Question 1

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

Accepted Answer

A)   $1.00
B)   $3.00
C)   $4.00
D)   $7.00

Question 2

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?

Accepted Answer

A)   variable costs
B)   fixed costs
C)   opportunity costs
D)   total cost

Question 3

Briefly explain how the total revenue for a profit-seeking firm is determined.

Accepted Answer

The total revenue for a profit-seeking f...

Question 4

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

Accepted Answer

A)   63%
B)   50%
C)   45%
D)   35%

Question 5

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

Accepted Answer

A)   Total profits
B)   Total revenues
C)   Total costs
D)   Total profit margins C

Question 6

Fixed costs are important because, at least in the ___________, the firm _______________.

Accepted Answer

A)   long run; cannot alter them
B)   short run; cannot alter them
C)   long run; can alter them
D)   short run; can alter them

Question 7

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

Accepted Answer

A)   diminishing marginal returns
B)   fixed costs
C)   variable cost
D)   average cost

Question 8

The term "constant returns to scale" describes a situation where

Accepted Answer

A)   expanding all inputs does not change the average cost of production.
B)   a larger-scale firm can produce at a lower cost than a smaller-scale firm.
C)   expanding all inputs changes the average cost of production.
D)   the quantity of output rises and the average cost of production falls.

Question 9

Refer to the table below.

If the firm produces 5 units that it sells for $39.00 each, what will its profits or losses equal?

Accepted Answer

A)   losses equal $40
B)   profits equal $70
C)   profits equal $40
D)   losses equal $70 C

Question 10

Contrast the role of fixed costs and variable costs in economic decisions about future production and pricing.

Accepted Answer

Fixed costs are sunk costs because they...

Question 11

-The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer.

Accepted Answer

A)   this market is perfectly competitive with excess profits possible in the short-run
B)   this market is imperfectly competitive with excess profits possible in the short-run
C)   this market is imperfectly competitive with excess profits possible in the long-run
D)   this market is perfectly competitive with negative profits possible in the long-run

Question 12

Why would labor be treated as a variable cost?

Accepted Answer

A)   they are costs incurred in the act of producing that will decrease with quantity produced
B)   they are made before production starts and vary according to the specific line of business
C)   labor costs are an input cost that firms are unable to change in the short run
D)   producing larger quantities of a good or service generally requires more workers

Question 13

Refer to the table below.

If this information were used to create a total cost graph, the curve should

Accepted Answer

A)   begin at 40 on the vertical axis and slope upward.
B)   become steeper as quantity increases.
C)   become steeper due to diminishing returns.
D)   reflect all of the above.

Question 14

Briefly explain what the term "agglomeration economies" refers to and briefly describe what the fundamental reason for the development of this particular type of economy relates to. Provide two examples of factors associated with agglomeration economies and identify what these factors help to explain. Identify two factors that would lead to diseconomies and briefly explain how the future of many of the world's cities will be likely be determined.

Accepted Answer

Agglomeration economies refer to the ec...

Question 15

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

Accepted Answer

A)   either total cost or average cost
B)   increasing marginal returns
C)   either total cost or variable cost
D)   decreasing marginal returns

Question 16

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Accepted Answer

A)   Total revenue
B)   Total profits
C)   Average profit margin
D)   Total cost

Question 17

____________ tells a firm whether it can earn profits given the price in the market.

Accepted Answer

A)   Marginal cost
B)   Total cost
C)   Average cost
D)   Average marginal cost

Question 18

______________ include all of the costs of production that increase with the quantity produced.

Accepted Answer

A)   Fixed costs
B)   Variable costs
C)   Average costs
D)   Average variable costs

Question 19

A situation where the level of output, scale and average costs are all rising is called

Accepted Answer

A)   decreasing returns to scale
B)   diseconomies of scale
C)   diminishing returns to scale
D)   both a and b are correct

Question 20

Refer to the table below.

If the firm sells 5 units at a price of $30 each, then the marginal unit produced

Accepted Answer

A)   costs more than the average cost.
B)   is subtracting from profits.
C)   costs the same as the average cost.
D)   is adding to profits. B

Exam 7: Cost and Industry Structure

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

Correct Answer
verified

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?

Correct Answer
verified

Briefly explain how the total revenue for a profit-seeking firm is determined.

Correct Answer
verified
The total revenue for a profit-seeking f...
View Answer

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

Correct Answer
verified

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

Correct Answer
verified
C

Fixed costs are important because, at least in the _, the firm _____.

Correct Answer
verified

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

Correct Answer
verified

The term "constant returns to scale" describes a situation where

Correct Answer
verified

Refer to the table below. If the firm produces 5 units that it sells for $39.00 each, what will its profits or losses equal?

Correct Answer
verified
C

Contrast the role of fixed costs and variable costs in economic decisions about future production and pricing.

Correct Answer
verified
Fixed costs are sunk costs because they...
View Answer

-The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer.

Correct Answer
verified

Why would labor be treated as a variable cost?

Correct Answer
verified

Refer to the table below. If this information were used to create a total cost graph, the curve should

Correct Answer
verified

Correct Answer
verified
Agglomeration economies refer to the ec...
View Answer

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

Correct Answer
verified

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Correct Answer
verified

____________ tells a firm whether it can earn profits given the price in the market.

Correct Answer
verified

______________ include all of the costs of production that increase with the quantity produced.

Correct Answer
verified

A situation where the level of output, scale and average costs are all rising is called

Correct Answer
verified

Refer to the table below. If the firm sells 5 units at a price of $30 each, then the marginal unit produced

Correct Answer
verified
B

Exam 7: Cost and Industry Structure

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

Correct AnswerverifiedShow Answer

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?

Correct AnswerverifiedShow Answer

Briefly explain how the total revenue for a profit-seeking firm is determined.

Correct AnswerverifiedThe total revenue for a profit-seeking f...View AnswerShow Answer

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

Correct AnswerverifiedShow Answer

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

Correct AnswerverifiedC

Fixed costs are important because, at least in the ___________, the firm _______________.

Correct AnswerverifiedShow Answer

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

Correct AnswerverifiedShow Answer

The term "constant returns to scale" describes a situation where

Correct AnswerverifiedShow Answer

Refer to the table below. If the firm produces 5 units that it sells for $39.00 each, what will its profits or losses equal?

Correct AnswerverifiedC

Contrast the role of fixed costs and variable costs in economic decisions about future production and pricing.

Correct Answerverified Fixed costs are sunk costs because they...View AnswerShow Answer

-The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer.

Correct AnswerverifiedShow Answer

Why would labor be treated as a variable cost?

Correct AnswerverifiedShow Answer

Refer to the table below. If this information were used to create a total cost graph, the curve should

Correct AnswerverifiedShow Answer

Correct Answerverified Agglomeration economies refer to the ec...View AnswerShow Answer

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

Correct AnswerverifiedShow Answer

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Correct AnswerverifiedShow Answer

____________ tells a firm whether it can earn profits given the price in the market.

Correct AnswerverifiedShow Answer

______________ include all of the costs of production that increase with the quantity produced.

Correct AnswerverifiedShow Answer

A situation where the level of output, scale and average costs are all rising is called

Correct AnswerverifiedShow Answer

Refer to the table below. If the firm sells 5 units at a price of $30 each, then the marginal unit produced

Correct AnswerverifiedB

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The total revenue for a profit-seeking f...
View Answer

Correct Answer
verified

Correct Answer
verified
C

Fixed costs are important because, at least in the _, the firm _____.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified
Fixed costs are sunk costs because they...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Agglomeration economies refer to the ec...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B