Question 1

The goal of most firms in the economy is to:

Accepted Answer

A)   maximise output
B)   maximise profit
C)   obtain the highest price for their product
D)   minimise costsE) A) and B)
F) A) and C)

Question 2

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximising firm is that, in the short run:

Accepted Answer

A)   output is not variable
B)   the size of the factory is fixed
C)   the number of workers used to produce the firm's product is fixed
D)   there are no fixed costsE) B) and C)
F) C) and D)

Question 3

Graph 13-4
  This graph depicts average total cost functions for a firm that produces automobiles. Use the graph to answer the following question(s) .
-Refer to Graph 13-4. This firm experiences constant returns to scale at which output levels?

Accepted Answer

A)   output levels above N
B)   output levels between M and N
C)   output levels below M
D)   all of the above levels if the firm is operating in the long runE) None of the above
F) All of the above

Question 4

During the summer Jeremy, a small business owner, can hire extra staff to help him repair boats. On his own Jeremy can repair 10 boats a day, adding a second staff member sees 15 boats a day repaired, and adding a third sees 18 boats a day repaired. The marginal product of the third worker is:

Accepted Answer

A)   18 boats/day
B)   15 boats/day
C)   5 boats/day
D)   3 boats/dayE) A) and C)
F) B) and C)

Question 5

In some cases, specialisation allows larger factories to produce goods at a lower average cost than smaller factories.

Accepted Answer

A) True 
 B)False

Question 6

Diminishing marginal product occurs:

Accepted Answer

A)  Immediately after the first worker is hired
B)   after the marginal cost curve crosses the average total cost curve.
C)   at different times for different firms
D)   when average variable cost begins to fallE) None of the above
F) B) and C)

Question 7

Table 13-1
Measures of Cost for Splashy Cardboard Kayak Factory.
 
-Refer to Table 13-1. What is the variable cost of producing five kayaks?

Accepted Answer

A)   $18
B)   $17
C)   $12
D)   it can't be determined from the information givenE) A) and D)
F) C) and D)

Question 8

Variable costs change as the firm alters the quantity of output produced.

Accepted Answer

A) True 
 B)False

Question 9

Marginal cost tells us the:

Accepted Answer

A)   amount total cost rises when price rises by one unit
B)   amount fixed cost rises when price rises by one unit
C)   amount total cost rises when output rises by one unit
D)   amount fixed cost rises when output rises by one unitE) B) and C)
F) None of the above

Question 10

The marginal cost curve bisects the average total cost curve at the minimum point of the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 11

Total revenue equals:

Accepted Answer

A)   total output multiplied by the unit cost of output
B)   total output multiplied by profit
C)   total output multiplied by the unit price of output
D)   total output divided by profitE) A) and B)
F) All of the above

Question 12

The production function depicts a relationship between which two variables? Draw a production function that exhibits diminishing marginal product.

Accepted Answer

The production function depict...

Question 13

One of the most important properties of cost curves is that:

Accepted Answer

A)   the average fixed cost must eventually rise
B)   the average total cost curve first rises, then falls with increased output
C)   for most producers, the average total cost curve must never cross the marginal cost curve
D)   the marginal cost eventually rises with the quantity of outputE) None of the above
F) B) and D)

Question 14

The cost of capital includes both any interest payments in loans as well as any forgone interest on savings used to finance the business.

Accepted Answer

A) True 
 B)False

Question 15

Graph 13-1
  This graph depicts a production function for a firm that produces cookies. Use the
graph to answer the following question(s) .
-Refer to Graph 13-1. The slope of the total product curve reveals information about the:

Accepted Answer

A)   average product of workers
B)   fixed product of workers
C)   total product of workers
D)   marginal product of workersE) A) and C)
F) A) and B)

Question 16

Table 13-2
Adrienne's Premium Boxing Service subcontracts with a chocolate manufacturer to box premium chocolates for their mail order catalogue business. Adrienne rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. Costs are in dollars per week.
 
-Refer to Table 13-2. Adrienne has received an order for 3000 boxes of chocolates for next week. If she expects that the trend in the marginal product of labour will continue in the same direction, it is most likely that her best decision will be to:

Accepted Answer

A)   hire about 12 new workers and hope she can satisfy the order
B)   commit to meeting the order and then take three weeks to complete the job
C)   not commit to meeting the order until she can move to a larger room and hire more workers to box the chocolates
D)   close her business until she is able to hire more productive workersE) None of the above
F) A) and D)

Question 17

A firm's profit is equivalent to:

Accepted Answer

A)   its total sales
B)   average revenue minus average total cost
C)   marginal revenue minus marginal cost
D)   total revenue minus total costE) A) and C)
F) B) and C)

Question 18

Consider the following graph of a firm in the short-run.
  
Identify the average fixed cost curve, the marginal cost curve, the average variable cost curve and the average total cost curve.

Accepted Answer

The average fixed cost curve i...

Question 19

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Accepted Answer

The total cost curve will incr...

