Question 1

At the point where diminishing marginal returns of an input sets in, the

Accepted Answer

A)  average product starts to decrease.
B)  marginal product starts to decrease.
C)  total product starts to decrease.
D)  average product exceeds the marginal product.

Question 2

Which of the following statements is true?

Accepted Answer

A)  Diminishing marginal returns means that total output decreases as more of the variable inputs are employed.
B)  Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs.
C)  Diminishing marginal returns implies that there will never be increasing returns to scale.
D)  Diminishing marginal returns implies that the firm's profits will be shrinking as it produces more of its product.

Question 3

Average fixed cost

Accepted Answer

A)  equals marginal cost when average total cost is at its minimum.
B)  may be found for any output by adding average variable cost and average total cost.
C)  graphs as a U-shaped curve.
D)  declines continually as output increases.

Question 4

If a firm wanted to know how much it would save by producing one less unit of output, it would look to

Accepted Answer

A)  MC.
B)  ATC.
C)  AVC.
D)  AFC.

Question 5

How can diseconomies of scale occur?

Accepted Answer

The expansion of a firm may lead to dise...

Question 6

Answer the question on the basis of the following cost data.  The average variable cost of producing 5 units of output is

Accepted Answer

A)  $7.40.
B)  $37.
C)  $12.20.
D)  $4.80.

Question 7

If a firm decides to produce no output in the short run, its costs will be

Accepted Answer

A)  its marginal costs.
B)  its variable costs.
C)  its fixed costs.
D)  zero.

Question 8

A natural monopoly is characterized by

Accepted Answer

A)  collusion with other competitors to divide up the market.
B)  a decreasing average-cost curve extending beyond the market's size.
C)  a firm protected from competition by a government regulation.
D)  a firm having control over the entire supply of a basic input in the production process.

Question 9

A firm encountering economies of scale over some range of output will have a

Accepted Answer

A)  rising long-run average cost curve.
B)  falling long-run average cost curve.
C)  flat long-run average cost curve.
D)  rising, then falling, then rising long-run average cost curve.

Question 10

Refer to the provided graph. At which point does marginal product (MP) equal average product (AP) at a specific level of output?

Accepted Answer

A)  point A
B)  point B
C)  point C
D)  point D

Question 11

If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are

Accepted Answer

A)  $104.
B)  $930.
C)  $1,040.
D)  $1,130.

Question 12

Over the range of output where the slope of the short-run total cost curve becomes steeper,

Accepted Answer

A)  fixed costs are increasing.
B)  marginal cost is increasing.
C)  marginal cost is positive but decreasing.
D)  marginal cost is lower than average variable cost.

Question 13

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The economic profits of Harvey's firm in the first year were

Accepted Answer

A)  $220,000.
B)  $60,000.
C)  $160,000.
D)  $825,000.

Question 14

Answer the question on the basis of the following cost data.  The profit-maximizing output for this firm

Accepted Answer

A)  is 3.
B)  is 4.
C)  is 5.
D)  cannot be determined from the information given.

Question 15

In the short run, which of the following statements is correct?

Accepted Answer

A)  The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points.
B)  Average variable cost declines continuously as total output is expanded.
C)  Total cost will exceed variable cost.
D)  If the inputs of all resources are increased by equal amounts, total output will expand by diminishing amounts.

Question 16

The total product curve graphically shows how much

Accepted Answer

A)  profit the firm will earn at various levels of production.
B)  output the firm will produce at various prices of its product.
C)  the costs of production will be as the firm changes its total production level.
D)  output the firm can produce with various quantities of its variable input.

Question 17

Refer to the diagram. The per unit costs at output level Q that are both attainable and imply the least-cost production for this level of output

Accepted Answer

A)  are A.
B)  are B.
C)  are C.
D)  cannot be determined with the information given.

Question 18

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.

Question 19

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.

Question 20

Which of the following definitions is correct?

Accepted Answer

A)  Accounting profit + economic profit = normal profit.
B)  Economic profit − accounting profit = explicit costs.
C)  Economic profit = accounting profit − implicit costs.
D)  Economic profit − implicit costs = accounting profits.

Exam 9: Businesses and the Costs of Production

Refer to the diagram. The per unit costs at output level Q that are both attainable and imply the least-cost production for this level of output

Correct Answer
verified

How can diseconomies of scale occur?

Correct Answer
verified
The expansion of a firm may lead to dise...
View Answer

A natural monopoly is characterized by

Correct Answer
verified

A firm encountering economies of scale over some range of output will have a

Correct Answer
verified

In the short run, which of the following statements is correct?

Correct Answer
verified

Answer the question on the basis of the following cost data. The average variable cost of producing 5 units of output is

Correct Answer
verified

Over the range of output where the slope of the short-run total cost curve becomes steeper,

Correct Answer
verified

The total product curve graphically shows how much

Correct Answer
verified

At the point where diminishing marginal returns of an input sets in, the

Correct Answer
verified

If a firm decides to produce no output in the short run, its costs will be

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are

Correct Answer
verified

If a firm wanted to know how much it would save by producing one less unit of output, it would look to

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Average fixed cost

Correct Answer
verified

Refer to the provided graph. At which point does marginal product (MP) equal average product (AP) at a specific level of output?

Correct Answer
verified

Which of the following definitions is correct?

Correct Answer
verified

Answer the question on the basis of the following cost data. The profit-maximizing output for this firm

Correct Answer
verified

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

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

Refer to the diagram. The per unit costs at output level Q that are both attainable and imply the least-cost production for this level of output

Correct AnswerverifiedShow Answer

How can diseconomies of scale occur?

Correct AnswerverifiedThe expansion of a firm may lead to dise...View AnswerShow Answer

A natural monopoly is characterized by

Correct AnswerverifiedShow Answer

A firm encountering economies of scale over some range of output will have a

Correct AnswerverifiedShow Answer

In the short run, which of the following statements is correct?

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The average variable cost of producing 5 units of output is

Correct AnswerverifiedShow Answer

Over the range of output where the slope of the short-run total cost curve becomes steeper,

Correct AnswerverifiedShow Answer

The total product curve graphically shows how much

Correct AnswerverifiedShow Answer

At the point where diminishing marginal returns of an input sets in, the

Correct AnswerverifiedShow Answer

If a firm decides to produce no output in the short run, its costs will be

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are

Correct AnswerverifiedShow Answer

If a firm wanted to know how much it would save by producing one less unit of output, it would look to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Average fixed cost

Correct AnswerverifiedShow Answer

Refer to the provided graph. At which point does marginal product (MP) equal average product (AP) at a specific level of output?

Correct AnswerverifiedShow Answer

Which of the following definitions is correct?

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The profit-maximizing output for this firm

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The expansion of a firm may lead to dise...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified