Question 1

Exhibit 21-5
​
 
-Refer to Exhibit 21-5. The minimum efficient scale is at

Accepted Answer

A)  point A.
B)  point B.
C)  point C.
D)  point D.
E)  points B and C.

Question 2

Exhibit 21-5
​
 
-Refer to Exhibit 21-5. Diseconomies of scale are present between

Accepted Answer

A)  points A and B.
B)  points A and C.
C)  points B and C.
D)  points B and D.
E)  points C and D.

Question 3

Exhibit 21-9
​
 1 and ATC1 represent the initial cost curves of a peanut butter producer. In which of the following cases is it most likely that the firm's curves will shift leftward to MC2 and ATC2? A) The market price of peanuts decreases. B) There is an improvement in technology in the production of peanut butter. C) The government raises taxes paid by peanut butter producers. D) a and b" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 21-9. Let MC1 and ATC1 represent the initial cost curves of a peanut butter producer. In which of the following cases is it most likely that the firm's curves will shift leftward to MC2 and ATC2?

Accepted Answer

A)  The market price of peanuts decreases.
B)  There is an improvement in technology in the production of peanut butter.
C)  The government raises taxes paid by peanut butter producers.
D)  a and b

Question 4

Exhibit 21-7
​
 
-Refer to Exhibit 21-7. The average total cost of producing 4 units of output is

Accepted Answer

A)  $11.25.
B)  $5.00.
C)  $3.50.
D)  $27.50.
E)  There is not enough information to answer this question.

Question 5

Exhibit 21-10
​
  ​
-Refer to Exhibit 21-10. Which of the students has the highest marginal productivity for the fifth hour of studying?

Accepted Answer

A)  Jose
B)  Paul
C)  Marisol
D)  both Paul and Marisol

Question 6

The marginal cost curve passes through the __________ curve at its lowest point.

Accepted Answer

A)  average variable cost
B)  average total cost
C)  average fixed cost
D)  a and b
E)  a, b, and c

Question 7

-What is the relationship between the average fixed cost (AFC)  curve and the marginal cost (MC)  curve?

Accepted Answer

A)  The MC curve intersects the AFC curve at its minimum point.
B)  When the MC curve is above the AFC curve, AFC must be increasing.
C)  Both a and b are true.
D)  There is no relationship between the AFC curve and the MC curve..

Question 8

Suppose that one fixed and one variable input are used to produce good X. As the marginal physical product of the variable input increases, the marginal cost

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  There is not enough information to answer the question.

Question 9

A cost that is incurred when an actual monetary payment is made is a(n)  __________ cost.

Accepted Answer

A)  explicit
B)  implicit
C)  positive
D)  expressed

Question 10

A rising marginal cost curve is a reflection of a

Accepted Answer

A)  rising marginal physical product curve.
B)  falling marginal physical product curve.
C)  falling average fixed cost curve.
D)  rising average variable cost curve.

Question 11

-Refer to Situation 21-3. What are the total costs?

Accepted Answer

A)  $88,000
B)  $2,400
C)  $32,000
D)  $56,000
E)  There is not enough information to answer the question.

Question 12

If the LRATC curve is falling, then

Accepted Answer

A)  the law of diminishing marginal returns is operating.
B)  economies of scale are present.
C)  constant returns to scale are present.
D)  diseconomies of scale are present.

Question 13

Exhibit 21-3
​
 
-Refer to Exhibit 21-3. The marginal cost figures in blanks (I)  and (J) , respectively, are

Accepted Answer

A)  $5.33 and $10.00.
B)  $1.33 and $2.00.
C)  $1.33 and $1.43.
D)  $13.33 and $20.
E)  none of the above

Question 14

If labor is the variable input, then marginal cost equals

Accepted Answer

A)  MPP divided by the wage rate.
B)  average variable (labor)  costs divided by MPP.
C)  average variable (labor)  costs multiplied by MPP.
D)  the wage rate divided by MPP.
E)  the wage rate multiplied by MPP.

Question 15

Economic profit is the difference between total revenue and

Accepted Answer

A)  explicit costs.
B)  implicit costs.
C)  sunk costs.
D)  the sum of explicit and implicit costs.

Question 16

Which of the following situations would prompt individuals to try to form a team (firm) , according to Alchian and Demsetz.

Accepted Answer

A)  Jones, Smith, and Brown together produce 100 units of good X each day working alone and 90 units of good X each day working together.
B)  Jones, Smith, and Brown together produce 100 units of good X each day working alone and 120 units of good X each day working together.
C)  Jones, Smith, and Brown together produce 100 units of good X each day working alone and 100 units of good X each day working together.
D)  Jones produces more working alone than Smith or Brown produce working alone.
E)  Jones produces more working as a member of a team than Smith or Brown produce working as a member of a team.

Question 17

Economies of scale are exclusively a long-run phenomenon, while the law of diminishing marginal returns applies to both the short-run and to the long-run.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a given marginal cost curve starts out downward sloping and at some level of output turns upward and becomes upward sloping. The point at which it turns upward is the point at which

Accepted Answer

A)  marginal physical product increases.
B)  total cost rises.
C)  average fixed cost declines.
D)  average variable cost is below marginal cost.
E)  diminishing marginal returns set in.

Question 19

Minimum efficient scale refers to the

Accepted Answer

A)  smallest plant size a firm can utilize and still maintain production.
B)  lowest point on a given SRATC curve.
C)  output level at which the LRATC curve touches each SRATC curve.
D)  lowest output level at which average total costs are minimized.

Question 20

A firm that earns zero accounting profit is earning a normal profit.

Accepted Answer

A) True 
 B)False

Exam 21: Production and Costs

Economic profit is the difference between total revenue and

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Which of the following situations would prompt individuals to try to form a team (firm) , according to Alchian and Demsetz.

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Exhibit 21-5 ​ -Refer to Exhibit 21-5. The minimum efficient scale is at

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A firm that earns zero accounting profit is earning a normal profit.

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Suppose that one fixed and one variable input are used to produce good X. As the marginal physical product of the variable input increases, the marginal cost

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Economies of scale are exclusively a long-run phenomenon, while the law of diminishing marginal returns applies to both the short-run and to the long-run.

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Exhibit 21-9 ​ -Refer to Exhibit 21-9. Let MC1 and ATC1 represent the initial cost curves of a peanut butter producer. In which of the following cases is it most likely that the firm's curves will shift leftward to MC2 and ATC2?

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A cost that is incurred when an actual monetary payment is made is a(n) __________ cost.

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A rising marginal cost curve is a reflection of a

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Exhibit 21-7 ​ -Refer to Exhibit 21-7. The average total cost of producing 4 units of output is

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-What is the relationship between the average fixed cost (AFC) curve and the marginal cost (MC) curve?

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If labor is the variable input, then marginal cost equals

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If the LRATC curve is falling, then

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-Refer to Situation 21-3. What are the total costs?

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Suppose a given marginal cost curve starts out downward sloping and at some level of output turns upward and becomes upward sloping. The point at which it turns upward is the point at which

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Exhibit 21-3 ​ -Refer to Exhibit 21-3. The marginal cost figures in blanks (I) and (J) , respectively, are

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Exhibit 21-10 ​ ​ -Refer to Exhibit 21-10. Which of the students has the highest marginal productivity for the fifth hour of studying?

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The marginal cost curve passes through the __________ curve at its lowest point.

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Minimum efficient scale refers to the

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Exhibit 21-5 ​ -Refer to Exhibit 21-5. Diseconomies of scale are present between

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Exhibit 21-5 -Refer to Exhibit 21-5. The minimum efficient scale is at

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Exhibit 21-9 -Refer to Exhibit 21-9. Let MC₁ and ATC₁ represent the initial cost curves of a peanut butter producer. In which of the following cases is it most likely that the firm's curves will shift leftward to MC₂ and ATC₂?

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Exhibit 21-7 -Refer to Exhibit 21-7. The average total cost of producing 4 units of output is

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Exhibit 21-3 -Refer to Exhibit 21-3. The marginal cost figures in blanks (I) and (J) , respectively, are

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Exhibit 21-10 -Refer to Exhibit 21-10. Which of the students has the highest marginal productivity for the fifth hour of studying?

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Exhibit 21-5 -Refer to Exhibit 21-5. Diseconomies of scale are present between

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