Quiz 8: Production Technology and Cost
Business
Q 1Q 1
A firm's objective is to maximize its economic profit,which is:
A)total revenue minus economic cost.
B)total profit minus total cost.
C)economic cost minus profit.
D)economic cost minus total revenue.
Free
Multiple Choice
A
Q 2Q 2
Sarah has a savings account with a $1000 balance that earns 3% APY.She decides to withdraw the entire balance to buy a laptop computer,what will be her opportunity if her buying the laptop?
A)the cost of the laptop
B)the forgone interest
C)the forgone interest and the cost of the laptop
D)the cost of the laptop minus the forgone interest
Free
Multiple Choice
B
Q 3Q 3
You own a building that has four possible uses: an Internet cafe,a coffee store,an ice cream store,and a bookstore.The value of the building in each use is $2,000;$3,000;$4,000;and $5,000,respectively.You decide to open an ice cream store.The opportunity cost of using this building for an ice cream store is:
A)$2,000,the value if the building is used as an Internet cafe.
B)$3,000,the value if the building is used as a coffee store.
C)$3,333,the average of the values if the building is used for either an Internet cafe,a coffee store,or a bookstore.
D)$5,000,the value if the building is used for a bookstore.
Free
Multiple Choice
D
Q 4Q 4
You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at another computer software firm that paid $40,000 a year.During the year,your economic costs were:
A)$10,000.
B)$40,000.
C)$50,000.
D)$75,000.
Free
Multiple Choice
Q 5Q 5
You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at another computer software firm that paid $40,000 a year.Last year,your economic profits were:
A)$100,000.
B)$75,000.
C)$50,000.
D)$25,000.
Free
Multiple Choice
Q 6Q 6
Dan is an entrepreneur who invests in commercial and residential real estate.He has a savings account with $100,000 that earns 1% APY.Dan wants to buy a house that will give him a monthly cash inflow of $200.What will opportunity cost of investing in the house be?
A)1000
B)1200
C)800
D)200
Free
Multiple Choice
Q 7Q 7
Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue.
-Refer to Scenario 8.1.What is Ana's explicit cost?
A)$65,000
B)$55,000
C)$45,000
D)$35,000
Free
Multiple Choice
Q 8Q 8
Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue.
-Refer to Scenario 8.1.Ana's opportunity cost of running her own business is:
A)$30,000.
B)$60,000.
C)$65,000.
D)$120,000.
Free
Multiple Choice
Q 9Q 9
Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue.
-Refer to Scenario 8.1.Ana's accounting profit is:
A)$65,000.
B)$55,000.
C)$5,000.
D)$120,000.
Free
Multiple Choice
Q 10Q 10
Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue.
-Refer to Scenario 8.1.Ana's economic profit is:
A)-$55,000.
B)-$15,000.
C)-$5,000.
D)-$120,000.
Free
Multiple Choice
Q 11Q 11
Mario has a company that produces plastic freezer bags.His company objective is to maximize:
A)his company's revenues.
B)his company's total out-of-pocket costs.
C)his company's opportunity costs of each factor of production.
D)his company's economic profits,the difference between total revenue and total cost.
Free
Multiple Choice
Q 12Q 12
Total economic costs include:
A)a normal rate of return.
B)out-of-pocket costs.
C)opportunity costs of all inputs.
D)all of the above
Free
Multiple Choice
Q 13Q 13
Table 8.1
-Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals:
A)$100,000.
B)$45,000.
C)$0.
D)-$45,000.
Free
Multiple Choice
Q 14Q 14
Table 8.1
-Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's implicit cost equals:
A)$100,000.
B)$90,000.
C)$50,000.
D)45,000.
Free
Multiple Choice
Q 15Q 15
Table 8.1
-Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.If Mr.B is excited about his $45,000 profit,an economist would:
A)celebrate with him.
B)mention the $90,000 he has given up.
C)tell him his economic profit is indeed positive but not as big as $45,000.
D)tell him he made zero economic profit.
Free
Multiple Choice
Q 16Q 16
Table 8.1
-Which of the following situations describes a short-run adjustment of a firm to changing business conditions?
A)A doctor increases the size of his waiting room.
B)A manager calls in two part-time workers to prepare for the holiday rush.
C)A rancher sells some of his land.
D)A manufacturing firm expands its production facility.
