Question 1

Economic profit is found by subtracting accounting costs from total revenue.

Accepted Answer

A) True 
 B)False

Question 2

Which statement is correct?

Accepted Answer

A)   Marginal cost is the change in average cost when there is a change in output of 1 unit.
B)   The marginal cost curve cuts the average variable cost curve at its lowest point.
C)   The marginal cost curve cuts the average variable cost curve at an output greater than where the marginal cost curve cuts the average cost curve.
D)   If average variable cost is increasing, then average total cost must be increasing too.E) A) and D)
F) B) and C)

Question 3

Which of the following statements is not correct?

Accepted Answer

A)   The real cost of producing X is the quantity of products, R, S, or T etc., which could have been produced with the resources devoted to X.
B)   Diseconomies of scale arise primarily from the difficulties in managing and coordinating a large-scale business enterprise.
C)   The law of diminishing returns explains the fact that the long-run average total cost curve is U-shaped.
D)   Average fixed costs diminish so long as output increases.E) All of the above
F) A) and C)

Question 4

Answer the question on the basis of the accompanying table that shows average total costs (ATC)  for a manufacturing firm whose total fixed costs are $10.   Output  ATC 1$40227329431538\begin{array}{|c|c|}\hline 	ext { Output } & 	ext { ATC } \\hline 1 & \$ 40 \\hline 2 & 27 \\hline 3 & 29 \\hline 4 & 31 \\hline 5 & 38 \\hline\end{array} Output 12345​ ATC $4027293138​​  The marginal cost of the fourth unit of output is

Accepted Answer

A)   $2.
B)   $12.
C)   $37.
D)   $16. E) A) and D)
F) B) and D)

Question 5

Average fixed cost

Accepted Answer

A)   equals marginal cost when average total cost is at its minimum.
B)   may be found for any output by adding average variable cost and average total cost.
C)   graphs as a U-shaped curve.
D)   declines continually as output increases.E) B) and D)
F) None of the above

Question 6

Accounting profits equal total revenue minus

Accepted Answer

A)   total explicit costs.
B)   total implicit costs.
C)   total economic costs.
D)   economic profits.E) B) and D)
F) B) and C)

Question 7

Economies of scale are indicated by

Accepted Answer

A)   the rising segment of the average variable cost curve.
B)   the declining segment of the long-run average total cost curve.
C)   the difference between total revenue and total cost.
D)   a rising marginal cost curve.E) A) and C)
F) None of the above

Question 8

Answer the question on the basis of the following information. TFC = Total Fixed Cost Q = Quantity of Output
MC = Marginal Cost P = Product Price TVC = Total Variable Cost
Marginal cost is .

Accepted Answer

A)     Change in TVC Q \frac { 	ext { Change in TVC } } { Q }Q Change in TVC ​ 
B)     Change in TVC  Change in Q  \frac { 	ext { Change in TVC } } { 	ext { Change in Q }} Change in Q  Change in TVC ​ 
C)    P−Q Change in Q  \frac { P-Q} { 	ext { Change in Q }} Change in Q P−Q​ 
D)     Change in TPC  Change in Q  \frac { 	ext { Change in TPC } } { 	ext { Change in Q }} Change in Q  Change in TPC ​E) B) and C)
F) A) and B)

Question 9

Answer the question on the basis of the following cost data.   Output  Total Cost 0$24133241348454561669\begin{array} { | c | c | } \hline 	ext { Output } & 	ext { Total Cost } \\hline \mathbf { 0 } & \mathbf { \$2 4 } \\hline 1 & 33 \\hline 2 & 41 \\hline 3 & 48 \\hline 4 & 54 \\hline 5 & 61 \\hline 6 & 69 \\hline\end{array} Output 0123456​ Total Cost $24334148546169​​  The average total cost of producing 3 units of output is

Accepted Answer

A)   $14.
B)   $12.
C)   $13.50.
D)   $16. E) B) and D)
F) A) and B)

Question 10

The mass affordability of the iPhone is the result of the following, except

Accepted Answer

A)   mass production and spreading of fixed costs.
B)   the law of diminishing returns in manufacturing.
C)   economies of scale and large volumes.
D)   mass sales and distribution cost savings.E) B) and C)
F) B) and D)

Question 11

(Consider This)  If the law of diminishing returns applies to study time,

Accepted Answer

A)   the tenth hour of study will likely be less productive than the third.
B)   this implies that longer lectures are less productive than shorter ones.
C)   there is no benefit to studying a subject more than five hours in any given day.
D)   people with less intelligence necessarily experience diminishing returns sooner than those with greater intelligence.E) A) and C)
F) A) and D)

Question 12

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC)  change with output as shown in the accompanying table. Use this information to answer the following question.   Output  TVC 1$302503654855110\begin{array}{|c|c|}\hline 	ext { Output } & 	ext { TVC } \\hline 1 & \$ 30 \\hline 2 & 50 \\hline 3 & 65 \\hline 4 & 85 \\hline 5 & 110 \\hline\end{array} Output 12345​ TVC $30506585110​​  The marginal cost of the third unit of output is

Accepted Answer

A)   $105.
B)   $25.
C)   $15.
D)   $20. E) B) and C)
F) A) and B)

Question 13

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal)  costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's economic profit is

Accepted Answer

A)   $150,000.
B)   $80,000.
C)   $230,000.
D)   $94,000.E) A) and B)
F) A) and C)

Question 14

If you operated a small bakery, which of the following would be a variable cost in the short run?

