Question 1

Suppose Winston's annual salary as an accountant is $60,000,and his financial assets generate $4,000 per year in interest.One day,after deciding to be his own boss,he quits his job and uses his financial assets to establish a consulting business,which he runs out of his home.To run the business,he outlays $8,000 in cash to cover all the costs involved with running the business,and earns revenues of $150,000.What costs would be considered when calculating economic profit?

Accepted Answer

A)   The opportunity cost of his job and interest forgone of $64,000, and the explicit cost of $8,000
B)   The implicit cost of the interest forgone of $4,000 and the explicit cost of $8,000
C)   The explicit cost of $8,000
D)   The implicit cost of his job of $60,000 and the opportunity cost of forgone interest of $4,000E) A) and C)
F) B) and C)

Question 2

Total cost can be defined as:

Accepted Answer

A)   the amount that a firm receives from the sale of goods and services.
B)   the amount that an individual spends on all normal goods and services within a specified period of time.
C)   the amount that a firm spends on all inputs that go into producing a good or service.
D)   None of these is correct.E) C) and D)
F) All of the above

Question 3

Average variable costs:

Accepted Answer

A)   always trend upward as output increases.
B)   always trend downward as output increases.
C)   decrease, then increase as output increases.
D)   increase, then decrease as output increases.E) A) and B)
F) None of the above

Question 4

Mika borrows $100,000 to start up her own beauty shop.She pays 5 percent interest on her loan.In order to account for all costs of her business,Mika must not forget:

Accepted Answer

A)   the implicit cost of $100,000.
B)   the implicit cost of $5,000.
C)   the explicit cost of $105,000.
D)   the explicit cost of $5,000.E) A) and B)
F) All of the above

Question 5

A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be an ongoing expense of the business?

Accepted Answer

A)   The cost of the truck
B)   The cost of the gasoline used
C)   The cost of ice cream scoopers
D)   None of these is an ongoing expense.E) B) and C)
F) A) and D)

Question 6

Costs that require a firm to spend money are considered:

Accepted Answer

A)   fixed costs.
B)   variable costs.
C)   explicit costs.
D)   implicit costs.E) C) and D)
F) B) and C)

Question 7

When economic profits are positive,accounting profits could be:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   All of these are possible.E) C) and D)
F) B) and C)

Question 8

If a firm increases production,then its:

Accepted Answer

A)   variable costs rise.
B)   fixed costs stay the same.
C)   total costs increase.
D)   All of these are true.E) None of the above
F) B) and C)

Question 9

A bracelet making company has three employees,and together they produce 10 bracelets an hour.When a fourth worker joins them,the output for the company is now 11 bracelets an hour.Which of the following is true?

Accepted Answer

A)   Diminishing marginal product started with the fourth worker.
B)   Average product has increased.
C)   Total product is increasing.
D)   None of these is true.E) B) and D)
F) A) and B)

Question 10

When accounting profits are negative,economic profits could be:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   All of these are possible.E) A) and C)
F) B) and C)

Question 11

If a firm produces nothing,then its:

Accepted Answer

A)   variable costs equal zero.
B)   fixed costs equal zero.
C)   total costs equal zero.
D)   All of these are true.E) A) and C)
F) All of the above

Question 12

Suppose Chip's Chips produces bags of potato chips.An example of a variable cost for this firm would be:

Accepted Answer

A)   the potato peeling machine.
B)   the factory building.
C)   the deep fryer.
D)   None of these is an example of a variable cost.E) C) and D)
F) All of the above

Question 13

If a firm stops production,then its:

Accepted Answer

A)   variable costs decrease to zero.
B)   fixed costs stay the same.
C)   total costs decrease.
D)   All of these are true.E) C) and D)
F) A) and B)

Question 14

When the slope of the total production curve steepens,it means:

Accepted Answer

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

Question 15

The additional cost a firm will incur by producing one additional unit of output is the:

Accepted Answer

A)   variable cost.
B)   fixed cost.
C)   marginal cost.
D)   total cost.E) A) and B)
F) A) and C)

Question 16

The larger the implicit costs of a business:

Accepted Answer

A)   the greater accounting profit will be.
B)   the smaller economic profit will be.
C)   the more likely it will be a successful venture.
D)   the smaller the explicit costs will be.E) A) and B)
F) B) and C)

Question 17

Marginal cost is:

Accepted Answer

A)   the additional output a firm will get by employing one additional unit of input.
B)   the additional cost a firm will incur by producing one additional unit of output.
C)   the total cost a firm will incur by producing a given level of output.
D)   the costs that sit on the margin, that do not change regardless of the level of output.E) None of the above
F) A) and D)

Question 18

Average product measures:

Accepted Answer

A)   the quantity of output produced per unit of input.
B)   the additional output created from an additional unit of input.
C)   the marginal product averaged across all inputs.
D)   All of these are true.E) None of the above
F) C) and D)

Question 19

Mike wants to open his own repair shop,and is considering using his savings of $30,000 to get it started.He is currently earning 3 percent interest on his savings.His friend Bob calls him and asks to borrow $30,000 to start up a bagel shop; Bob offers to pay him 5 percent interest if he loans him the money.If Mike were to use the money to open his own repair shop,how can he accurately account for his costs?

Accepted Answer

A)   Mike must consider the $900 in forgone interest on his savings as an implicit cost.
B)   Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost.
C)   Mike must consider the $900 in forgone interest on his savings as an explicit cost.
D)   Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an explicit cost.E) A) and D)
F) B) and D)

Question 20

Average product curve tells us:

Accepted Answer

A)   the level of inputs that are the most productive.
B)   the cost-minimizing level of inputs to hire.
C)   the profit-maximizing level of inputs to hire.
D)   All of these are true.E) B) and C)
F) A) and D)

Exam 12: The Costs of Production

When accounting profits are negative,economic profits could be:

Correct Answer
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When the slope of the total production curve steepens,it means:

Correct Answer
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The larger the implicit costs of a business:

Correct Answer
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If a firm stops production,then its:

Correct Answer
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Suppose Chip's Chips produces bags of potato chips.An example of a variable cost for this firm would be:

Correct Answer
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Mika borrows $100,000 to start up her own beauty shop.She pays 5 percent interest on her loan.In order to account for all costs of her business,Mika must not forget:

Correct Answer
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Total cost can be defined as:

Correct Answer
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Marginal cost is:

Correct Answer
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Costs that require a firm to spend money are considered:

Correct Answer
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If a firm increases production,then its:

Correct Answer
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Average product curve tells us:

Correct Answer
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A bracelet making company has three employees,and together they produce 10 bracelets an hour.When a fourth worker joins them,the output for the company is now 11 bracelets an hour.Which of the following is true?

Correct Answer
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Average variable costs:

Correct Answer
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If a firm produces nothing,then its:

Correct Answer
verified

A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be an ongoing expense of the business?

Correct Answer
verified

Average product measures:

Correct Answer
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The additional cost a firm will incur by producing one additional unit of output is the:

Correct Answer
verified

Correct Answer
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Correct Answer
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When economic profits are positive,accounting profits could be:

Correct Answer
verified

Exam 12: The Costs of Production

When accounting profits are negative,economic profits could be:

Correct AnswerverifiedShow Answer

When the slope of the total production curve steepens,it means:

Correct AnswerverifiedShow Answer

The larger the implicit costs of a business:

Correct AnswerverifiedShow Answer

If a firm stops production,then its:

Correct AnswerverifiedShow Answer

Suppose Chip's Chips produces bags of potato chips.An example of a variable cost for this firm would be:

Correct AnswerverifiedShow Answer

Mika borrows $100,000 to start up her own beauty shop.She pays 5 percent interest on her loan.In order to account for all costs of her business,Mika must not forget:

Correct AnswerverifiedShow Answer

Total cost can be defined as:

Correct AnswerverifiedShow Answer

Marginal cost is:

Correct AnswerverifiedShow Answer

Costs that require a firm to spend money are considered:

Correct AnswerverifiedShow Answer

If a firm increases production,then its:

Correct AnswerverifiedShow Answer

Average product curve tells us:

Correct AnswerverifiedShow Answer

A bracelet making company has three employees,and together they produce 10 bracelets an hour.When a fourth worker joins them,the output for the company is now 11 bracelets an hour.Which of the following is true?

Correct AnswerverifiedShow Answer

Average variable costs:

Correct AnswerverifiedShow Answer

If a firm produces nothing,then its:

Correct AnswerverifiedShow Answer

A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be an ongoing expense of the business?

Correct AnswerverifiedShow Answer

Average product measures:

Correct AnswerverifiedShow Answer

The additional cost a firm will incur by producing one additional unit of output is the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When economic profits are positive,accounting profits could be:

Correct AnswerverifiedShow Answer

Correct Answer
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