Free
Multiple Choice
Q 17Q 17
Additional Application
Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand.
"Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70.
-Which of the following would be an implicit cost of operating a golf course?
A)the cost of fertilizers and water
B)the cost of groundskeepers
C)the cost of property insurance
D)the cost of not developing houses on the property
Free
Multiple Choice
Q 18Q 18
Additional Application
Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand.
"Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70.
-If the owners of a golf course only include their explicit costs when they calculate their annual profit:
A)their economic profit will be greater than their accounting profit.
B)their economic profit will be equal to their accounting profit.
C)their economic profit will be less than their accounting profit.
D)none of the above will be true.
Free
Multiple Choice
Q 19Q 19
Additional Application
Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand.
"Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70.
-Which of the following would be an implicit cost of playing a round of golf?
A)the value of meeting new friends or improving business relationships
B)the value of another activity the golfer could be doing
C)the cost of property insurance;the value of fresh air and exercise for five hours
D)the value of competition and improving your skill level
Free
Multiple Choice
Free
True False
Q 21Q 21
Accounting costs include all monetary payments and all the opportunity cost of inputs that do not require an explicit monetary payment.
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True False
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True False
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True False
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True False
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True False
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True False
Q 27Q 27
Your friend Harry has quit his $20,000-a-year job to start a business that rents fishing boats.He asks you to lend him $50,000 and agrees to pay you a 10% return on your $50,000 if he earns a profit.During the first year Harry's total revenue is $120,000 and his total cost for equipment and supplies are $100,000.Harry tells you that he cannot pay you any interest this year because he did not earn a profit.Is your friend Harry trying to cheat you?
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Essay
Q 28Q 28
Jimmy was working for an accounting firm earning $30,000 per year.He has $100,000 in an investment account earning 10% per year.If he decided to invest the $100,000 in a new business and quit his job to work full-time at this new business,what is his implicit cost of this new business?
Free
Essay
Free
Essay
Q 30Q 30
Table 8.2
-Mitzi's Pet Salon hires you to determine the company's status.The data in Table 8.2 provides information on the company's annual costs and revenues.Mitzi spends at least 40 hours a week at her place of business.If she closed the salon,she could work for her competitor and earn $15,000 per year.She also owns the building that houses the salon and could rent it out for $18,000 per year if she closes her business.Calculate the economic cost and economic profit for Mitzi's Pet Salon.Would an accountant come to the same conclusion about the profitability of this firm? Explain.
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Essay
Q 31Q 31
The period of time when a firm is unable to change all of inputs,or factors of production,is called the:
A)economic term.
B)short run.
C)accounting term.
D)long run.
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Multiple Choice
Q 32Q 32
The short run can be defined as any period of time:
A)less than one year.
B)in which some inputs are fixed.
C)in which all inputs are variable.
D)in which price is fixed.
Free
Multiple Choice
Q 33Q 33
-Refer to Figure 8.1.The marginal product of the second worker is ________ lawns moved.
A)4
B)5
C)5.5
D)11
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Multiple Choice
Q 34Q 34
-Refer to Figure 8.1.The lawn mower company's total-product curve shows the following:
A)the effects of labor specialization.
B)the effects of diminishing returns.
C)the effects of labor specialization and diminishing returns.
D)none of the above.
Free
Multiple Choice
Q 35Q 35
When El Guapo's Mexican Restaurant hires one waiter,5 tables can be served in an hour.When El Guapo's Mexican Restaurant hires two waiters,12 tables can be served in an hour.The marginal product of labor of the second waiter is ________ tables served per hour.
A)5
B)7
C)12
D)17
Free
Multiple Choice
Q 36Q 36
At Carolina's Bakery,the marginal products of the first,second,third,and fourth workers are 15,11,8,and 6 cakes produced respectively.The total product of the first three workers is:
A)8.
B)15.
C)34.
D)42.
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Multiple Choice
Q 37Q 37
-Refer to Figure 8.2.Diminishing marginal returns set in after the ________ worker is hired.
A)first
B)second
C)third
D)fifth
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Multiple Choice
Q 38Q 38
-Refer to Figure 8.2.The marginal product of the third worker is ________.
A)forty-two
B)thirty-two
C)twelve
D)ten
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Multiple Choice
Q 39Q 39
-Refer to Figure 8.2.The marginal product of the fifth worker is ________.
