Question 1

When a company's accounting profit is positive, what will the economic profit be?

Accepted Answer

A)  Positive
B)  Negative
C)  Zero
D)  It could be positive, negative, or zero.E) C) and D)
F) All of the above

Question 2

The slope of the total production curve becomes _____ when marginal product decreases.

Accepted Answer

A)  steeper
B)  flatter
C)  negative
D)  None of these are correct.E) A) and D)
F) A) and C)

Question 3

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. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What is Winston's accounting profit?

Accepted Answer

A)  $78,000
B)  $142,000
C)  $138,000
D)  $150,000E) A) and D)
F) All of the above

Question 4

In the long run, when average total cost does not depend on the quantity of output, a firm experiences:

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  constant economies to scale.
D)  minimum average total cost.E) A) and B)
F) A) and D)

Question 5

Fixed costs are:

Accepted Answer

A)  costs that depend on the quantity of output produced.
B)  input costs that stay the same price per unit.
C)  costs that don't depend on the quantity of output produced.
D)  costs that are negotiated to stay the same throughout the life of a contract.E) B) and C)
F) A) and B)

Question 6

Which of the following would be considered an ongoing expense?

Accepted Answer

A)  Employee salaries
B)  Raw materials
C)  Advertising
D)  All of these are ongoing expenses.E) A) and D)
F) C) and D)

Question 7

Assume a company is at a point in production at which marginal product is above average product. Which of the following must be true?

Accepted Answer

A)  Diminishing marginal product must not have set in yet.
B)  Marginal product must be rising.
C)  Average product must be rising.
D)  All of these are correct.E) A) and B)
F) B) and C)

Question 8

If a firm increases production, its:

Accepted Answer

A)  variable costs rise.
B)  fixed costs stay the same.
C)  total costs increase.
D)  All of these are correct.E) A) and C)
F) B) and C)

Question 9

A business can analyze its accounting profit to figure out if _____, while economic profit tells the company whether _____.

Accepted Answer

A)  it is making money with a venture; it can make more money with a different venture
B)  it could make more money with a different venture; it is making money with this venture
C)  it is profitable; it can be any more profitable
D)  it can be any more profitable; it is profitableE) B) and C)
F) A) and B)

Question 10

The table shows the total production of hats at a factory given various numbers of employees. What is the marginal product of the fifth worker?

Accepted Answer

A)  40
B)  50
C)  30
D)  200E) All of the above
F) A) and D)

Question 11

Suppose Sam's Shoe Co. makes one kind of shoe. An example of a variable cost for this company would be:

Accepted Answer

A)  the design pattern for the shoes.
B)  the leather needed to make the shoes.
C)  the lease to the factory building.
D)  All of these are examples of variable costs.E) A) and D)
F) A) and C)

Question 12

The table shows the total production of hats in a factory given various numbers of employees. Diminishing marginal product sets in with the:

Accepted Answer

A)  fourth worker.
B)  third worker.
C)  fifth worker.
D)  second worker.E) B) and D)
F) C) and D)

Question 13

The principle of diminishing marginal product states that:

Accepted Answer

A)  the total output produced increases as the quantity of the input increases.
B)  the marginal product of an input decreases as the quantity of the input increases.
C)  the marginal product of an input eventually will be negative.
D)  the total output produced decreases as the quantity of the input increases.E) B) and C)
F) A) and C)

Question 14

Suppose Chip's Chips produces bags of potato chips that sell for $3 a bag. If Chip's sells 12,000 bags and incurs total costs of $30,000, what is the company's profit?

Accepted Answer

A)  $6,000
B)  $42,000
C)  $36,000
D)  $18,000E) A) and C)
F) A) and B)

Question 15

Suppose Bev's Bags makes large and small handbags. Bev rents an industrial space where she keeps the company's fabric, industrial sewing machine, measuring board, cutting shears, extra needles, thread, buttons, and labels. Bev can produce three bags an hour, regardless of the size of the bag. Which of the following would be considered a variable cost?

Accepted Answer

A)  The rent Bev pays
B)  The fabric
C)  The cutting shears
D)  None of these are variable costs.E) B) and C)
F) A) and D)

Question 16

The table shows costs for an individual firm. At the fifth unit produced:

Accepted Answer

A)  marginal cost is greater than average total cost.
B)  marginal cost is increasing.
C)  variable cost is decreasing.
D)  None of these are correct.E) All of the above
F) A) and D)

Question 17

Suppose Larry's Lariats produces 25,000 lassos and sells each for $10. What is the company's total revenue?

Accepted Answer

A)  $250,000
B)  $25,000
C)  $2,500
D)  $2,500,000E) A) and D)
F) A) and C)

Question 18

Average variable costs:

Accepted Answer

A)  decrease when marginal product rises and increase when marginal product declines.
B)  increase when marginal product rises and decrease when marginal product declines.
C)  increase when output declines and decrease when output rises.
D)  decrease when output declines and increase when output declines.E) C) and D)
F) B) and C)

Question 19

Suppose Bev's Bags makes large handbags and small handbags. If Bev's sells 70,000 large bags for $45 each and 25,000 small bags for $15 each, what is the company's total revenue?

