Question 1

Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.If the company had total costs of $2,000,000,what was the profit for this company?

Accepted Answer

A)   $1,525,000
B)   $3,525,000
C)   $375,000
D)   $850,000E) B) and D)
F) C) and D)

Question 2

When a firm is on the portion of its long run ATC curve that slopes upward,it is experiencing:

Accepted Answer

A)   economies of scale.
B)   diseconomies of scale.
C)   constant returns to scale.
D)   Any of these is possible.E) B) and D)
F) A) and B)

Question 3

Suppose Larry's Lariats produces lassos in a factory,and uses nine feet of rope to make each lasso.The rope is put into a machine that automatically cuts it to the right length,then seals the ends to prevent fraying.The rope is then hand tied,dipped,and wound before being placed in a packaging machine to prepare it for retail sale.Which of the following would be considered a fixed cost for this company?

Accepted Answer

A)   Employee wages
B)   The cost of rope
C)   The packaging material
D)   None of these would be considered a fixed cost.E) A) and B)
F) B) and D)

Question 4

The amount that a firm receives from the sale of goods and services is called:

Accepted Answer

A)   total cost.
B)   total revenue.
C)   profit.
D)   maximum profit.E) All of the above
F) C) and D)

Question 5

Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.What are Tom's economic profits?

Accepted Answer

A)   $35,000
B)   $50,000
C)   $24,000
D)   $6,000E) All of the above
F) None of the above

Question 6

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) A) and B)
F) All of the above

Question 7

If a firm decreases production,then its:

Accepted Answer

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

Question 8

If a firm stops production,then its:

Accepted Answer

A)   fixed costs rise.
B)   total costs may increase or decrease.
C)   variable costs drop to zero.
D)   All of these are true.E) None of the above
F) A) and C)

Question 9

A firm currently employs four workers in a sandwich shop,and produces sandwiches at a total cost per sandwich (ATC) of $3.The sandwiches sell for $5.If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich,then:

Accepted Answer

A)   it will cost $5.50 to make another sandwich, which can only be sold for $5.
B)   the firm will lose $0.50 per sandwich if it hires another worker.
C)   the firm should not hire a fifth worker.
D)   All of these are true.E) All of the above
F) A) and B)

Question 10

Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.Which of the following statements is true?

Accepted Answer

A)   Tom has an opportunity cost of $41,000.
B)   Tom earns an accounting profit of $35,000.
C)   Tom experiences an economic loss of $6000.
D)   All of these are true.E) C) and D)
F) All of the above

Question 11

Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the total revenue for the company?

Accepted Answer

A)   $250,000
B)   $25,000
C)   $2,500
D)   $2,500,000E) None of the above
F) B) and C)

Question 12

Average total cost:

Accepted Answer

A)   decreases when output levels are low, then increases as output increases.
B)   increases when output levels are low, then decreases as output decreases.
C)   is minimized when it equals average variable cost.
D)   is maximized when it equals marginal cost.E) A) and C)
F) C) and D)

Question 13

The increase in output that is generated by an additional unit of input is called the:

Accepted Answer

A)   input-output relationship.
B)   production function.
C)   marginal product.
D)   resource product.E) A) and C)
F) All of the above

Question 14

Suppose Chip's Chips produces bags of potato chips.An example of a fixed cost for this company would be:

Accepted Answer

A)   a potato peeling machine.
B)   the factory building.
C)   the deep fryer.
D)   All of these are examples of fixed costs.E) A) and B)
F) A) and C)

Question 15

The fixed cost curve:

Accepted Answer

A)   is steep when output levels are low, then flattens as output increases.
B)   is flatter when output levels are low, then gets steeper as output increases.
C)   is a constant, flat line.
D)   is a constant, vertical line.E) C) and D)
F) None of the above

Question 16

Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

Accepted Answer

A)   implicit cost of $4,500.
B)   explicit cost of $4,500.
C)   explicit cost of $0.
D)   This is neither an implicit or explicit cost; it is a fixed cost of $4,500.E) B) and C)
F) A) and D)

Question 17

Sanford wants to start up his own business,and needs $50,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 2 percent,or he can take out a loan for $50,000 and pay 2 percent interest.Sanford should compare:

Accepted Answer

A)   the implicit cost of $1,000 to the explicit cost of $51,000 and choose to use his savings.
B)   the implicit cost of $51,000 to the explicit cost of $1,000 and choose to borrow the money.
C)   the explicit cost of $1,000 to the implicit cost of $1,000 and realize it will cost the same whether he borrows it or uses his savings for the venture.
D)   the explicit cost of $1,000 to the implicit cost of $51,000 and choose to borrow the money.E) B) and C)
F) A) and D)

Question 18

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Accepted Answer

A)   had a marginal product of 50 bottles of soda.
B)   caused average product to fall.
C)   had a lower marginal product than the sixth worker.
D)   All of these are true.E) A) and D)
F) C) and D)

Question 19

A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be a one-time expense of the business?

Accepted Answer

A)   The cost of ice cream cones
B)   The cost of the truck
C)   The cost of the gasoline
D)   All of these are one-time expenses.E) A) and B)
F) B) and C)

Question 20

The marginal cost curve:

Accepted Answer

A)   is U-shaped.
B)   rises when marginal product falls, and falls when marginal product rises.
C)   intersects ATC at the average total cost curve's minimum.
D)   All of these are true.E) B) and C)
F) B) and D)

Exam 12: The Costs of Production

Average total cost:

Correct Answer
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If a firm stops production,then its:

Correct Answer
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A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be a one-time expense of the business?

Correct Answer
verified

The amount that a firm receives from the sale of goods and services is called:

Correct Answer
verified

Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

Correct Answer
verified

Suppose Chip's Chips produces bags of potato chips.An example of a fixed cost for this company would be:

Correct Answer
verified

The fixed cost curve:

Correct Answer
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Average variable costs:

Correct Answer
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Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.If the company had total costs of $2,000,000,what was the profit for this company?

Correct Answer
verified

A firm currently employs four workers in a sandwich shop,and produces sandwiches at a total cost per sandwich (ATC) of $3.The sandwiches sell for $5.If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich,then:

Correct Answer
verified

Correct Answer
verified

Sanford wants to start up his own business,and needs $50,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 2 percent,or he can take out a loan for $50,000 and pay 2 percent interest.Sanford should compare:

Correct Answer
verified

If a firm decreases production,then its:

Correct Answer
verified

The increase in output that is generated by an additional unit of input is called the:

Correct Answer
verified

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Correct Answer
verified

Correct Answer
verified

When a firm is on the portion of its long run ATC curve that slopes upward,it is experiencing:

Correct Answer
verified

The marginal cost curve:

Correct Answer
verified

Correct Answer
verified

Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the total revenue for the company?

Correct Answer
verified

Exam 12: The Costs of Production

Average total cost:

Correct AnswerverifiedShow Answer

If a firm stops production,then its:

Correct AnswerverifiedShow Answer

A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be a one-time expense of the business?

Correct AnswerverifiedShow Answer

The amount that a firm receives from the sale of goods and services is called:

Correct AnswerverifiedShow Answer

Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

Correct AnswerverifiedShow Answer

Suppose Chip's Chips produces bags of potato chips.An example of a fixed cost for this company would be:

Correct AnswerverifiedShow Answer

The fixed cost curve:

Correct AnswerverifiedShow Answer

Average variable costs:

Correct AnswerverifiedShow Answer

Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.If the company had total costs of $2,000,000,what was the profit for this company?

Correct AnswerverifiedShow Answer

A firm currently employs four workers in a sandwich shop,and produces sandwiches at a total cost per sandwich (ATC) of $3.The sandwiches sell for $5.If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich,then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Sanford wants to start up his own business,and needs $50,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 2 percent,or he can take out a loan for $50,000 and pay 2 percent interest.Sanford should compare:

Correct AnswerverifiedShow Answer

If a firm decreases production,then its:

Correct AnswerverifiedShow Answer

The increase in output that is generated by an additional unit of input is called the:

Correct AnswerverifiedShow Answer

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a firm is on the portion of its long run ATC curve that slopes upward,it is experiencing:

Correct AnswerverifiedShow Answer

The marginal cost curve:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the total revenue for the company?

Correct AnswerverifiedShow Answer

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