A)one
B)five
C)eight
D)ten
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Multiple Choice
Q 40Q 40
-Refer to Figure 8.2.The marginal product of the sixth worker is ________.
A)0
B)5
C)-5
D)50
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Multiple Choice
Q 41Q 41
Which of the following is a reason why the marginal product increases as output increases:
A)decreasing repetition.
B)increasing continuity.
C)both A and B
D)neither A nor B
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Multiple Choice
Q 42Q 42
Suppose that at Pollo Loco's Restaurant 5 cooks can make 70 meals.Assuming that there are diminishing returns to labor,it will require ________ to make 70 more meals.
A)an additional 5 cooks
B)more than an additional 5 cooks
C)less than an additional 5 cooks
D)a total of 10 cooks
Free
Multiple Choice
Q 43Q 43
If marginal product is negative,then:
A)total product will decrease if more of the input is hired.
B)total product is equal to zero.
C)marginal product will increase if more of the input is hired.
D)average product will increase if more of the input is hired.
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Multiple Choice
Q 44Q 44
Table 8.3
-Refer to Table 8.3.If the firm hires seven workers,then:
A)marginal product is negative.
B)marginal product is less than one.
C)total product is negative.
D)marginal product is equal to three.
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Multiple Choice
Q 45Q 45
Table 8.3
-Refer to Table 8.3.If four workers are hired,then:
A)diminishing marginal returns have started.
B)marginal product equals five.
C)total product is maximized on the table.
D)all of the above
Free
Multiple Choice
Q 46Q 46
Table 8.3
-Refer to Table 8.3.The firm will experience diminishing marginal returns to labor as long it hires more than:
A)0 units of labor.
B)1 unit of labor.
C)2 units of labor.
D)3 units of labor.
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Multiple Choice
Q 47Q 47
Which of the following statements about fixed costs is correct?
A)Fixed costs are not opportunity costs.
B)Fixed costs must be paid even if the firm's output is zero.
C)Fixed costs are always the largest portion of total costs.
D)none of the above
Free
Multiple Choice
Q 48Q 48
Dan owns a factory that manufactures smartphones.He has a lot of costs every month to keep his factory running.Which of the following is one of Dan's fixed costs?
A)plastic used to make the smartphones
B)his electricity bill for the factory
C)his mortgage on the factory
D)memory devices used to store music and video on the smartphones
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Multiple Choice
Q 49Q 49
A fixed cost can be thought of as:
A)a cost that changes as output increases.
B)a cost that must be paid even if output equals zero.
C)a cost that is paid only when output equals zero.
D)total costs ignoring opportunity costs.
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Multiple Choice
Q 50Q 50
Total variable cost:
A)increases as output increases.
B)is constant as output increases.
C)decreases as output increases.
D)is lowest for labor-intensive technologies.
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Multiple Choice
Q 51Q 51
Which type of cost always increases immediately when output increases?
A)fixed costs
B)overhead costs
C)total variable costs
D)sunk costs
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Multiple Choice
Q 52Q 52
If the price of a fixed factor of production increases,then:
A)total costs are unchanged.
B)marginal costs will increase.
C)variable costs are unchanged.
D)variable costs will increase.
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Multiple Choice
Q 53Q 53
A firm's short-run total cost (TC)is equal to:
A)fixed costs plus variable costs.
B)variable cost minus total cost.
C)total cost divided by variable cost.
D)fixed cost minus variable cost.
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Multiple Choice
Q 54Q 54
A residential cleaning company has total costs of $45,000 and total variable costs of $25,000.The cleaning company has total fixed costs that equal to:
A)$45,000.
B)$20,000.
C)$70,000.
D)indeterminate because the firm's output level is not known.
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Multiple Choice
Q 55Q 55
Short-run costs that depend on the level of output are:
A)total fixed cost only.
B)total variable costs only.
C)total costs only.
D)both total variable costs and total costs.
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Multiple Choice
Q 56Q 56
Raphael's Salon has $5,000 in fixed cost and $15,000 in variable costs monthly.Raphael's Salon gives 1500 hair cuts a month.What is the average total cost for Raphael's Salon?
A)8
B)7
C)0.075
D)13.33
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Multiple Choice
Q 57Q 57
Which of the following is most likely to be a variable cost for a firm?
