Question 1

How long is the long run?

Accepted Answer

A)  A defined,set period of time,usually a year
B)  However long it would take a firm to vary all of its costs
C)  However long it would take a firm to have at least one variable cost
D)  None of these defines the long run.E) B) and C)
F) A) and D)

Question 2

A college student is thinking about running an ice-cream truck over the summer.What should the student's main objective be?

Accepted Answer

A)  To have fun
B)  To meet new people
C)  To sell as many ice cream cones as possible
D)  To maximize his profitE) B) and D)
F) B) and C)

Question 3

Mika borrows $100,000 to start up her own beauty shop.She pays 5 percent interest on her loan.In order to account for all costs of her business,Mika must not forget:

Accepted Answer

A)  the implicit cost of $100,000.
B)  the implicit cost of $5,000.
C)  the explicit cost of $105,000.
D)  the explicit cost of $5,000.E) A) and B)
F) C) and D)

Question 4

A long-run ATC curve shows:

Accepted Answer

A)  the minimum average total cost possible for every possible size firm across an industry.
B)  which size firm can capture the lowest costs per unit for an industry.
C)  what size firms can capture economies of scale by expanding.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 5

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) C) and D)
F) A) and B)

Question 6

The marginal product of any input into the production process:

Accepted Answer

A)  is the increase in output that is generated by an additional unit of input.
B)  is the decrease in input that is generated by an additional unit of output.
C)  is the constant ratio of inputs to outputs.
D)  None of these is true.E) B) and C)
F) B) and D)

Question 7

An example of an ongoing expense for a toy company would be buying:

Accepted Answer

A)  a delivery truck,and would be included in total cost.
B)  a new factory,and would be excluded from total cost.
C)  advertising for their products,and would be included in total cost.
D)  None of these is true.E) A) and C)
F) A) and D)

Question 8

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 at output increases.
C)  is a constant,flat line.
D)  is a constant,vertical line.E) None of the above
F) C) and D)

Question 9

The slope of the total production curve becomes:

Accepted Answer

A)  steeper when marginal product increases,typically at low levels of input.
B)  flatter when marginal product increases,typically at high levels of input.
C)  steeper when marginal product decreases,typically at high levels of input.
D)  flatter when marginal product decreases,typically at low levels of input.E) A) and C)
F) None of the above

Question 10

The slope of the total production curve is the:

Accepted Answer

A)  marginal product.
B)  rate of return.
C)  production function.
D)  derivative of the product optimization function.E) A) and B)
F) B) and C)

Question 11

When economic profits are zero,accounting profits are most likely:

Accepted Answer

A)  positive.
B)  negative.
C)  zero.
D)  All of these are likely.E) B) and C)
F) B) and D)

Question 12

Suppose Chip's Chips produces bags of potato chips that sell for $3 a bag.If they sold 12,000 bags and incurred total costs of $30,000,what was the company's profit?

Accepted Answer

A)  $6,000
B)  $42,000
C)  $36,000
D)  $18,000E) None of the above
F) B) and C)

Question 13

Economies of scale refers to returns that occur when:

Accepted Answer

A)  an increase in the quantity of output decreases average total cost in the long run.
B)  an increase in the quantity of output increases average total cost in the long run.
C)  average total cost does not depend on the quantity of output in the long run.
D)  None of these is true.E) B) and C)
F) A) and D)

Question 14

Average product tells us:

Accepted Answer

A)  the level of inputs that are the most productive.
B)  the cost-minimizing level of inputs to hire.
C)  the profit-maximizing level of inputs to hire.
D)  All of these are true.E) B) and C)
F) A) and C)

Question 15

Fixed costs are:

Accepted Answer

A)  costs that don't depend on the quantity of output produced.
B)  costs that depend on the quantity of output produced.
C)  inputs costs that stay the same price per unit.
D)  costs that are negotiated to stay the same throughout the life of a contract.E) B) and C)
F) None of the above

Question 16

Suppose Winston's annual salary as an accountant is $60,000,and his financial assets generate $4,000 per year in interest.One day,after deciding to be his own boss,he quits his job and uses his financial assets to establish a consulting business,which he runs out of his home.To run the business,he outlays $8,000 in cash to cover all the costs involved with running the business,and earns revenues of $150,000.What costs would be considered when calculating economic profit?

