Question 1

Exhibit 7-3  In Exhibit 7-3, the marginal product of the third worker is

Accepted Answer

A)  20
B)  100/3
C)  60
D)  50
E)  140F) All of the above
G) B) and D)

Question 2

Exhibit 7-2  Given the information in Exhibit 7-2, what is the marginal product of the third unit of labor?

Accepted Answer

A)  45 pairs of shoes
B)  25 pairs of shoes
C)  15 pairs of shoes
D)  $45
E)  $25F) A) and D)
G) B) and D)

Question 3

A young chef is considering opening his own sushi bar.To do so, he would have to quit his current job, which pays $20, 000 a year, and take over a store building he owns and currently rents for $6, 000 a year.His expenses at the sushi bar would be $50, 000 for food and $2, 000 for gas and electricity.What is the minimum revenue he must earn per year in order for it to be worth his while to open his sushi bar?

Accepted Answer

A)  $26, 000
B)  $66, 000
C)  $78, 000
D)  $52, 000
E)  $72, 000F) A) and C)
G) A) and E)

Question 4

Exhibit 7-11  Movement from point b to point c in Exhibit 7-11 indicates that the firm is experiencing

Accepted Answer

A)  economies of scale
B)  increasing average cost
C)  economies of cost
D)  a decrease in average plant size
E)  diseconomies of scaleF) A) and D)
G) A) and C)

Question 5

The law of diminishing returns explains why

Accepted Answer

A)  monopolies have a guaranteed profit margin
B)  short-run MC and AVC curves are U-shaped
C)  the production possibilities curve is bowed out
D)  long run supply curves are downward sloping
E)  total product is a straight lineF) All of the above
G) C) and D)

Question 6

Economies of scale can be caused by

Accepted Answer

A)  all of the following
B)  short-run increases in marginal productivity
C)  the use of larger, more specialized machines
D)  higher information costs as a firm expands
E)  bureaucratic red tape as a firm expandsF) B) and D)
G) All of the above

Question 7

Maryann and Don want to open their own deli.To do so, Maryann must give up her job, at which she earns $20, 000 per year, and Don must give up his part-time job, at which he earns $10, 000 per year.They must liquidate their money market fund, which earns $1, 000 interest annually.The rent on the building is $10, 000 per year, and expenses for such necessities as utilities, corned beef, and pickles are $35, 000 annually.What is the explicit cost per year of operating the deli?

Accepted Answer

A)  $10, 000
B)  $35, 000
C)  $45, 000
D)  $31, 000
E)  $76, 000F) A) and D)
G) A) and E)

Question 8

Exhibit 7-14 Total Cost Curve  In Exhibit 7-14, what is variable cost when no output is being produced?

Accepted Answer

A)  $0
B)  $3
C)  $10
D)  $20
E)  impossible to calculate variable cost unless we know the daily wageF) C) and D)
G) A) and B)

Question 9

Minimum efficient scale is the level of output at which

Accepted Answer

A)  short-run average total cost stops decreasing
B)  short-run average total cost stops increasing
C)  long-run average cost stops decreasing
D)  long-run average cost stops increasing
E)  profit stops increasingF) A) and E)
G) B) and E)

Question 10

A young chef is considering opening his own sushi bar.To do so, he would have to quit his current job, which pays $20, 000 a year, and take over a store building that he owns and currently rents to his brother for $6, 000 a year.His expenses at the sushi bar would be $50, 000 for food and $2, 000 for gas and electricity.What are his implicit costs?

Accepted Answer

A)  $26, 000
B)  $66, 000
C)  $78, 000
D)  $52, 000
E)  $72, 000F) B) and E)
G) None of the above

Question 11

If a firm is experiencing diseconomies of scale, its long-run marginal cost curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 12

The law of diminishing marginal returns is first evident in the following table

Accepted Answer

A)  when the first worker begins
B)  with each of the workers
C)  when the third unit of labor is added
D)  with the last unit of labor input
E)  when the fourth unit of labor is addedF) A) and B)
G) A) and E)

Question 13

Exhibit 7-5  In Exhibit 7-5, what is variable cost when no output is being produced?

Accepted Answer

A)  $0
B)  $10
C)  infinity
D)  it is impossible to calculate variable cost unless we know the daily wage
E)  it is impossible to calculate variable cost unless we know fixed cost at Q = 0F) B) and E)
G) A) and D)

Question 14

If marginal cost is less than average total cost,

Accepted Answer

A)  marginal cost must be falling
B)  average total cost must be increasing
C)  average variable cost equals average total cost
D)  average variable cost must be decreasing
E)  average variable cost may be increasing or decreasingF) All of the above
G) A) and E)

Question 15

If the average height in the classroom were 5 feet 10 inches and Patrick Ewing, who is 7 feet tall, came in and sat down,

Accepted Answer

A)  the average height would rise to 7 feet
B)  the marginal height would be 5 feet 10 inches
C)  the average height would not change
D)  the average height would rise somewhat
E)  the marginal height would riseF) B) and D)
G) C) and D)

Question 16

In the short run, which of the following is likely to be a variable cost to a physician?

Accepted Answer

A)  office space
B)  computers
C)  liability insurance
D)  insurance forms
E)  examining tableF) None of the above
G) B) and E)

Question 17

Exhibit 7-5  In Exhibit 7-5, what is fixed cost at 15 units of output?

Accepted Answer

A)  $0
B)  $10
C)  $30
D)  it is impossible to calculate fixed cost unless we know the daily wage
E)  it is impossible to calculate fixed cost unless we know variable cost at Q = 0F) A) and D)
G) None of the above

Question 18

Suppose a professor gives up her teaching job to devote her time to writing textbooks.If salaries of professors rise,

Accepted Answer

A)  her accounting profit will rise
B)  her accounting profit will fall
C)  her explicit costs will rise
D)  her economic profit from textbooks will fall
E)  her economic profit from textbooks will riseF) C) and D)
G) None of the above

Question 19

If the marginal product of an input is negative, the total product must also be negative.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 7-7  Fixed cost in Exhibit 7-7 equals

Accepted Answer

A)  $20
B)  $30
C)  $50
D)  $280
E)  we cannot calculate fixed costF) All of the above
G) A) and E)

Exam 7: Production and Cost in the Firm

The law of diminishing marginal returns is first evident in the following table

Correct Answer
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Exhibit 7-14 Total Cost Curve In Exhibit 7-14, what is variable cost when no output is being produced?

Correct Answer
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If a firm is experiencing diseconomies of scale, its long-run marginal cost curve is upward sloping.

Correct Answer
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If the average height in the classroom were 5 feet 10 inches and Patrick Ewing, who is 7 feet tall, came in and sat down,

Correct Answer
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Exhibit 7-5 In Exhibit 7-5, what is variable cost when no output is being produced?

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Exhibit 7-2 Given the information in Exhibit 7-2, what is the marginal product of the third unit of labor?

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If the marginal product of an input is negative, the total product must also be negative.

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Suppose a professor gives up her teaching job to devote her time to writing textbooks.If salaries of professors rise,

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Exhibit 7-7 Fixed cost in Exhibit 7-7 equals

Correct Answer
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Exhibit 7-3 In Exhibit 7-3, the marginal product of the third worker is

Correct Answer
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Minimum efficient scale is the level of output at which

Correct Answer
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In the short run, which of the following is likely to be a variable cost to a physician?

Correct Answer
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Exhibit 7-11 Movement from point b to point c in Exhibit 7-11 indicates that the firm is experiencing

Correct Answer
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Exhibit 7-5 In Exhibit 7-5, what is fixed cost at 15 units of output?

Correct Answer
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If marginal cost is less than average total cost,

Correct Answer
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The law of diminishing returns explains why

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Economies of scale can be caused by

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Exam 7: Production and Cost in the Firm

The law of diminishing marginal returns is first evident in the following table

Correct AnswerverifiedShow Answer

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, what is variable cost when no output is being produced?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a firm is experiencing diseconomies of scale, its long-run marginal cost curve is upward sloping.

Correct AnswerverifiedShow Answer

If the average height in the classroom were 5 feet 10 inches and Patrick Ewing, who is 7 feet tall, came in and sat down,

Correct AnswerverifiedShow Answer

Exhibit 7-5 In Exhibit 7-5, what is variable cost when no output is being produced?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 7-2 Given the information in Exhibit 7-2, what is the marginal product of the third unit of labor?

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If the marginal product of an input is negative, the total product must also be negative.

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Correct AnswerverifiedShow Answer

Suppose a professor gives up her teaching job to devote her time to writing textbooks.If salaries of professors rise,

Correct AnswerverifiedShow Answer

Exhibit 7-7 Fixed cost in Exhibit 7-7 equals

Correct AnswerverifiedShow Answer

Exhibit 7-3 In Exhibit 7-3, the marginal product of the third worker is

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Minimum efficient scale is the level of output at which

Correct AnswerverifiedShow Answer

In the short run, which of the following is likely to be a variable cost to a physician?

Correct AnswerverifiedShow Answer

Exhibit 7-11 Movement from point b to point c in Exhibit 7-11 indicates that the firm is experiencing

Correct AnswerverifiedShow Answer

Exhibit 7-5 In Exhibit 7-5, what is fixed cost at 15 units of output?

Correct AnswerverifiedShow Answer

If marginal cost is less than average total cost,

Correct AnswerverifiedShow Answer

The law of diminishing returns explains why

Correct AnswerverifiedShow Answer

Economies of scale can be caused by

Correct AnswerverifiedShow Answer

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