A)the interest payments made on equipment loans
B)an annual payment for insurance on the firm's plant
C)the monthly rent on office space that it leased for 5 years
D)the payments made to match workers' 401K contributions
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Multiple Choice
Q 58Q 58
-Refer to Figure 8.3.Micro Oven's total fixed costs are:
A)$0.
B)$200.
C)$500.
D)indeterminate from this information.
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Multiple Choice
Q 59Q 59
-Refer to Figure 8.3.If two microwave ovens are produced,Micro Oven's total variable costs are:
A)$350.
B)$425.
C)$500.
D)indeterminate from this information.
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Multiple Choice
Q 60Q 60
-Refer to Figure 8.3.The vertical distance AB represents:
A)total fixed costs.
B)marginal costs.
C)average fixed costs.
D)average total costs.
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Multiple Choice
Q 61Q 61
For small quantities of output,average variable cost decreases as output increases due to:
A)a reduction in the number of workers.
B)diminishing return.
C)labor specialization increases worker productivity.
D)More information is needed to determine.
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Multiple Choice
Q 62Q 62
Marginal cost:
A)is the increase in total cost resulting from producing one more unit of output.
B)is the average cost of production divided by output.
C)equals the increase in average variable cost resulting from producing one more unit of output.
D)always equals average cost.
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Multiple Choice
Q 63Q 63
A firm will begin to experience diminishing returns at the point where:
A)marginal cost increases.
B)marginal cost decreases.
C)marginal product increases.
D)both B and C
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Multiple Choice
Q 64Q 64
Marginal cost is equal to:
A)variable cost divided by output.
B)output divided by variable cost.
C)the change in output divided by the change in variable cost.
D)the change in variable cost divided by the change in output.
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Multiple Choice
Q 65Q 65
-Refer to Figure 8.4.The marginal cost of the 10th basketball is:
A)$2.
B)$30.
C)$28.
D)$1.
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Multiple Choice
Q 66Q 66
Tom's landscaping service has only one variable input which is labor.Tom's landscaping service labor costs are $300 a day and Tom's landscaping service does 9 yards per day.To do 10 yards per day,Tom's landscaping service labor costs increase to $325 a day.The marginal cost of doing that 10th yard is:
A)$25.
B)$32.5.
C)$45.
D)indeterminate from the information given.
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Multiple Choice
Q 67Q 67
If Mayo Lawyer Firm's total costs are $7000 when 20 clients' cases are worked and $7600 when 21 clients' cases are worked,the marginal cost of the 21st client's case is:
A)$300.
B)$400.
C)$500.
D)$600.
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Multiple Choice
Q 68Q 68
-Refer to Figure 8.5.The marginal cost of the third oven is:
A)$100.
B)$150.
C)$50.
D)indeterminate from this information.
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Multiple Choice
Q 69Q 69
The law of diminishing returns applies in the:
A)short run and the long run.
B)long run but not the short run.
C)short run only.
D)long run only.
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Multiple Choice
Q 70Q 70
Marginal costs typically:
A)increase as output increases.
B)decrease as output increases.
C)first increase then decrease as output increases.
D)first decrease then increase as output increases.
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Multiple Choice
Q 71Q 71
As output increases,total cost also increases.Therefore:
A)marginal cost is increasing.
B)marginal cost is positive.
C)average fixed costs are increasing.
D)all of the above
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Multiple Choice
Q 72Q 72
As output increases,it is always true that:
A)average total cost decreases.
B)average variable cost is above marginal cost.
C)average fixed costs decrease.
D)total fixed costs increase.
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Multiple Choice
Q 73Q 73
At Fresh Hot Bakery,the average cost of making 20 baguettes is $1.00.The average cost of making 21 baguettes is $1.10.The marginal cost of the 21st baguettes is:
A)$0.10.
B)$2.10.
C)$3.00.
D)$3.10.
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Multiple Choice
Q 74Q 74
-Refer to Figure 8.6.The total fixed costs for Cyndy's Floral Arrangements are $1,000.If Cyndy's Floral Arrangements produces 200 silk flower arrangements,the average fixed costs are:
A)$.20.
B)$5.
C)$20.
D)$200.
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Multiple Choice
Q 75Q 75
-As output increases,average fixed costs:
A)decrease.