Accepted Answer

A)  $3,150,000
B)  $375,000
C)  $3,525,000
D)  $2,850,000E) None of the above
F) A) and D)

Question 20

Suppose Bev's Bags makes large and small handbags. Bev rents an industrial space where she keeps the company's fabric, industrial sewing machine, measuring board, cutting shears, extra needles, thread, buttons, and labels. Bev can produce three bags an hour, regardless of the size of the bag. If Bev produces no bags, which of the following is true regarding Bev's costs?

Accepted Answer

A)  The variable cost of fabric would drop to zero.
B)  The fixed cost of thread would stay the same.
C)  The variable cost of cutting shears would drop to zero.
D)  All of these are correct.E) None of the above
F) A) and B)

Exam 12: The Costs of Production

A business can analyze its accounting profit to figure out if _, while economic profit tells the company whether _.

Correct Answer
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Which of the following would be considered an ongoing expense?

Correct Answer
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Suppose Bev's Bags makes large handbags and small handbags. If Bev's sells 70,000 large bags for $45 each and 25,000 small bags for $15 each, what is the company's total revenue?

Correct Answer
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In the long run, when average total cost does not depend on the quantity of output, a firm experiences:

Correct Answer
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Assume a company is at a point in production at which marginal product is above average product. Which of the following must be true?

Correct Answer
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The slope of the total production curve becomes _____ when marginal product decreases.

Correct Answer
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Suppose Larry's Lariats produces 25,000 lassos and sells each for $10. What is the company's total revenue?

Correct Answer
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Fixed costs are:

Correct Answer
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Correct Answer
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When a company's accounting profit is positive, what will the economic profit be?

Correct Answer
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Correct Answer
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Suppose Chip's Chips produces bags of potato chips that sell for $3 a bag. If Chip's sells 12,000 bags and incurs total costs of $30,000, what is the company's profit?

Correct Answer
verified

The table shows the total production of hats in a factory given various numbers of employees. Diminishing marginal product sets in with the:

Correct Answer
verified

The principle of diminishing marginal product states that:

Correct Answer
verified

Suppose Sam's Shoe Co. makes one kind of shoe. An example of a variable cost for this company would be:

Correct Answer
verified

Correct Answer
verified

The table shows the total production of hats at a factory given various numbers of employees. What is the marginal product of the fifth worker?

Correct Answer
verified

The table shows costs for an individual firm. At the fifth unit produced:

Correct Answer
verified

Average variable costs:

Correct Answer
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If a firm increases production, its:

Correct Answer
verified

Exam 12: The Costs of Production

A business can analyze its accounting profit to figure out if _____, while economic profit tells the company whether _____.

Correct AnswerverifiedShow Answer

Which of the following would be considered an ongoing expense?

Correct AnswerverifiedShow Answer

Suppose Bev's Bags makes large handbags and small handbags. If Bev's sells 70,000 large bags for $45 each and 25,000 small bags for $15 each, what is the company's total revenue?

Correct AnswerverifiedShow Answer

In the long run, when average total cost does not depend on the quantity of output, a firm experiences:

Correct AnswerverifiedShow Answer

Assume a company is at a point in production at which marginal product is above average product. Which of the following must be true?

Correct AnswerverifiedShow Answer

The slope of the total production curve becomes _____ when marginal product decreases.

Correct AnswerverifiedShow Answer

Suppose Larry's Lariats produces 25,000 lassos and sells each for $10. What is the company's total revenue?

Correct AnswerverifiedShow Answer

Fixed costs are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a company's accounting profit is positive, what will the economic profit be?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Chip's Chips produces bags of potato chips that sell for $3 a bag. If Chip's sells 12,000 bags and incurs total costs of $30,000, what is the company's profit?

Correct AnswerverifiedShow Answer

The table shows the total production of hats in a factory given various numbers of employees. Diminishing marginal product sets in with the:

Correct AnswerverifiedShow Answer

The principle of diminishing marginal product states that:

Correct AnswerverifiedShow Answer

Suppose Sam's Shoe Co. makes one kind of shoe. An example of a variable cost for this company would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The table shows the total production of hats at a factory given various numbers of employees. What is the marginal product of the fifth worker?

Correct AnswerverifiedShow Answer

The table shows costs for an individual firm. At the fifth unit produced:

Correct AnswerverifiedShow Answer

Average variable costs:

Correct AnswerverifiedShow Answer

If a firm increases production, its:

Correct AnswerverifiedShow Answer

A business can analyze its accounting profit to figure out if _, while economic profit tells the company whether _.

Correct Answer
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Correct Answer
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