Question 1

Normal profit is

Accepted Answer

A)  determined by subtracting implicit costs from total revenue.
B)  determined by subtracting explicit costs from total revenue.
C)  the return to the entrepreneur when economic profits are zero.
D)  the average profitability of an industry over the preceding 10 years.E) All of the above
F) C) and D)

Question 2

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $48,000Annual lease on building = $20,000Annual revenue from operations = $280,000Payments to workers = $118,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's explicit costs are

Accepted Answer

A)  $280,000.
B)  $146,000.
C)  $0.
D)  $152,000.E) B) and C)
F) A) and D)

Question 3

Answer the question on the basis of the following cost data.  The average total cost of producing 3 units of output is

Accepted Answer

A)  $14.
B)  $12.
C)  $13.5.
D)  $16.E) C) and D)
F) None of the above

Question 4

As the firm in the diagram expands from plant size #1 to plant size #3, it experiences

Accepted Answer

A)  diminishing returns.
B)  economies of scale.
C)  diseconomies of scale.
D)  constant costs.E) B) and C)
F) A) and B)

Question 5

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.  Average product is at a maximum when

Accepted Answer

A)  three worker(s) is/are hired.
B)  four worker(s) is/are hired.
C)  two worker(s) is/are hired.
D)  six worker(s) is/are hired.E) B) and D)
F) B) and C)

Question 6

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 accounting profit of Harvey's firm in the first year was

Accepted Answer

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

Question 7

Plant sizes get larger as you move from ATC-1 to ATC-4.  In the long run, the firm should use plant size ATC-3 for what level of output?

Accepted Answer

A)  less than 3,000
B)  3,000 to 3,500
C)  4,000 to 4,500
D)  5,000 to 5,500E) B) and D)
F) A) and B)

Question 8

Based on the diagram provided, which of the following statements is true?

Accepted Answer

A)  Average total cost at Q₂ is the slope of line 0 A.
B)  Average total cost at Q₁ is the slope of line AB.
C)  Marginal cost at Q₂ is the slope of line CB.
D)  Marginal cost at Q₁ is the slope of line 0 A.E) C) and D)
F) A) and B)

Question 9

Which of the following holds true?

Accepted Answer

A)  There is no relationship between AP and AVC.
B)  When MP is rising, AVC is falling, and when MP is falling, AVC is rising.
C)  When AP is rising, AVC is falling, and when AP is falling, AVC is rising.
D)  When AP is rising, AVC is rising, and when AP is falling, AVC is falling.E) B) and D)
F) B) and C)

Question 10

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question.  The average fixed cost of 3 units of output is

Accepted Answer

A)  $13.33.
B)  $12.50.
C)  $40.
D)  $18.50.E) A) and C)
F) A) and D)

Question 11

Refer to the provided graphs. They show the long-run average total cost (LRATC) for a product. Which graph would most probably be applicable to a natural monopoly?

Accepted Answer

A)  graph A
B)  graph B
C)  graph C
D)  graph DE) B) and D)
F) A) and D)

Question 12

Refer to the diagram. For output level Q, per unit costs of B are

Accepted Answer

A)  unattainable and imply the inefficient use of resources.
B)  unattainable, given resource prices and the current state of technology.
C)  attainable but imply the inefficient use of resources.
D)  attainable and imply least-cost production of this level of output.E) A) and B)
F) A) and C)

Question 13

Refer to the diagram. The vertical distance between ATC and AVC reflects

Accepted Answer

A)  the law of diminishing returns.
B)  the average fixed cost at each level of output.
C)  marginal cost at each level of output.
D)  the presence of economies of scale.E) All of the above
F) A) and B)

Question 14

The following table shows the short-run total cost data for a firm.  All of the following are correct, except that the firm has

Accepted Answer

A)  economies of scale.
B)  fixed costs of $80.
C)  constant marginal cost.
D)  an average fixed cost of $20 at 4 units of output.E) A) and B)
F) All of the above

Question 15

Answer the question on the basis of the following cost data.  Total fixed cost is

Accepted Answer

A)  $6.25.
B)  $100.00.
C)  $150.00.
D)  $50.00.E) A) and B)
F) None of the above

Question 16

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

Question 17

Why is it important to distinguish between explicit and implicit costs?

