \begin{array} { c } 	ext { Output } \	ext { Quantity }\end{array} & \begin{array} { c } 	ext { Total Fixed } \	ext { Cost }\end{array} & \begin{array} { c } 	ext { Total Variable } \	ext { Cost }\end{array} \\hline 0 & \$ 100 & \$ 0 \1 & 100 & 50 \2 & 100 & 84 \3 & 100 & 108 \4 & 100 & 127 \5 & 100 & 150 \\hline\end{array} Output  Quantity ​012345​ Total Fixed  Cost ​$100100100100100100​ Total Variable  Cost ​$05084108127150​​  As shown in Exhibit 6-9, the marginal cost of producing the third unit is:

Accepted Answer

A)   $50.
B)   $16.
C)   $24.
D)   $23. E) All of the above
F) A) and B)

Question 16

The marginal cost intersects the average variable cost

Accepted Answer

A)   and the average total cost through their upward-sloping sections.
B)   in its upward-sloping section and the average total cost through its downward-sloping section.
C)   through its minimum point and the average total cost through its maximum point.
D)   and the average total cost through their minimum points.E) A) and D)
F) None of the above

Question 17

Exhibit 6 -14 Cost curves

In Exhibit 6-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

Accepted Answer

A)   Diseconomies of scale; constant returns to scale; economies of scale.
B)   Constant returns to scale; economies of scale; diseconomies of scale.
C)   Economies of scale; constant returns to scale; diseconomies of scale.
D)   Economies of scale; diseconomies of scale; constant returns to scale.E) A) and D)
F) B) and C)

Question 18

Which of the following best describes a production function?

Accepted Answer

A)   The relationship between consumer preferences and market demand.
B)   The relationship between the quantity of labor employed and total cost.
C)   The relationship between the maximum amounts of output a firm can produce and various quantities of inputs.
D)   The relationship between price and quantity supplied by sellers in a market.E) B) and C)
F) A) and D)

Question 19

Which of the following represents the key difference between the short run and the long run?

Accepted Answer

A)   In the long run, the firm makes commitments to a certain type of production technology which are represented as fixed costs in the long run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the short run.
B)   In the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run.
C)   The short run refers to less than two years and the long run is over two years.
D)   In the short run, all costs are fixed but in the long run, capital costs are variable.E) A) and B)
F) B) and C)

Question 20

The total fixed cost curve:

Accepted Answer

A)   varies with the quantity of inputs used.
B)   decreases with output.
C)   increases with output.
D)   remains constant regardless of output.E) A) and B)
F) None of the above

Exam 6: Production Costs

Economies of scale can be caused by all of the following except :

Correct Answer
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Exhibit 6-13 Cost curves In Exhibit 6-13, ATC is shown by the graph labeled:

Correct Answer
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The total fixed cost curve:

Correct Answer
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The marginal cost intersects the average variable cost

Correct Answer
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Unlike implicit costs, explicit costs:

Correct Answer
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Correct Answer
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Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?

Correct Answer
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Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Correct Answer
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In the long run, firms in many industries often experience a falling average total cost curve as a result of:

Correct Answer
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Exhibit 6 -14 Cost curves In Exhibit 6-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

Correct Answer
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Correct Answer
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Diseconomies of scale exist for all of the following reasons except :

Correct Answer
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Which of the following best describes a production function?

Correct Answer
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Exhibit 6-13 Cost curves In Exhibit 6-13, AFC is shown by the graph labeled:

Correct Answer
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Which of the following is most likely to be a fixed cost for a business?

Correct Answer
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Exhibit 6-4 A marginal product curve As shown in Exhibit 6-4, the law of diminishing returns applies in the range of:

Correct Answer
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Exhibit 6-15 Long-run average cost In Exhibit 6-15, diseconomies of scale are shown in the range of:

Correct Answer
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Correct Answer
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Which of the following represents the key difference between the short run and the long run?

Correct Answer
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A downward-sloping portion of a long-run average total cost curve is the result of:

Correct Answer
verified

Exam 6: Production Costs

Economies of scale can be caused by all of the following except :

Correct AnswerverifiedShow Answer

Exhibit 6-13 Cost curves In Exhibit 6-13, ATC is shown by the graph labeled:

Correct AnswerverifiedShow Answer

The total fixed cost curve:

Correct AnswerverifiedShow Answer

The marginal cost intersects the average variable cost

Correct AnswerverifiedShow Answer

Unlike implicit costs, explicit costs:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?

Correct AnswerverifiedShow Answer

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

Correct AnswerverifiedShow Answer

In the long run, firms in many industries often experience a falling average total cost curve as a result of:

Correct AnswerverifiedShow Answer

Exhibit 6 -14 Cost curves In Exhibit 6-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Diseconomies of scale exist for all of the following reasons except :

Correct AnswerverifiedShow Answer

Which of the following best describes a production function?

Correct AnswerverifiedShow Answer

Exhibit 6-13 Cost curves In Exhibit 6-13, AFC is shown by the graph labeled:

Correct AnswerverifiedShow Answer

Which of the following is most likely to be a fixed cost for a business?

Correct AnswerverifiedShow Answer

Exhibit 6-4 A marginal product curve As shown in Exhibit 6-4, the law of diminishing returns applies in the range of:

Correct AnswerverifiedShow Answer

Exhibit 6-15 Long-run average cost In Exhibit 6-15, diseconomies of scale are shown in the range of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following represents the key difference between the short run and the long run?

Correct AnswerverifiedShow Answer

A downward-sloping portion of a long-run average total cost curve is the result of:

Correct AnswerverifiedShow Answer

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