Question 1

Average variable cost:

Accepted Answer

A)  first decreases then increases as output expands.
B)  remains unchanged as output expands.
C)  always increases as output increases.
D)  always decreases as output expands.E) A) and D)
F) B) and C)

Question 2

An example of an implicit cost of production is:

Accepted Answer

A)  the cost of raw materials used to produce bread in a bakery.
B)  the cost of labor in a factory that assembles DVD players.
C)  the income an entrepreneur could have earned working for someone else.
D)  all of the above.E) A) and B)
F) A) and C)

Question 3

Table 6-D
The table below shows how total cost varies with output in a factory producing watches:
   Output  (Per Week)   Tatal Cost  (Dollars)  0$501$602$653$694$725$956$120\begin{array} { c c } \begin{array} { c } 	ext { Output } \	ext { (Per Week)  }\end{array} & \begin{array} { c } 	ext { Tatal Cost } \	ext { (Dollars)  }\end{array} \\hline 0 & \$ 50 \1 & \$ 60 \2 & \$ 65 \3 & \$ 69 \4 & \$ 72 \5 & \$ 95 \6 & \$ 120\end{array} Output  (Per Week)  ​0123456​ Tatal Cost  (Dollars)  ​$50$60$65$69$72$95$120​​ 
-Refer to Table 6-D.The marginal cost of producing a third watch equals:

Accepted Answer

A)  $50.
B)  $69.
C)  $5.
D)  $4.
E)  none of the above. F) A) and E)
G) None of the above

Question 4

Figure 6-C 
-Refer to Figure 6-C.The short-run average total cost curve is the curve labeled:

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) A) and B)
F) B) and D)

Question 5

Which of the following would be considered a variable input in the long run?

Accepted Answer

A)  The size of a firm's plant.
B)  The acreage of an apple farmer's orchard.
C)  The production capacity of a machine.
D)  All of the above.
E)  None of the above.F) None of the above
G) B) and D)

Question 6

An economist's measurement of profit differs from an accountant's in that:

Accepted Answer

A)  accountants calculate total revenue differently than do economists.
B)  economists do not always include all of the opportunity costs when calculating total production costs.
C)  accountants do not always include all of the opportunity costs when calculating total production costs.
D)  economic profit generally exceeds accounting profit.E) A) and B)
F) A) and C)

Question 7

Figure 7-H 
-Economists define the long run as any production time period lasting over one year.

Accepted Answer

A) True 
 B)False

Question 8

Figure 6-D 
-Refer to Figure 6-D.At output level 0Q, total fixed cost equals:

Accepted Answer

A)  area ADQ0.
B)  area ADEB.
C)  area ADFC.
D)  area BEQ0.E) None of the above
F) A) and B)

Question 9

Figure 7-H 
-The law of diminishing marginal product provides an explanation for why average total cost eventually increases as output is expanded in the short run.

Accepted Answer

A) True 
 B)False

Question 10

Table 6-E
   Quantity of Bicycles 0123456 (in thousands)   Total Cost of Production $5$8$12$16.5$20$27.5$36 (in thousands)  \begin{array}{lrrrrrrr}	ext { Quantity of Bicycles } & 0 & 1 & 2 & 3 & 4 & 5&6 \	ext { (in thousands)  } \	ext { Total Cost of Production } & \$ 5 & \$ 8 & \$ 12 & \$ 16.5 & \$ 20 & \$ 27.5 & \$ 36\	ext { (in thousands)  } \end{array} Quantity of Bicycles  (in thousands)   Total Cost of Production  (in thousands)  ​0$5​1$8​2$12​3$16.5​4$20​5$27.5​6$36​  
-Refer to Table 6-E.At what level of output (in thousands)  is average total cost minimized?

Accepted Answer

A)  1
B)  2
C)  3
D)  4
E)  5 F) A) and B)
G) A) and E)

Question 11

If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced:

Accepted Answer

A)  is definitely greater than the marginal cost of producing the tenth unit.
B)  is definitely less than the marginal cost of producing the tenth unit.
C)  is less than the average total cost of producing ten units.
D)  is greater than the average total cost of producing ten units.E) B) and C)
F) C) and D)

Question 12

As quantity increases, which of the following must be true if average total costs are rising?

Accepted Answer

A)  Marginal cost must be greater than average total cost.
B)  Marginal cost must be less than average total cost.
C)  Average fixed cost must be increasing.
D)  Average fixed cost must be less than average variable cost.E) B) and C)
F) None of the above

Question 13

Which of the following is most likely a fixed cost?

Accepted Answer

A)  Raw materials costs.
B)  Shipping charges.
C)  Property insurance premiums.
D)  Fuel costs for running the factory.
E)  None of the above.F) C) and D)
G) None of the above

Question 14

Figure 7-H 
-When marginal cost is increasing, average total cost must be increasing.

