Question 1

As output increases, total variable cost

Accepted Answer

A)  increases more rapidly than does total cost.
B)  increases continuously at a decreasing rate.
C)  increases at a decreasing rate and then at an increasing rate.
D)  increases at a constant rate.E) A) and B)
F) None of the above

Question 2

Diseconomies of scale are caused by the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 3

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.E) C) and D)
F) B) and C)

Question 4

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

Accepted Answer

A)  an increase in the amount of steel that the firm buys
B)  a decrease in the number of production workers in the assembly line
C)  a switch in production to a redesigned and retooled facility
D)  an increase in the number of shifts of workers from two to threeE) B) and C)
F) A) and D)

Question 5

Which of the following statements is true, given the total cost function: Total cost = 10Q + 5Q2 + 100?

Accepted Answer

A)  Total cost at Q = 4 is 120.
B)  Average total cost at Q = 10 is 70.
C)  Total cost at Q = 5 is 175.
D)  Average fixed cost is zero at Q = 100.E) A) and B)
F) A) and C)

Question 6

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve.If it raises output by 1 unit, then average

Accepted Answer

A)  fixed cost will increase.
B)  total cost will decrease.
C)  fixed cost will necessarily be below average variable cost.
D)  total cost will be less than average variable cost.E) B) and C)
F) A) and C)

Question 7

If the price of labor or some other variable resource decreased, the

Accepted Answer

A)  AVC curve would shift upward.
B)  AFC curve would shift downward.
C)  AFC curve would shift upward.
D)  MC curve would shift downward.E) A) and B)
F) All of the above

Question 8

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 9

The firm's short-run marginal-cost curve is increasing when

Accepted Answer

A)  marginal product is increasing.
B)  marginal product is decreasing.
C)  total fixed cost is increasing.
D)  average fixed cost is decreasing.E) None of the above
F) B) and C)

Question 10

Which of the following gadgets is hoped to deliver a Third Industrial Revolution?

Accepted Answer

A)  tablet computers or iPads
B)  GPS and iPhones
C)  3-D printers
D)  drones or unmanned aerial vehiclesE) None of the above
F) A) and D)

Question 11

According to the law of diminishing marginal returns,

Accepted Answer

A)  output will fall and then rise as additional units of input are employed.
B)  employing additional inputs will diminish total output.
C)  the additional output generated by additional units of an input will diminish.
D)  the additional inputs necessary to produce an additional unit of output will diminish.E) A) and D)
F) A) and C)

Question 12

Which of the following is not correct?

Accepted Answer

A)  Where marginal product is greater than average product, average product is rising.
B)  Where total product is at a maximum, average product is also at a maximum.
C)  Where marginal product is zero, total product is at a maximum.
D)  Marginal product becomes negative before average product becomes negative.E) B) and C)
F) None of the above

Question 13

Economic profits are calculated by subtracting

Accepted Answer

A)  explicit costs from total revenue.
B)  implicit costs from total revenue.
C)  implicit costs from normal profits.
D)  explicit and implicit costs from total revenue.E) B) and C)
F) A) and D)

Question 14

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then

Accepted Answer

A)  the average variable cost of 10 units is $10.
B)  the average variable cost of 9 units is $10.
C)  the marginal cost of the tenth unit is $90.
D)  the firm is operating in the range of increasing marginal returns.E) B) and C)
F) A) and D)

Question 15

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 implicit costs of Harvey's firm in the first year were

Accepted Answer

A)  $50,000.
B)  $60,000.
C)  $100,000.
D)  $150,000.E) A) and B)
F) None of the above

Question 16

Marginal product is highest where marginal cost is lowest.

Accepted Answer

A) True 
 B)False

Question 17

When total product is increasing at a decreasing rate, marginal product is positive, but falling.

Accepted Answer

A) True 
 B)False

Question 18

The short-run marginal-cost curve is upward-sloping because of the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 19

In the short run, total output in an industry

Accepted Answer

A)  is fixed at a specific level.
B)  can vary as the result of using a fixed amount of plant and equipment more or less intensively.
C)  may be altered by varying the size of plant and equipment which now exist in the industry.
D)  can vary as the result of new firms entering or leaving the industry.E) A) and B)
F) B) and D)

Question 20

At what point does marginal product equal average product?

Accepted Answer

A)  where average product is equal to its minimum value
B)  where average product is equal to its maximum value
C)  where marginal product is equal to its minimum value
D)  where marginal product is equal to its maximum valueE) A) and B)
F) A) and C)

Exam 9: Businesses and the Costs of Production

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

Correct Answer
verified

According to the law of diminishing marginal returns,

Correct Answer
verified

Correct Answer
verified

The short-run marginal-cost curve is upward-sloping because of the law of diminishing marginal returns.

Correct Answer
verified

The firm's short-run marginal-cost curve is increasing when

Correct Answer
verified

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Correct Answer
verified

If the price of labor or some other variable resource decreased, the

Correct Answer
verified

At what point does marginal product equal average product?

Correct Answer
verified

As output increases, total variable cost

Correct Answer
verified

Which of the following statements is true, given the total cost function: Total cost = 10Q + 5Q2 + 100?

Correct Answer
verified

Marginal product is highest where marginal cost is lowest.

Correct Answer
verified

Which of the following gadgets is hoped to deliver a Third Industrial Revolution?

Correct Answer
verified

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve.If it raises output by 1 unit, then average

Correct Answer
verified

Economic profits are calculated by subtracting

Correct Answer
verified

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

Correct Answer
verified

In the short run, total output in an industry

Correct Answer
verified

When total product is increasing at a decreasing rate, marginal product is positive, but falling.

Correct Answer
verified

Diseconomies of scale are caused by the law of diminishing marginal returns.

Correct Answer
verified

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

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

Correct AnswerverifiedShow Answer

According to the law of diminishing marginal returns,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short-run marginal-cost curve is upward-sloping because of the law of diminishing marginal returns.

Correct AnswerverifiedShow Answer

The firm's short-run marginal-cost curve is increasing when

Correct AnswerverifiedShow Answer

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Correct AnswerverifiedShow Answer

If the price of labor or some other variable resource decreased, the

Correct AnswerverifiedShow Answer

At what point does marginal product equal average product?

Correct AnswerverifiedShow Answer

As output increases, total variable cost

Correct AnswerverifiedShow Answer

Which of the following statements is true, given the total cost function: Total cost = 10Q + 5Q2 + 100?

Correct AnswerverifiedShow Answer

Marginal product is highest where marginal cost is lowest.

Correct AnswerverifiedShow Answer

Which of the following gadgets is hoped to deliver a Third Industrial Revolution?

Correct AnswerverifiedShow Answer

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve.If it raises output by 1 unit, then average

Correct AnswerverifiedShow Answer

Economic profits are calculated by subtracting

Correct AnswerverifiedShow Answer

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

Correct AnswerverifiedShow Answer

In the short run, total output in an industry

Correct AnswerverifiedShow Answer

When total product is increasing at a decreasing rate, marginal product is positive, but falling.

Correct AnswerverifiedShow Answer

Diseconomies of scale are caused by the law of diminishing marginal returns.

Correct AnswerverifiedShow Answer

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

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