Accepted Answer

A)   baking ovens
B)   interest on business loans
C)   annual lease payment for use of the building
D)   baking supplies (flour, salt, etc.) E) None of the above
F) A) and B)

Question 15

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 16

The vertical distance between the total cost and the total variable cost curves differs by an amount that

Accepted Answer

A)   initially increases, but then decreases, as output increases.
B)   is constant as output changes.
C)   decreases as output increases.
D)   increases as output increases.E) A) and C)
F) A) and D)

Question 17

A firm encountering economies of scale over some range of output will have a

Accepted Answer

A)   rising long-run average cost curve.
B)   falling long-run average cost curve.
C)   flat long-run average cost curve.
D)   rising, then falling, then rising long-run average cost curve.E) B) and C)
F) B) and D)

Question 18

Answer the question on the basis of the following cost data.   Output  Total Cost 0$24133241348454561669\begin{array}{|c|c|}\hline 	ext { Output } & 	ext { Total Cost } \\hline 0 & \$ 24 \\hline 1 & 33 \\hline 2 & 41 \\hline 3 & 48 \\hline 4 & 54 \\hline 5 & 61 \\hline 6 & 69 \\hline\end{array} Output 0123456​ Total Cost $24334148546169​​  The marginal cost of producing the sixth unit of output is

Accepted Answer

A)   $24.
B)   $12.
C)   $16.
D)   $8. E) All of the above
F) None of the above

Question 19

When a firm increases its output, its average fixed costs will stay constant.

Accepted Answer

A) True 
 B)False

Question 20

According to the law of diminishing marginal returns,

Accepted Answer

A)   output will fall and then rise as additional units of input are employed.
B)   employing additional inputs will diminish total output.
C)   the additional output generated by additional units of an input will diminish.
D)   the additional inputs necessary to produce an additional unit of output will diminish.E) All of the above
F) C) and D)

Exam 9: Businesses and the Costs of Production

If you operated a small bakery, which of the following would be a variable cost in the short run?

Correct Answer
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Economies of scale are indicated by

Correct Answer
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Economic profit is found by subtracting accounting costs from total revenue.

Correct Answer
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Which statement is correct?

Correct Answer
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Average fixed cost

Correct Answer
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(Consider This) If the law of diminishing returns applies to study time,

Correct Answer
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The vertical distance between the total cost and the total variable cost curves differs by an amount that

Correct Answer
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Correct Answer
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Correct Answer
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A firm encountering economies of scale over some range of output will have a

Correct Answer
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According to the law of diminishing marginal returns,

Correct Answer
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One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Correct Answer
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The mass affordability of the iPhone is the result of the following, except

Correct Answer
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Correct Answer
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Accounting profits equal total revenue minus

Correct Answer
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Answer the question on the basis of the following information. TFC = Total Fixed Cost Q = Quantity of Output MC = Marginal Cost P = Product Price TVC = Total Variable Cost Marginal cost is .

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Correct Answer
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Correct Answer
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When a firm increases its output, its average fixed costs will stay constant.

Correct Answer
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Exam 9: Businesses and the Costs of Production

If you operated a small bakery, which of the following would be a variable cost in the short run?

Correct AnswerverifiedShow Answer

Economies of scale are indicated by

Correct AnswerverifiedShow Answer

Economic profit is found by subtracting accounting costs from total revenue.

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Average fixed cost

Correct AnswerverifiedShow Answer

(Consider This) If the law of diminishing returns applies to study time,

Correct AnswerverifiedShow Answer

The vertical distance between the total cost and the total variable cost curves differs by an amount that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm encountering economies of scale over some range of output will have a

Correct AnswerverifiedShow Answer

According to the law of diminishing marginal returns,

Correct AnswerverifiedShow Answer

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Correct AnswerverifiedShow Answer

The mass affordability of the iPhone is the result of the following, except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accounting profits equal total revenue minus

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following information. TFC = Total Fixed Cost Q = Quantity of Output MC = Marginal Cost P = Product Price TVC = Total Variable Cost Marginal cost is .

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a firm increases its output, its average fixed costs will stay constant.

Correct AnswerverifiedShow Answer

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