Accepted Answer

A) True 
 B)False

Question 15

Over the range of diminishing marginal product, if the variable input to a firm is increased:

Accepted Answer

A)  output will increase more than in proportion to the increase in the input.
B)  output will increase less than in proportion to the increase in the input.
C)  output will increase exactly in proportion to the increase in the input.
D)  output will increase more than in proportion to the increase in the inputs at first, but it will eventually increase less than in proportion to the increase in the input.
E)  According to the principle of diminishing marginal product nothing will happen to output when only the variable input is increased.F) A) and E)
G) None of the above

Question 16

If marginal cost is increasing then:

Accepted Answer

A)  marginal product must be increasing.
B)  average variable cost must be increasing.
C)  average total cost must be increasing.
D)  average variable cost must be decreasing.
E)  none of the above must necessarily be true.F) B) and D)
G) None of the above

Question 17

Table 6-A
   # of Pickers  Total # of Oranges Picked 11,00022,00033,00043,90054,70065,40076,00086,20096,000\begin{array} { | c | c | } \hline 	ext { \# of Pickers } & 	ext { Total \# of Oranges Picked } \\hline 1 & 1,000 \\hline 2 & 2,000 \\hline 3 & 3,000 \\hline 4 & 3,900 \\hline 5 & 4,700 \\hline 6 & 5,400 \\hline 7 & 6,000 \\hline 8 & 6,200 \\hline 9 & 6,000 \\hline\end{array} # of Pickers 123456789​ Total # of Oranges Picked 1,0002,0003,0003,9004,7005,4006,0006,2006,000​​ 
-Refer to Table 6-A.The total product of labor diminishes with the addition of the ____ picker.

Accepted Answer

A)  fourth
B)  fifth
C)  seventh
D)  eighth
E)  ninth F) C) and D)
G) B) and D)

Question 18

Diseconomies of scale are associated with:

Accepted Answer

A)  a downward sloping long-run average total cost curve.
B)  an upward sloping long-run average total cost curve.
C)  a horizontal long-run average total cost curve.
D)  a vertical long-run average total cost curve.
E)  none of the above.F) A) and B)
G) A) and C)

Question 19

Assume the following cost information about Fred's widget company: Its fixed cost is $27, and its total variable cost is $18 for 1 unit; $33 for 2; $45 for 3; $60 for 4; and $78 for 5.Given this information:

Accepted Answer

A)  average fixed cost rises from an output of four to an output of five.
B)  average fixed cost is greater than marginal cost for the second unit produced.
C)  the output level which minimizes average total cost is four units.
D)  average variable cost rises, but average total cost falls, as output increases from four to five.E) B) and C)
F) A) and B)

Question 20

An important and often ignored opportunity cost is the:

Accepted Answer

A)  cost of accounting services.
B)  cost of missed market opportunities when funds are invested in a firm.
C)  cost of interest paid to bondholders by the firm.
D)  cost of utilities used by the firm.E) B) and D)
F) None of the above

Exam 6: Production and Costs

Which of the following is most likely a fixed cost?

Correct Answer
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Diseconomies of scale are associated with:

Correct Answer
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Which of the following would be considered a variable input in the long run?

Correct Answer
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An example of an implicit cost of production is:

Correct Answer
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Correct Answer
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An important and often ignored opportunity cost is the:

Correct Answer
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Figure 7-H -When marginal cost is increasing, average total cost must be increasing.

Correct Answer
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Over the range of diminishing marginal product, if the variable input to a firm is increased:

Correct Answer
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An economist's measurement of profit differs from an accountant's in that:

Correct Answer
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Assume the following cost information about Fred's widget company: Its fixed cost is $27, and its total variable cost is $18 for 1 unit; $33 for 2; $45 for 3; $60 for 4; and $78 for 5.Given this information:

Correct Answer
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As quantity increases, which of the following must be true if average total costs are rising?

Correct Answer
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If marginal cost is increasing then:

Correct Answer
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Correct Answer
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If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced:

Correct Answer
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Figure 7-H -Economists define the long run as any production time period lasting over one year.

Correct Answer
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Average variable cost:

Correct Answer
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Figure 7-H -The law of diminishing marginal product provides an explanation for why average total cost eventually increases as output is expanded in the short run.

Correct Answer
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Figure 6-D -Refer to Figure 6-D.At output level 0Q, total fixed cost equals:

Correct Answer
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Figure 6-C -Refer to Figure 6-C.The short-run average total cost curve is the curve labeled:

Correct Answer
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Exam 6: Production and Costs

Which of the following is most likely a fixed cost?

Correct AnswerverifiedShow Answer

Diseconomies of scale are associated with:

Correct AnswerverifiedShow Answer

Which of the following would be considered a variable input in the long run?

Correct AnswerverifiedShow Answer

An example of an implicit cost of production is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An important and often ignored opportunity cost is the:

Correct AnswerverifiedShow Answer

Figure 7-H -When marginal cost is increasing, average total cost must be increasing.

Correct AnswerverifiedShow Answer

Over the range of diminishing marginal product, if the variable input to a firm is increased:

Correct AnswerverifiedShow Answer

An economist's measurement of profit differs from an accountant's in that:

Correct AnswerverifiedShow Answer

Assume the following cost information about Fred's widget company: Its fixed cost is $27, and its total variable cost is $18 for 1 unit; $33 for 2; $45 for 3; $60 for 4; and $78 for 5.Given this information:

Correct AnswerverifiedShow Answer

As quantity increases, which of the following must be true if average total costs are rising?

Correct AnswerverifiedShow Answer

If marginal cost is increasing then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced:

Correct AnswerverifiedShow Answer

Figure 7-H -Economists define the long run as any production time period lasting over one year.

Correct AnswerverifiedShow Answer

Average variable cost:

Correct AnswerverifiedShow Answer

Figure 7-H -The law of diminishing marginal product provides an explanation for why average total cost eventually increases as output is expanded in the short run.

Correct AnswerverifiedShow Answer

Figure 6-D -Refer to Figure 6-D.At output level 0Q, total fixed cost equals:

Correct AnswerverifiedShow Answer

Figure 6-C -Refer to Figure 6-C.The short-run average total cost curve is the curve labeled:

Correct AnswerverifiedShow Answer

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