Question 1

Which of the following is a short-run adjustment?

Accepted Answer

A)   A local bakery hires two additional bakers.
B)   Six new firms enter the plastics industry.
C)   The number of farms in the United States declines by 5 percent.
D)   BMW constructs a new assembly plant in South Carolina.E) B) and C)
F) C) and D)

Question 2

The long run is characterized by:

Accepted Answer

A)   the relevance of the law of diminishing returns.
B)   at least one fixed input.
C)   insufficient time for firms to enter or leave the industry.
D)   the ability of the firm to change its plant size.E) B) and C)
F) A) and D)

Question 3

In the short run:

Accepted Answer

A)   TVC will increase for a time at a diminishing rate,but then beyond some point will increase at an increasing rate.
B)   TVC will increase for a time at an increasing rate,but then beyond some point will increase at a diminishing rate.
C)   TVC will increase by the same absolute amount for each additional unit of output produced.
D)   one cannot generalize concerning the behavior of TVC as output increases.E) C) and D)
F) B) and C)

Question 4

To the economist,total cost includes:

Accepted Answer

A)   explicit and implicit costs.
B)   neither implicit nor explicit costs.
C)   implicit,but not explicit,costs.
D)   explicit,but not implicit,costs.E) None of the above
F) A) and D) A

Question 5

Answer the question on the basis of the following cost data:   Total  Output  Cost 0$24133241348454561669\begin{array} { c c c } &&	ext { Total } \	ext { Output }&&	ext { Cost }\\hline0 & & \$ 24 \1 & & 33 \2 & & 41 \3 & & 48 \4 & & 54 \5 & & 61 \6 & & 69\end{array} Output 0123456​​ Total  Cost $24334148546169​​  Refer to the data.The average fixed cost of producing 3 units of output is:

Accepted Answer

A)   $8.
B)   $7.40.
C)   $5.50.
D)   $6. E) A) and B)
F) A) and C)

Question 6

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent.This means that initially it was producing:

Accepted Answer

A)   in the range of diseconomies of scale.
B)   in the range of economies of scale.
C)   where AP is less than MP.
D)   at the point of minimum efficient scale.E) None of the above
F) All of the above

Question 7

In which of the following industries are economies of scale exhausted at relatively low levels of output?

Accepted Answer

A)   Aircraft production.
B)   Automobile manufacturing.
C)   Concrete mixing.
D)   Newspaper printing.E) A) and C)
F) B) and C)

Question 8

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased:

Accepted Answer

A)   total cost at first increases at a decreasing rate and then increases at an increasing rate.
B)   total variable cost at first increases at an increasing rate and then increases at a decreasing rate.
C)   average total cost at first increases and then diminishes.
D)   average fixed cost will rise beyond the point of diminishing returns.E) A) and C)
F) All of the above

Question 9

(Last Word) Which of the following is predicted to deliver a Third Industrial Revolution characterized by low production and transportation costs?

Accepted Answer

A)   New technology in additive manufacturing.
B)   New technology in energy production involving fusion reactors.
C)   Significant decreases in petroleum prices with the discovery of new oil fields and new extraction techniques.
D)   New transportation technology involving anti-gravitational fields.E) A) and B)
F) A) and C)

Question 10

If a firm doubles its output in the long run and its unit costs of production decline,we can conclude that:

Accepted Answer

A)   technological progress has occurred.
B)   economies of scale are being realized.
C)   the firm is encountering diminishing returns.
D)   diseconomies of scale are being encountered.E) None of the above
F) C) and D)

Question 11

Answer the question on the basis of the following cost data:  Output‾12345678AverageFixedCost ‾$50.0025.0016.6712.5010.008.377.146.25AverageVariableCost ‾$100.0080.0066.6765.0068.0073.3380.0087.50\begin{array}{c}\begin{array}{c}\\\underline{	ext {Output}}\1 \2 \3 \4 \5 \6 \7 \8\end{array}\begin{array}{c}	ext {Average}\	ext {Fixed}\\underline{	ext {Cost }}\\$ 50.00  \25.00 \16.67 \12.50 \10.00 \8.37 \7.14 \6.25\end{array}\begin{array}{c}	ext {Average}\	ext {Variable}\\underline{	ext {Cost }}\ \$ 100.00  \80.00 \66.67 \65.00 \68.00 \73.33 \80.00 \87.50\end{array}\end{array}Output​12345678​AverageFixedCost ​$50.0025.0016.6712.5010.008.377.146.25​AverageVariableCost ​$100.0080.0066.6765.0068.0073.3380.0087.50​​ 
 Refer to the data.The average total cost of five units of output is:

Accepted Answer

A)   $69.
B)   $78.
C)   $3.
D)   $10. E) A) and B)
F) B) and D)

Question 12

Answer the question on the basis of the following output data for a firm.Assume that the amounts of all nonlabor resources are fixed.   Number of Units of  Workers  Output 001402903126415051656180\begin{array}{l}\begin{array} { c c c } 	ext { Number of}&&	ext{ Units of }\	ext { Workers } & & 	ext { Output } \\hline0 & & 0 \1 & & 40 \2 & & 90 \3 & & 126 \4 & & 150 \5 & & 165 \6 & & 180\end{array}\end{array} Number of Workers 0123456​​ Units of  Output 04090126150165180​​​  Refer to the data.Diminishing marginal returns become evident with the addition of the:

Accepted Answer

A)   sixth worker.
B)   fourth worker.
C)   third worker.
D)   second worker. E) All of the above
F) B) and D)

Question 13

Which of the following best expresses the law of diminishing returns?

Accepted Answer

A)   Because large-scale production allows the realization of economies of scale,the real costs of production vary directly with the level of output.
B)   Population growth automatically adjusts to that level at which the average product per worker will be at a maximum.
C)   As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital) ,beyond some point the resulting extra or marginal output will decline.
D)   Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.E) A) and B)
F) B) and D)

Question 14

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent,then:

Accepted Answer

A)   it is encountering diseconomies of scale.
B)   it is encountering economies of scale.
C)   it is encountering constant returns to scale.
D)   the marginal products of all inputs are falling.E) A) and B)
F) All of the above

Question 15

Marginal product:

Accepted Answer

A)   diminishes at all levels of production.
B)   may initially increase,then diminish,but never become negative.
C)   may initially increase,then diminish,and ultimately become negative.
D)   is always less than average product.E) None of the above
F) A) and B) C

Question 16

Average fixed costs for a given level of output can be determined graphically by:

Accepted Answer

A)   summing the marginal costs of any number of units of output and dividing the sum by that output.
B)   the vertical distance between TC and TVC.
C)   the vertical distance between AVC and MC.
D)   the vertical distance between ATC and AVC.E) C) and D)
F) A) and B)

Question 17

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
Refer to the data.Creamy Crisp's implicit costs,including a normal profit,are:

Accepted Answer

A)   $136,000.
B)   $150,000.
C)   $94,000.
D)   $156,000.E) All of the above
F) B) and C)

Question 18

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
Refer to the data.Creamy Crisp's explicit costs are:

Accepted Answer

A)   $286,000.
B)   $150,000.
C)   $94,000.
D)   $156,000.E) All of the above
F) A) and C) B

Question 19

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120,then:

Accepted Answer

A)   the average variable cost of 10 units is $10.
B)   the average variable cost of 9 units is $10.
C)   the marginal cost of the tenth unit is $90.
D)   the firm is operating in the range of increasing marginal returns.E) A) and B)
F) A) and C)

Question 20

Answer the question on the basis of the following cost data:  Output‾12345678AverageFixedCost ‾$50.0025.0016.6712.5010.008.377.146.25AverageVariableCost ‾$100.0080.0066.6765.0068.0073.3380.0087.50\begin{array}{c}\begin{array}{c}\\\underline{	ext {Output}}\1 \2 \3 \4 \5 \6 \7 \8\end{array}\begin{array}{c}	ext {Average}\	ext {Fixed}\\underline{	ext {Cost }}\\$ 50.00  \25.00 \16.67 \12.50 \10.00 \8.37 \7.14 \6.25\end{array}\begin{array}{c}	ext {Average}\	ext {Variable}\\underline{	ext {Cost }}\ \$ 100.00  \80.00 \66.67 \65.00 \68.00 \73.33 \80.00 \87.50\end{array}\end{array}Output​12345678​AverageFixedCost ​$50.0025.0016.6712.5010.008.377.146.25​AverageVariableCost ​$100.0080.0066.6765.0068.0073.3380.0087.50​​ 
 Refer to the data.The marginal cost curve would intersect the average variable cost curve at about:

Accepted Answer

A)   2 units of output.
B)   4 units of output.
C)   6 units of output.
D)   7 units of output. E) A) and B)
F) A) and C)

Exam 9: Businesses and the Cost of Production

Which of the following is a short-run adjustment?

Correct Answer
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The long run is characterized by:

Correct Answer
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In the short run:

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To the economist,total cost includes:

Correct Answer
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A

Correct Answer
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The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent.This means that initially it was producing:

Correct Answer
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In which of the following industries are economies of scale exhausted at relatively low levels of output?

Correct Answer
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Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased:

Correct Answer
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(Last Word) Which of the following is predicted to deliver a Third Industrial Revolution characterized by low production and transportation costs?

Correct Answer
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If a firm doubles its output in the long run and its unit costs of production decline,we can conclude that:

Correct Answer
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Which of the following best expresses the law of diminishing returns?

Correct Answer
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If a firm increases all of its inputs by 10 percent and its output increases by 10 percent,then:

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Marginal product:

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C

Average fixed costs for a given level of output can be determined graphically by:

Correct Answer
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B

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120,then:

Correct Answer
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Correct Answer
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Exam 9: Businesses and the Cost of Production

Which of the following is a short-run adjustment?

Correct AnswerverifiedShow Answer

The long run is characterized by:

Correct AnswerverifiedShow Answer

In the short run:

Correct AnswerverifiedShow Answer

To the economist,total cost includes:

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent.This means that initially it was producing:

Correct AnswerverifiedShow Answer

In which of the following industries are economies of scale exhausted at relatively low levels of output?

Correct AnswerverifiedShow Answer

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased:

Correct AnswerverifiedShow Answer

(Last Word) Which of the following is predicted to deliver a Third Industrial Revolution characterized by low production and transportation costs?

Correct AnswerverifiedShow Answer

If a firm doubles its output in the long run and its unit costs of production decline,we can conclude that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best expresses the law of diminishing returns?

Correct AnswerverifiedShow Answer

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent,then:

Correct AnswerverifiedShow Answer

Marginal product:

Correct AnswerverifiedC

Average fixed costs for a given level of output can be determined graphically by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120,then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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A

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C

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B

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