Question 1

If a technological advance reduces the amount of variable resources needed to produce any level of output, then the

Accepted Answer

A)  AVC curve will shift upward.
B)  MC curve will shift downward.
C)  ATC curve will shift upward.
D)  AFC curve will shift downward.Topic: Short-Run Production Costs Topic: Short-Run Production Relationships Type: GraphE) A) and D)
F) B) and C)

Question 2

Which of the following is correct?

Accepted Answer

A)  There is no relationship between MP and MC.
B)  When AP is rising, MC is falling, and when AP is falling, MC is rising.
C)  When MP is rising, MC is rising, and when MP is falling, MC is falling.
D)  When MP is rising, MC is falling, and when MP is falling, MC is rising.Topic: Short-Run Production RelationshipsE) B) and D)
F) A) and C)

Question 3

Over the range of positive, but diminishing, marginal returns for an input, the total product curve increases at a decreasing rate.

Accepted Answer

A) True 
 B)False

Question 4

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) B) and C)
F) All of the above

Question 5

When average variable cost is at a minimum,

Accepted Answer

A)  marginal cost is at a maximum.
B)  the average product of labor is at a minimum.
C)  the marginal product of labor is at a minimum.
D)  the average product of labor is at a maximum.E) C) and D)
F) None of the above

Question 6

Fixed costs are those costs that are

Accepted Answer

A)  zero if the firm produces no output in the short run.
B)  unchanging through time.
C)  independent of the rate of output.
D)  for inputs whose prices are fixeD.Topic: Short-Run Production CostsE) A) and D)
F) C) and D)

Question 7

Over the range of positive, but diminishing, marginal returns for an input, the total product curve

Accepted Answer

A)  falls.
B)  rises at a constant rate.
C)  rises at a decreasing rate.
D)  rises at an increasing rate.E) B) and D)
F) B) and C)

Question 8

Which statement best illustrates the law of diminishing returns from studying?

Accepted Answer

A)  As hours of studying decrease, the student's GPA will also diminish.
B)  As study hours increase, the amount of learning will increase at a diminishing rate.
C)  Students with higher GPAs tend to study fewer hours on the night before a big exam.
D)  Students who cram the night before a big exam do not show much improvement in their learning.E) A) and D)
F) C) and D)

Question 9

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) A) and B)
F) B) and D)

Question 10

Which of the following statements is correct?

Accepted Answer

A)  Average total cost is the difference between average variable cost and average fixed cost.
B)  Marginal cost measures the cost per unit of output associated with any level of production.
C)  When marginal product rises, marginal cost must also rise.
D)  Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine)  divided by its marginal product.Topic: Short-Run Production RelationshipsE) B) and C)
F) A) and B)

Question 11

An explicit cost is

Accepted Answer

A)  omitted when accounting profits are calculated.
B)  a money payment made for resources not owned by the firm itself.
C)  an implicit cost to the resource owner who receives that payment.
D)  always in excess of a resource's opportunity cost.E) A) and B)
F) A) and C)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is correct?

Accepted Answer

A)  When total product is rising, both average product and marginal product must also be rising.
B)  When marginal product is falling, total product must be falling.
C)  When marginal product is falling, average product must also be falling.
D)  Marginal product rises faster than average product and also falls faster than average product.E) A) and B)
F) A) and C)

Question 14

Economic profits are

Accepted Answer

A)  always larger than accounting profits.
B)  the sum of accounting profits and implicit costs.
C)  equal to the difference between total revenues and implicit costs.
D)  equal to the difference between accounting profits and implicit costs.E) C) and D)
F) A) and D)

Question 15

In the long run, a firm can increase its output quantity, but it will be limited by the size of its existing production plant.

Accepted Answer

A) True 
 B)False

Question 16

For most producing firms,

Accepted Answer

A)  marginal cost rises as output is carried to a certain level, and then begins to decline.
B)  total costs rise as output is carried to a certain level, and then begin to decline.
C)  average total costs decline as output is carried to a certain level, and then begin to rise.
D)  average total costs rise as output is carried to a certain level, and then begin to decline.E) All of the above
F) B) and D)

Question 17

Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen?

Accepted Answer

A)  Marginal costs and average variable costs would both rise.
B)  Average fixed costs and average variable costs would rise.
C)  Average fixed costs and average total costs would rise.
D)  Average fixed costs would rise, but marginal costs would fall.E) B) and C)
F) A) and C)

Question 18

Which of the following is correct as it relates to cost curves?

Accepted Answer

A)  Average variable cost intersects marginal cost at the latter's minimum point.
B)  Marginal cost intersects average total cost at the latter's minimum point.
C)  Average fixed cost intersects marginal cost at the latter's minimum point.
D)  Marginal cost intersects average fixed cost at the latter's minimum point.E) A) and B)
F) None of the above

Question 19

At zero units of output, a firm's variable costs are zero.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that a firm produces 200,000 units a year and sells them all for $10 each.The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000.The firm earns an accounting profit of

Accepted Answer

A)  $500,000 and an economic profit of $200,000.
B)  $2,000,000 and an economic profit of $200,000.
C)  $200,000 and an economic profit of $2,000,000.
D)  $200,000 and an economic profit of $500,000.E) B) and D)
F) B) and C)

Exam 9: Businesses and the Costs of Production

Which statement best illustrates the law of diminishing returns from studying?

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Economic profits are

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

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Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen?

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In the long run, a firm can increase its output quantity, but it will be limited by the size of its existing production plant.

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Which of the following is correct?

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If a technological advance reduces the amount of variable resources needed to produce any level of output, then the

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Which of the following statements is correct?

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Which statement is correct?

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At zero units of output, a firm's variable costs are zero.

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Over the range of positive, but diminishing, marginal returns for an input, the total product curve increases at a decreasing rate.

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When average variable cost is at a minimum,

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Suppose that a firm produces 200,000 units a year and sells them all for $10 each.The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000.The firm earns an accounting profit of

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Over the range of positive, but diminishing, marginal returns for an input, the total product curve

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Which of the following is correct?

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Which of the following is correct as it relates to cost curves?

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Fixed costs are those costs that are

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An explicit cost is

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In the short run,

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For most producing firms,

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