B)initially decrease and then increase.
C)remain constant.
D)increase.
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Multiple Choice
Q 76Q 76
Table 8.4
-Refer to Table 8.4.There are diminishing returns to labor for:
A)all workers.
B)workers 1 and 2 only.
C)workers 4 through 5 only.
D)worker 1 only.
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Multiple Choice
Q 77Q 77
Table 8.4
-Refer to Table 8.4.Three workers can produce ________ cakes per day at a total cost of ________.
A)90;350
B)90;$50
C)90;$550
D)90;$750
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Multiple Choice
Q 78Q 78
Table 8.4
-Refer to Table 8.4.When the second worker is hired,the marginal cost is equal to:
A)$2.
B)$3.
C)$6.
D)$50.
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Multiple Choice
Q 79Q 79
Table 8.4
-Refer to Table 8.4.When the fifth worker is employed,the marginal cost is:
A)$150.
B)$100.
C)$15.
D)$10.
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Multiple Choice
Q 80Q 80
Table 8.5
-Refer to Table 8.5.If Sherry produces zero earrings,her total fixed costs are:
A)$0.
B)$50.
C)$100.
D)indeterminate from this information.
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Multiple Choice
Q 81Q 81
Table 8.5
-Refer to Table 8.5.If Sherry produces one pair of earrings,her total variable costs are:
A)$50.
B)$100.
C)$150.
D)indeterminate from this information.
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Multiple Choice
Q 82Q 82
Table 8.5
-Refer to Table 8.5.If Sherry produces two pair of earrings,her marginal cost is:
A)$40.
B)$45.
C)$72.50.
D)$122.50.
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Multiple Choice
Q 83Q 83
Table 8.5
-Refer to Table 8.5.If Sherry produces three pair of earrings,her total variable costs are:
A)$26.67.
B)$140.
C)$175.
D)$225.
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Multiple Choice
Q 84Q 84
Table 8.5
-Refer to Table 8.5.If Sherry produces five pair of earrings,her total costs are:
A)$320.
B)$360.
C)$370.
D)$400.
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Multiple Choice
Q 85Q 85
Table 8.5
-Refer to Table 8.5.If Sherry produces four pair of earrings,her average fixed costs are:
A)$4.
B)$20.
C)$25.
D)$100.
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Multiple Choice
Q 86Q 86
-Refer to Figure 8.7.If six microwave ovens are produced,Micro Oven's average total costs are:
A)$116.67.
B)$700.
C)$1200.
D)$200.00.
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Multiple Choice
Q 87Q 87
Average total cost is equal to:
A)total cost divided by quantity.
B)variable cost divided by quantity.
C)average fixed cost minus average variable cost.
D)the extra cost of producing one more unit of output.
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Multiple Choice
Q 88Q 88
O'Connor Lamp Factory has total fixed costs of $4500.O'Connor Lamp Factory's average variable cost per lamp is $30 and its average total cost is $45.O'Connor Lamp Factory sells each lamp for $100 each.How many lamps is O'Connor Lamp Factory currently manufacturing:
A)200 lamps.
B)250 lamps.
C)300 lamps.
D)a number of lamps that is indeterminate from this information.
Free
Multiple Choice
Q 89Q 89
Suppose that a donut bakery has $1,500 of variable costs and $2,500 of fixed costs when it produces 1000 donuts and sells them for $1 per donut.Average total cost is equal to:
A)$4.
B)$25.
C)$2.
D)$1.5.
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Multiple Choice
Q 90Q 90
If a firm spends $200 to produce 20 units of output and spends $440 to produce 40 units of output,then the marginal cost of increasing output is:
A)$22.
B)$12.
C)$20.
D)$10.
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Multiple Choice
Q 91Q 91
Average variable cost and average total costs get closer together as output increases because:
A)diminishing returns set in.
B)average fixed costs decrease as output increases.
C)marginal costs decrease as output increases.
D)economies of scale become apparent.
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Multiple Choice
Q 92Q 92
-Refer to Figure 8.8.Curve 1 is Outdoor Equipment's:
A)marginal cost curve.
B)average variable cost curve.
C)average total cost curve.
D)average fixed cost curve.
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Multiple Choice
Q 93Q 93
-Refer to Figure 8.8.Curve 2 is Outdoor Equipment's:
A)marginal cost curve.