Accepted Answer

A)  The opportunity cost of his job and interest forgone of $64,000,and the explicit cost of $8,000
B)  The implicit cost of the interest forgone of $4,000 and the explicit cost of $8,000
C)  The explicit cost of $8,000
D)  The implicit cost of his job of $60,000 and the opportunity cost of forgone interest of $4,000E) B) and C)
F) None of the above

Question 17

Accounting profits can tell a business _______________________,and economic profits can tell a business ______________________.

Accepted Answer

A)  if it is making money with this venture;if it can make more money with a different venture
B)  if it can make more money with a different venture;if it is making money with this venture
C)  if it is a profitable business;if it can be any more profitable
D)  if it can be any more profitable;if it is profitableE) C) and D)
F) B) and D)

Question 18

Economic profits are calculated as:

Accepted Answer

A)  total revenue minus explicit costs.
B)  total revenue minus all opportunity costs,explicit and implicit.
C)  total revenue minus implicit costs.
D)  None of these is true.E) A) and B)
F) A) and C)

Question 19

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Accepted Answer

A)  The marginal product of the fifth worker is three sandwiches.
B)  The total product of the sandwich shop is now 27 sandwiches.
C)  Diminishing marginal product has set in.
D)  All of these are true.E) All of the above
F) C) and D)

Question 20

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) A) and D)
F) A) and C)

Exam 12: The Costs of Production

Accounting profits can tell a business _,and economic profits can tell a business .

Correct Answer
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Average product tells us:

Correct Answer
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The slope of the total production curve becomes:

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
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If a firm decreases production,then its:

Correct Answer
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Suppose Chip's Chips produces bags of potato chips that sell for $3 a bag.If they sold 12,000 bags and incurred total costs of $30,000,what was the company's profit?

Correct Answer
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The fixed cost curve:

Correct Answer
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Economies of scale refers to returns that occur when:

Correct Answer
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Correct Answer
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An example of an ongoing expense for a toy company would be buying:

Correct Answer
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Economic profits are calculated as:

Correct Answer
verified

A college student is thinking about running an ice-cream truck over the summer.What should the student's main objective be?

Correct Answer
verified

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Correct Answer
verified

The slope of the total production curve is the:

Correct Answer
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Mika borrows $100,000 to start up her own beauty shop.She pays 5 percent interest on her loan.In order to account for all costs of her business,Mika must not forget:

Correct Answer
verified

A long-run ATC curve shows:

Correct Answer
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When economic profits are zero,accounting profits are most likely:

Correct Answer
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The marginal product of any input into the production process:

Correct Answer
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Fixed costs are:

Correct Answer
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How long is the long run?

Correct Answer
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Exam 12: The Costs of Production

Accounting profits can tell a business _______________________,and economic profits can tell a business ______________________.

Correct AnswerverifiedShow Answer

Average product tells us:

Correct AnswerverifiedShow Answer

The slope of the total production curve becomes:

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

If a firm decreases production,then its:

Correct AnswerverifiedShow Answer

Suppose Chip's Chips produces bags of potato chips that sell for $3 a bag.If they sold 12,000 bags and incurred total costs of $30,000,what was the company's profit?

Correct AnswerverifiedShow Answer

The fixed cost curve:

Correct AnswerverifiedShow Answer

Economies of scale refers to returns that occur when:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An example of an ongoing expense for a toy company would be buying:

Correct AnswerverifiedShow Answer

Economic profits are calculated as:

Correct AnswerverifiedShow Answer

A college student is thinking about running an ice-cream truck over the summer.What should the student's main objective be?

Correct AnswerverifiedShow Answer

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Correct AnswerverifiedShow Answer

The slope of the total production curve is the:

Correct AnswerverifiedShow Answer

Mika borrows $100,000 to start up her own beauty shop.She pays 5 percent interest on her loan.In order to account for all costs of her business,Mika must not forget:

Correct AnswerverifiedShow Answer

A long-run ATC curve shows:

Correct AnswerverifiedShow Answer

When economic profits are zero,accounting profits are most likely:

Correct AnswerverifiedShow Answer

The marginal product of any input into the production process:

Correct AnswerverifiedShow Answer

Fixed costs are:

Correct AnswerverifiedShow Answer

How long is the long run?

Correct AnswerverifiedShow Answer

Accounting profits can tell a business _,and economic profits can tell a business .

Correct Answer
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