Question 20

Graph 13-3
  The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s) .
-Refer to Graph 13-3. Which of the curves is most likely to represent average variable cost?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) All of the above
F) A) and C)

Exam 13: The Costs of Production

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Correct Answer
verified
The total cost curve will incr...
View Answer

The production function depicts a relationship between which two variables? Draw a production function that exhibits diminishing marginal product.

Correct Answer
verified
The production function depict...
View Answer

The marginal cost curve bisects the average total cost curve at the minimum point of the average total cost curve.

Correct Answer
verified

Total revenue equals:

Correct Answer
verified

Consider the following graph of a firm in the short-run. Identify the average fixed cost curve, the marginal cost curve, the average variable cost curve and the average total cost curve.

Correct Answer
verified
The average fixed cost curve i...
View Answer

The cost of capital includes both any interest payments in loans as well as any forgone interest on savings used to finance the business.

Correct Answer
verified

Marginal cost tells us the:

Correct Answer
verified

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximising firm is that, in the short run:

Correct Answer
verified

Diminishing marginal product occurs:

Correct Answer
verified

One of the most important properties of cost curves is that:

Correct Answer
verified

Variable costs change as the firm alters the quantity of output produced.

Correct Answer
verified

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1. What is the variable cost of producing five kayaks?

Correct Answer
verified

In some cases, specialisation allows larger factories to produce goods at a lower average cost than smaller factories.

Correct Answer
verified

Graph 13-4 This graph depicts average total cost functions for a firm that produces automobiles. Use the graph to answer the following question(s) . -Refer to Graph 13-4. This firm experiences constant returns to scale at which output levels?

Correct Answer
verified

Correct Answer
verified

Graph 13-1 This graph depicts a production function for a firm that produces cookies. Use the graph to answer the following question(s) . -Refer to Graph 13-1. The slope of the total product curve reveals information about the:

Correct Answer
verified

A firm's profit is equivalent to:

Correct Answer
verified

Graph 13-3 The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s) . -Refer to Graph 13-3. Which of the curves is most likely to represent average variable cost?

Correct Answer
verified

During the summer Jeremy, a small business owner, can hire extra staff to help him repair boats. On his own Jeremy can repair 10 boats a day, adding a second staff member sees 15 boats a day repaired, and adding a third sees 18 boats a day repaired. The marginal product of the third worker is:

Correct Answer
verified

The goal of most firms in the economy is to:

Correct Answer
verified

Exam 13: The Costs of Production

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Correct AnswerverifiedThe total cost curve will incr...View AnswerShow Answer

The production function depicts a relationship between which two variables? Draw a production function that exhibits diminishing marginal product.

Correct AnswerverifiedThe production function depict...View AnswerShow Answer

The marginal cost curve bisects the average total cost curve at the minimum point of the average total cost curve.

Correct AnswerverifiedShow Answer

Total revenue equals:

Correct AnswerverifiedShow Answer

Consider the following graph of a firm in the short-run. Identify the average fixed cost curve, the marginal cost curve, the average variable cost curve and the average total cost curve.

Correct AnswerverifiedThe average fixed cost curve i...View AnswerShow Answer

The cost of capital includes both any interest payments in loans as well as any forgone interest on savings used to finance the business.

Correct AnswerverifiedShow Answer

Marginal cost tells us the:

Correct AnswerverifiedShow Answer

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximising firm is that, in the short run:

Correct AnswerverifiedShow Answer

Diminishing marginal product occurs:

Correct AnswerverifiedShow Answer

One of the most important properties of cost curves is that:

Correct AnswerverifiedShow Answer

Variable costs change as the firm alters the quantity of output produced.

Correct AnswerverifiedShow Answer

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1. What is the variable cost of producing five kayaks?

Correct AnswerverifiedShow Answer

In some cases, specialisation allows larger factories to produce goods at a lower average cost than smaller factories.

Correct AnswerverifiedShow Answer

Graph 13-4 This graph depicts average total cost functions for a firm that produces automobiles. Use the graph to answer the following question(s) . -Refer to Graph 13-4. This firm experiences constant returns to scale at which output levels?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Graph 13-1 This graph depicts a production function for a firm that produces cookies. Use the graph to answer the following question(s) . -Refer to Graph 13-1. The slope of the total product curve reveals information about the:

Correct AnswerverifiedShow Answer

A firm's profit is equivalent to:

Correct AnswerverifiedShow Answer

Graph 13-3 The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s) . -Refer to Graph 13-3. Which of the curves is most likely to represent average variable cost?

Correct AnswerverifiedShow Answer

During the summer Jeremy, a small business owner, can hire extra staff to help him repair boats. On his own Jeremy can repair 10 boats a day, adding a second staff member sees 15 boats a day repaired, and adding a third sees 18 boats a day repaired. The marginal product of the third worker is:

Correct AnswerverifiedShow Answer

The goal of most firms in the economy is to:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The total cost curve will incr...
View Answer

Correct Answer
verified
The production function depict...
View Answer

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verified

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verified
The average fixed cost curve i...
View Answer

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