B)average variable cost curve.
C)average total cost curve.
D)average fixed cost curve.
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Multiple Choice
Q 94Q 94
-Refer to Figure 8.8.Curve 3 is Outdoor Equipment's:
A)marginal cost curve.
B)average variable cost curve.
C)average total cost curve.
D)average fixed cost curve.
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Multiple Choice
Q 95Q 95
-Refer to Figure 8.8.The vertical distance AB is Outdoor Equipment's:
A)marginal cost.
B)average fixed cost.
C)total fixed cost.
D)total cost.
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Multiple Choice
Q 96Q 96
If marginal cost is above average variable cost,then:
A)average variable cost is increasing.
B)marginal cost must be decreasing.
C)average variable cost is constant.
D)average variable cost is decreasing.
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Q 97Q 97
Marginal cost equals average total cost:
A)when average total cost is at its minimum point.
B)when marginal cost is at its minimum point.
C)when average variable cost is at its minimum point.
D)when there are no fixed costs.
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Multiple Choice
Q 98Q 98
If average variable cost decreases as output increases,then:
A)marginal cost is negative.
B)marginal cost is decreasing.
C)marginal cost is less than average variable cost.
D)marginal cost is greater than average variable cost.
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Multiple Choice
Q 99Q 99
Suppose that at Jones & Smith Shoe Factory,the marginal cost of making a pair of shoes is $15 and average variable cost is $15.For the next pair of shoes produced marginal cost will be ________ $15 and average variable cost will be ________ $15.
A)greater than;less than
B)less than;greater than
C)less than;less than
D)greater than;greater than
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Multiple Choice
Q 100Q 100
Suppose marginal cost is $5.Average variable costs are $10.For the next unit of output produced,average variable costs will be:
A)less than $10.
B)more than $10.
C)equal to $10.
D)It is impossible to say.
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Multiple Choice
Q 101Q 101
World's Best Chair Co.has produced 30 chairs at a total cost of $300.The next chair produced will add $10 to the company's total cost.Which of the following is definitely TRUE if the 31st chair is produced?
A)Short-run average total cost will decrease.
B)Marginal cost will decrease.
C)Average fixed cost will decrease.
D)A and C are true.
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Multiple Choice
Q 102Q 102
Which of the following is true for all units of output produced?
A)Marginal cost is less than average total cost.
B)Marginal cost is greater than average total cost.
C)Average variable cost is less than average total cost.
D)Average fixed cost is less than average variable cost.
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Multiple Choice
Q 103Q 103
Recall the application about idle capital and short-run marginal cost with a firm that simply digs holes and has a fixed amount of capital (10 standard shovels)and can vary the number of workers,Why is the marginal cost constant for the first 10 units of output?
A)The average total cost is falling.
B)The firm does not experience diminishing returns.
C)The average total cost is raising.
D)none of the above
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Multiple Choice
Q 104Q 104
The law of diminishing returns applies only in the long run when the fixed cost can be flexible.
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True False
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True False
Q 106Q 106
The increase in total cost that results from producing one more unit of output is the fixed cost.
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True False
Q 107Q 107
The gap between average total cost and the average variable cost is always the average fixed cost.
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True False
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True False
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True False
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True False
Q 111Q 111
Comment on the following statement: "In the short run,a firm's total costs will be zero if the firm chooses to produce nothing."
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Q 113Q 113
Table 8.6
-Refer to Table 8.6.For each level of output,compute average variable cost,marginal cost,average fixed cost,and average total cost.
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Q 115Q 115
Explain why the firm's short-run marginal cost curve initially decreases and then increases in most cases.
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Q 117Q 117
When XYZ Corporation produces 35 units of output,its average variable cost is $5.The marginal cost of the 36th unit of output is $7.If the firm choose to produce the 36th unit of output,what will happen to average variable cost? Explain.
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Q 118Q 118
Why does the vertical distance between the ATC curve and the AVC curve decrease as output increases?
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Q 119Q 119
The period of time when a firm is able to change all of inputs,or factors of production,is called the:
A)economic term.
B)short run.
C)accounting term.
D)long run.
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Multiple Choice
Q 120Q 120
One of the main differences between the long run and the short run is that:
A)the firm can earn a profit.
