Question 1

Fixed costs are incurred even when a firm does not produce anything.

Accepted Answer

A) True 
 B)False

Question 2

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Accepted Answer

A) True 
 B)False

Question 3

What does marginal cost tell us

Accepted Answer

A)  the value of all resources used in a production process
B)  the additional profit earned when output is increased by one unit
C)  the amount by which total cost rises when output is increased by one unit
D)  the amount by which output rises when labour is increased by one unitE) C) and D)
F) All of the above

Question 4

If a firm produces nothing,which of the following costs will be zero

Accepted Answer

A)  total cost
B)  fixed cost
C)  opportunity cost
D)  variable costE) None of the above
F) B) and C) D

Question 5

Which assumption is often realistic for a firm in the short run

Accepted Answer

A)  The firm can vary both the size of its factory and the number of workers it employs.
B)  The firm can vary the size of its factory, but not the number of workers it employs.
C)  The firm can vary the number of workers it employs, but not the size of its factory.
D)  The firm can vary neither the size of its factory nor the number of workers it employs.E) A) and C)
F) B) and C)

Question 6

What is the equation for accounting profit

Accepted Answer

A)  Total revenue - Total costs
B)  Economic profit + Implicit costs
C)  Total revenue - (Implicit costs + Total revenue)  - Opportunity costs
D)  Accounting revenue - Opportunity costsE) All of the above
F) A) and D)

Question 7

When a firm is making a profit-maximizing production decision,which of the following principles of economics is likely to be most important to the firm's decision

Accepted Answer

A)  The cost of something is what you give up to get it.
B)  A country's standard of living depends on its ability to produce goods and services.
C)  Prices rise when the government prints too much money.
D)  Governments can sometimes improve market outcomes.E) C) and D)
F) A) and B) A

Question 8

When does specialization among workers occur

Accepted Answer

A)  when each work is allowed to switch from one task to another
B)  when each worker is allowed to perfect one particular task
C)  when each worker is responsible for a number of different tasks
D)  when each worker is trained to be mobileE) A) and C)
F) B) and D)

Question 9

Suppose Jan is starting up a small lemonade stand business at the local farmer's market.What would be included in variable costs for Jan's lemonade stand

Accepted Answer

A)  the cost of building the lemonade stand
B)  the cost of hiring an artist to design a logo for her sign
C)  the cost of lemons
D)  the monthly fee for renting space at the marketE) B) and D)
F) All of the above C

Question 10

What is accounting profit equal to

Accepted Answer

A)  marginal revenue minus marginal cost
B)  total revenue minus the explicit cost of producing goods and services
C)  total revenue minus the opportunity cost of producing goods and services
D)  average revenue minus the average cost of producing the last unit of a good or serviceE) C) and D)
F) A) and B)

Question 11

Table 13-2 
-Refer to Table 13-2.During the week of July 1,Adrianne doesn't box any chocolates.What are her costs during the week

Accepted Answer

A)  $0
B)  $250
C)  $275
D)  $425E) A) and B)
F) C) and D)

Question 12

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

Accepted Answer

A) True 
 B)False

Question 13

Marginal cost increases as the quantity of output increases.What property does this reflect

Accepted Answer

A)  increasing total cost
B)  diminishing total cost
C)  increasing marginal product
D)  diminishing marginal productE) B) and D)
F) B) and C)

Question 14

XYZ Corporation produced 300 units of output but sold only 255 of the units it produced.The average cost of production for each unit of output produced was $100.Each of the 255 units sold was sold for a price of $100.What would total revenue for XYZ Corporation be

Accepted Answer

A)  -$2700
B)  $2700
C)  $21,125
D)  $25,500E) C) and D)
F) None of the above

Question 15

Scenario 13-5
A stationery firm produces and sells staplers.Last year, it produced 5000 staplers and sold each stapler for $10.In producing the 5000 staplers, it incurred variable costs of $25,000 and a total cost of $45,000.
-Refer to Scenario 13-5.What was the firm's economic profit for the year

Accepted Answer

A)  -$35,000
B)  -$5000
C)  $5000
D)  $10,000E) A) and B)
F) B) and D)

Question 16

Figure 13-2
The figure depicts a total cost function for a firm that produces cookies.
 