Accepted Answer

Explicit costs are the monetary payment ...

Question 18

Normal profit is an implicit cost.

Accepted Answer

A) True 
 B)False

Question 19

Normal profits are

Accepted Answer

A)  the profits reported by accountants on a firm's annual financial statement.
B)  identical to economic profits.
C)  determined by subtracting total costs from total revenues.
D)  considered an implicit cost by economists.E) B) and C)
F) A) and B)

Question 20

If a firm increases all of its inputs by 18 percent and its output increases by 14 percent, then

Accepted Answer

A)  it is encountering constant returns to scale.
B)  it is encountering economies of scale.
C)  it is encountering diseconomies of scale.
D)  the firm's long-run ATC curve will be falling.E) A) and B)
F) B) and C)

Exam 9: Businesses and the Costs of Production

Correct Answer
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Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Average product is at a maximum when

Correct Answer
verified

Correct Answer
verified

Answer the question on the basis of the following cost data. The average total cost of producing 3 units of output is

Correct Answer
verified

Normal profit is an implicit cost.

Correct Answer
verified

Which of the following holds true?

Correct Answer
verified

The following table shows the short-run total cost data for a firm. All of the following are correct, except that the firm has

Correct Answer
verified

Refer to the diagram. The vertical distance between ATC and AVC reflects

Correct Answer
verified

Plant sizes get larger as you move from ATC-1 to ATC-4. In the long run, the firm should use plant size ATC-3 for what level of output?

Correct Answer
verified

Why is it important to distinguish between explicit and implicit costs?

Correct Answer
verified
Explicit costs are the monetary payment ...
View Answer

Normal profits are

Correct Answer
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As the firm in the diagram expands from plant size #1 to plant size #3, it experiences

Correct Answer
verified

If a firm increases all of its inputs by 18 percent and its output increases by 14 percent, then

Correct Answer
verified

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. The average fixed cost of 3 units of output is

Correct Answer
verified

Normal profit is

Correct Answer
verified

Refer to the diagram. For output level Q, per unit costs of B are

Correct Answer
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Based on the diagram provided, which of the following statements is true?

Correct Answer
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Refer to the provided graphs. They show the long-run average total cost (LRATC) for a product. Which graph would most probably be applicable to a natural monopoly?

Correct Answer
verified

At what point does marginal product equal average product?

Correct Answer
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Answer the question on the basis of the following cost data. Total fixed cost is

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Average product is at a maximum when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The average total cost of producing 3 units of output is

Correct AnswerverifiedShow Answer

Normal profit is an implicit cost.

Correct AnswerverifiedShow Answer

Which of the following holds true?

Correct AnswerverifiedShow Answer

The following table shows the short-run total cost data for a firm. All of the following are correct, except that the firm has

Correct AnswerverifiedShow Answer

Refer to the diagram. The vertical distance between ATC and AVC reflects

Correct AnswerverifiedShow Answer

Plant sizes get larger as you move from ATC-1 to ATC-4. In the long run, the firm should use plant size ATC-3 for what level of output?

Correct AnswerverifiedShow Answer

Why is it important to distinguish between explicit and implicit costs?

Correct AnswerverifiedExplicit costs are the monetary payment ...View AnswerShow Answer

Normal profits are

Correct AnswerverifiedShow Answer

As the firm in the diagram expands from plant size #1 to plant size #3, it experiences

Correct AnswerverifiedShow Answer

If a firm increases all of its inputs by 18 percent and its output increases by 14 percent, then

Correct AnswerverifiedShow Answer

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. The average fixed cost of 3 units of output is

Correct AnswerverifiedShow Answer

Normal profit is

Correct AnswerverifiedShow Answer

Refer to the diagram. For output level Q, per unit costs of B are

Correct AnswerverifiedShow Answer

Based on the diagram provided, which of the following statements is true?

Correct AnswerverifiedShow Answer

Refer to the provided graphs. They show the long-run average total cost (LRATC) for a product. Which graph would most probably be applicable to a natural monopoly?

Correct AnswerverifiedShow Answer

At what point does marginal product equal average product?

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. Total fixed cost is

Correct AnswerverifiedShow Answer

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Explicit costs are the monetary payment ...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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