B)the firm can operate at a loss.
C)there are no diminishing returns in the short run.
D)there are no diminishing returns in the long run.
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Multiple Choice
Q 121Q 121
If a firm is operating in the long run the firm is flexible in the following:
A)altering all inputs.
B)building a new production facility.
C)modifying an existing facility.
D)all of the above
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Multiple Choice
Q 122Q 122
Which of the following describes a long-run adjustment of a firm to changing business conditions?
A)A restaurant owner leases an empty store next door and expands.
B)A dentist changes her hours to see more patients.
C)A farmer hires more workers to help bring in the harvest.
D)all of the above
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Multiple Choice
Q 123Q 123
If a firm's production process exhibits economies of scale for all levels of output,then the firm's long-run average cost curve will be:
A)horizontal.
B)positively sloped.
C)negatively sloped.
D)U-shaped.
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Multiple Choice
Q 124Q 124
If a firm's production process exhibits diseconomies of scale for all levels of output,then the firm's long-run average cost curve will be:
A)horizontal.
B)positively sloped.
C)negatively sloped.
D)U-shaped.
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Multiple Choice
Q 125Q 125
A firm's long run marginal cost is:
A)the change in long run cost resulting from producing one more unit of output.
B)the change in long run fixed cost resulting from producing one more unit of output.
C)the change in long run variable cost resulting from producing one more unit of output.
D)none of the above.
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Multiple Choice
Q 126Q 126
When an increase in a firm's scale of production leads to higher average costs it is referred to as:
A)economies of scale.
B)constant returns to scale.
C)decreasing returns to scale.
D)diseconomies of scale.
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Multiple Choice
Q 127Q 127
If the car manufacturer enjoys economies of scale,then an increase in the number of cars manufactured will lead to a(n):
A)decrease in average cost.
B)increase in average cost.
C)constant average cost.
D)decrease in total cost.
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Multiple Choice
Q 128Q 128
You are the manager and owner of E-bulbs Inc.and you know that your factory experiences economies of scale.You want to quantify the extent of scale economies in the production of E-bulbs Inc.so you need to find:
A)diseconomies of scale.
B)minimum efficient scale.
C)diminishing marginal productivity.
D)diminishing marginal returns.
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Multiple Choice
Q 129Q 129
The manager of HDG Computers reports that if output expands in the long run then average costs will rise.This is an example of:
A)economies of scale.
B)diseconomies of scale.
C)minimum efficient scale
D)constant returns to scale.
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Multiple Choice
Q 130Q 130
Diseconomies of scale can occur for:
A)coordination problems.
B)minimum efficient scale problems.
C)increasing input costs.
D)A and C are correct.
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Multiple Choice
Q 131Q 131
All of the following are possible reasons for diseconomies of scale EXCEPT:
A)bureaucratic inefficiency.
B)a top-heavy management structure.
C)indivisible inputs.
D)All of the above are possible reasons for diseconomies of scale.
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Multiple Choice
Q 132Q 132
-Which segment of the LAC in Figure 8.9 represents constant returns to scale?
A)ab
B)cd
C)de
D)all of the above
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Multiple Choice
Q 133Q 133
-Refer to Figure 8.9.Which point of the LAC represents minimum efficient scale?
A)a
B)b
C)c
D)e
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Multiple Choice
Q 134Q 134
-Refer to Figure 8.9.Which point of the LAC represents economies of scale?
A)a
B)b
C)c
D)e
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Multiple Choice
Q 135Q 135
-Refer to Figure 8.9.Which point of the LAC represents diseconomies of scale?
A)a
B)b
C)c
D)e
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Multiple Choice
Q 136Q 136
Which of the following industries is most likely to exhibit significant economies of scale?
A)home building
B)vegetable farming
C)motorcycle production
D)electric power generation
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Multiple Choice
Q 137Q 137
Suppose that an increase in the scale of production at CR Cabinets Inc.leads to no change in average costs,CR Cabinets Inc.experiences:
A)minimum efficient scale.
B)economies of scale.
C)diseconomies of scale.
D)constant returns to scale.
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Multiple Choice
Q 138Q 138
Which of the following is an example of economies of scale?
A)As the computer industry has expanded,the number of professionally trained computer programmers has also increased,which has caused the salaries of computer programmers to increase.
B)To attract firms to locate in its state,the state government reduced the tax rate that businesses must pay on its profits,thus lowering the costs to firms who locate in the state.
C)A firm increases in size and is therefore able to lower its health insurance costs because as the size of the group insured increases,the premium per person decreases substantially.
D)As the demand for calculators increased,the price of calculators actually fell.
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Multiple Choice
Q 139Q 139
Recall the application about invisible inputs and the cost of fake killer whales,Sea lions off the Washington coast eat steelhead and other fish,depleting some species threatened with extinction and decreasing the harvest of the commercial fishing industry.Rick Funk is a plastics manufacturer who has offered to build a life-sized fiberglass killer whale,mount it on a rail like a roller coaster,and send the whale diving through the water to scare off the sea lions,whales' natural prey.According to Funk,it would cost about $16,000 to make the first whale,including $11,000 for the mold and $5,000 for labor and materials.Once the mold is made,each additional whale would cost an additional $5,000.Why is the mold an invisible input?
A)because it cannot be scaled down and still produced the whales
B)because the cost of producing the mold is not visible in the total cost
C)because it can be scaled down and still produce the whales
D)both B and C
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Multiple Choice
Q 140Q 140
Suppose Greg's Carpet factory experiences economies of scale up to a certain point and constant returns of scale beyond that point.Its long-run average cost curve is most likely to be:
A)upward sloping to the right.
B)downward sloping to the right.
C)horizontal.
D)L-shaped.
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Multiple Choice
Q 141Q 141
If the fixed cost of producing a good is very high,but the marginal cost is low and constant,then the average total cost will:
A)increase as more units are produced.
B)decrease as more units are produced.
C)first decrease and then increase as more units are produced.
D)not change as more units are produced.
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Multiple Choice
Q 142Q 142
When an increase of a firm's scale of production leads to lower average costs per unit produced,economies of scale are present.
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True False
Q 143Q 143
When indivisible inputs are being used,the average cost of production increases as output decreases.
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True False
Q 144Q 144
If a firm's long-run average cost curve is horizontal the firm is experiencing economies of scale
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True False
Q 145Q 145
When the long-run cost curve is negatively sloped the firm is experiencing diseconomies of scale.
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True False
Q 146Q 146
When the long-run cost curve is negatively sloped the firm is experiencing economies of scale.
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True False
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True False
Q 148Q 148
The difference between the short run and long run is a firm's flexibility in choosing inputs.
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Q 150Q 150
The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?
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Q 151Q 151
What are economies of scale? What are diseconomies of scale? What are constant returns to scale?
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Q 152Q 152
How is a long-run average cost curve different from a short-run average cost curve? How are they related?
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Q 154Q 154
Comment on the following statement: "The shape of the long-run average cost curve is determined by diminishing returns."
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Q 156Q 156
The firm's short-run cost curves shows how ________ vary with the quantity produced when at least one input is fixed.
A)technology
B)production costs
C)economy of scales
D)none of the above
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Multiple Choice
Q 157Q 157
A large or a small wind turbine have similar installation,operating and maintenance costs,however,a large turbine has four times the generating capacity but costs less than three times as much as a small turbine,the average cost of generating electricity with wind is:
A)constant at each output.
B)increasing as output increases.
C)decreasing as output increases.
D)at first increasing and then decreasing as output rises.
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Multiple Choice
Q 158Q 158
When detailing the cost of producing electricity with turbines of different sizes.The concept of scale economies is realized when:
A)the average cost tend to decrease as the size of the turbine decreases.
B)the average cost tend to increase as the size of the turbine decreases.
C)the average cost tend to decrease as the size of the turbine increases.
D)the average cost tend to increase as the size of the turbine increases.
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Multiple Choice
Q 159Q 159
An informational good,such as a music video,has a ________ first-copy cost and a_______ marginal cost.
A)large;large
B)large;small
C)small;large
D)small;small
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Multiple Choice
Q 160Q 160
If the first copy cost of producing a R&B music video is $350,000 and the marginal cost is $0,how much total cost would the firm incur if it produces 5 million copies?
A)zero
B)$350,000
C)$5 million
D)$5 million + $350,000
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True False
Q 162Q 162
The long-run average-cost curve shows how the average cost of production varies when the firm is perfectly flexible in choosing its inputs.
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