-Refer to Figure 13-2.What does the changing slope of the total-cost curve reflect

Accepted Answer

A)  decreasing average variable cost
B)  decreasing average total cost
C)  decreasing marginal product
D)  decreasing marginal costE) B) and D)
F) A) and B)

Question 17

Table 13-3 
-Refer to Table 13-3.What is the average variable cost for the month if six instructional modules are produced

Accepted Answer

A)  $180.00
B)  $533.33
C)  $700.00
D)  $713.33E) None of the above
F) A) and B)

Question 18

Table 13-2 
-Refer to Table 13-2.Adrianne has received an order for 3000 boxes of chocolates for next week.Suppose she expects that the trend in the marginal product (MP)  of labour will continue in the same direction.What is most likely her best decision

Accepted Answer

A)  not commit to meeting the order until she can move to a larger room and hire more workers to box the chocolates
B)  close her business until she is able to hire more productive workers
C)  hire about 12 new workers and hope she can satisfy the order
D)  commit to meeting the order and then take three weeks to complete the jobE) C) and D)
F) B) and D)

Question 19

Figure 13-1
The figure depicts a production function for a firm that produces cookies.
 
-Refer to Figure 13-1.As the number of workers increases,what happens to the firm's production

Accepted Answer

A)  total output increases, but at a decreasing rate
B)  marginal product increases, but at a decreasing rate
C)  marginal product increases at an increasing rate
D)  total output increases, at an increasing rateE) A) and B)
F) A) and C)

Question 20

What is the cost of producing an additional unit of output

Accepted Answer

A)  the firm's marginal cost
B)  the firm's marginal product
C)  the firm's variable cost
D)  the firm's average variable costE) All of the above
F) B) and D)

Exam 13: The Costs of Production

Fixed costs are incurred even when a firm does not produce anything.

Correct AnswerverifiedShow Answer

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Correct AnswerverifiedShow Answer

What does marginal cost tell us

Correct AnswerverifiedShow Answer

If a firm produces nothing,which of the following costs will be zero

Correct AnswerverifiedD

Which assumption is often realistic for a firm in the short run

Correct AnswerverifiedShow Answer

What is the equation for accounting profit

Correct AnswerverifiedShow Answer

When a firm is making a profit-maximizing production decision,which of the following principles of economics is likely to be most important to the firm's decision

Correct AnswerverifiedA

When does specialization among workers occur

Correct AnswerverifiedShow Answer

Suppose Jan is starting up a small lemonade stand business at the local farmer's market.What would be included in variable costs for Jan's lemonade stand

Correct AnswerverifiedC

What is accounting profit equal to

Correct AnswerverifiedShow Answer

Table 13-2 -Refer to Table 13-2.During the week of July 1,Adrianne doesn't box any chocolates.What are her costs during the week

Correct AnswerverifiedShow Answer

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

Correct AnswerverifiedShow Answer

Marginal cost increases as the quantity of output increases.What property does this reflect

Correct AnswerverifiedShow Answer

XYZ Corporation produced 300 units of output but sold only 255 of the units it produced.The average cost of production for each unit of output produced was $100.Each of the 255 units sold was sold for a price of $100.What would total revenue for XYZ Corporation be

Correct AnswerverifiedShow Answer

Scenario 13-5 A stationery firm produces and sells staplers.Last year, it produced 5000 staplers and sold each stapler for $10.In producing the 5000 staplers, it incurred variable costs of $25,000 and a total cost of $45,000. -Refer to Scenario 13-5.What was the firm's economic profit for the year

Correct AnswerverifiedShow Answer

Figure 13-2 The figure depicts a total cost function for a firm that produces cookies. -Refer to Figure 13-2.What does the changing slope of the total-cost curve reflect

Correct AnswerverifiedShow Answer

Table 13-3 -Refer to Table 13-3.What is the average variable cost for the month if six instructional modules are produced

Correct AnswerverifiedShow Answer

Table 13-2 -Refer to Table 13-2.Adrianne has received an order for 3000 boxes of chocolates for next week.Suppose she expects that the trend in the marginal product (MP) of labour will continue in the same direction.What is most likely her best decision

Correct AnswerverifiedShow Answer

Figure 13-1 The figure depicts a production function for a firm that produces cookies. -Refer to Figure 13-1.As the number of workers increases,what happens to the firm's production

Correct AnswerverifiedShow Answer

What is the cost of producing an additional unit of output

Correct AnswerverifiedShow Answer

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