Question 1

Economists normally assume that the goal of a firm is to

Accepted Answer

A)  maximize its total revenue.
B)  maximize its profit.
C)  minimize its explicit costs.
D)  minimize its total cost.E) A) and D)
F) A) and C)

Question 2

Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each.
-Refer to Scenario 13-11. An accountant would calculate the total cost for one birdhouse to be

Accepted Answer

A)  $5.
B)  $8.
C)  $9.
D)  $13.E) A) and D)
F) A) and C)

Question 3

When calculating a firm's profit, an economist will subtract only

Accepted Answer

A)  explicit costs from total revenue because these are the only costs that can be measured explicitly.
B)  implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured.
C)  the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.
D)  the marginal cost because the cost of the next unit is the only relevant cost.E) A) and D)
F) A) and C)

Question 4

Scenario 13-19
Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000.
-Refer to Scenario 13-19. In producing the 7,000 pounds of cheese, the firm's average fixed cost was

Accepted Answer

A)  $0.29.
B)  $1.71.
C)  $2,00.
D)  $6.00.E) None of the above
F) B) and C)

Question 5

Scenario 13-10
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each.
-Refer to Scenario 13-10. An accountant would calculate the total cost for one photo frame to be

Accepted Answer

A)  $5.
B)  $10.
C)  $15.
D)  $25.E) B) and D)
F) B) and C)

Question 6

Figure 13-3 
-Refer to Figure 13-3. The graph illustrates a typical

Accepted Answer

A)  total-cost curve.
B)  production function.
C)  production possibilities frontier.
D)  fixed-cost curve.E) A) and C)
F) C) and D)

Question 7

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  coordination problems arising from the large size of the firm.
D)  fixed costs greatly exceeding variable costs.E) B) and C)
F) None of the above

Question 8

The marginal cost curve crosses the average total cost curve at

Accepted Answer

A)  the efficient scale.
B)  the minimum point on the average total cost curve.
C)  a point where the marginal cost curve is rising.
D)  All of the above are correct.E) None of the above
F) A) and C) D

Question 9

​​​Table 13-7 
-Refer to Table 13-7. At which number of workers does diminishing marginal product begin?

Accepted Answer

A)  ​1
B)  ​2
C)  ​3
D)  ​4E) A) and C)
F) B) and D)

Question 10

Average variable cost is equal to total variable cost divided by quantity of output.

Accepted Answer

A) True 
 B)False

Question 11

When a firm is operating at an efficient scale,

Accepted Answer

A)  average variable cost is minimized.
B)  average fixed cost is minimized.
C)  average total cost is minimized.
D)  marginal cost is minimized.E) B) and C)
F) C) and D)

Question 12

Analyzing the behavior of the firm enhances our understanding of

Accepted Answer

A)  what decisions lie behind the market supply curve.
B)  how consumers allocate their income to purchase scarce resources.
C)  how financial institutions set interest rates.
D)  whether resources are allocated fairly.E) A) and C)
F) A) and B)

Question 13

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Accepted Answer

A) True 
 B)False  True

Question 14

Scenario 13-1
Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year.
-Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

Accepted Answer

A)  $3,000
B)  $6,000
C)  $15,000
D)  $18,000E) A) and B)
F) C) and D)

Question 15

Which of the following expressions is correct?

Accepted Answer

A)  accounting profit = total revenue - explicit costs
B)  economic profit = total revenue - implicit costs
C)  economic profit = total revenue - explicit costs
D)  Both a and b are correct.E) None of the above
F) A) and B)

Question 16

Gwen has decided to start her own photography studio. To purchase the necessary equipment, Gwen withdrew $2,000 from her savings account, which was earning 3% interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%. What is Gwen's annual opportunity cost of the financial capital that has been invested in the business?

Accepted Answer

A)  $60
B)  $280
C)  $340
D)  $660E) B) and C)
F) C) and D)

Question 17

Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct? ​

Accepted Answer

A)  ​Sebastian's total explicit costs are $15,400.
B)  ​Sebastian's total implicit costs are $55,600.
C)  ​Sebastian's accounting profit is $35,000.
D)  ​Sebastian's economic profit is $4,600.E) All of the above
F) A) and D) A

Question 18

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Accepted Answer

A)  competition.
B)  opportunity costs.
C)  specialization.
D)  incentives.E) B) and D)
F) A) and C)

Question 19

Marginal cost is equal to

Accepted Answer

A)  TC/Q.
B)  ΔATC/Q.
C)  ΔTC/ΔQ.
D)  ΔQ/ΔTC.E) A) and B)
F) C) and D)

Question 20

Figure 13-5 
-Refer to Figure 13-5. Curve D intersects curve C

Accepted Answer

A)  where the firm maximizes profit.
B)  at the minimum of average fixed cost.
C)  at the efficient scale.
D)  where fixed costs equal variable costs.E) A) and D)
F) A) and B)

Exam 13: The Costs of Production

Economists normally assume that the goal of a firm is to

Correct Answer
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When calculating a firm's profit, an economist will subtract only

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Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical

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If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Correct Answer
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The marginal cost curve crosses the average total cost curve at

Correct Answer
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D

Table 13-7 -Refer to Table 13-7. At which number of workers does diminishing marginal product begin?

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Average variable cost is equal to total variable cost divided by quantity of output.

Correct Answer
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When a firm is operating at an efficient scale,

Correct Answer
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Analyzing the behavior of the firm enhances our understanding of

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The cost of producing an additional unit of a good is not the same as the average cost of the good.

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True

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Which of the following expressions is correct?

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A

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Correct Answer
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Marginal cost is equal to

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Figure 13-5 -Refer to Figure 13-5. Curve D intersects curve C

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Exam 13: The Costs of Production

Economists normally assume that the goal of a firm is to

Correct AnswerverifiedShow Answer

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When calculating a firm's profit, an economist will subtract only

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical

Correct AnswerverifiedShow Answer

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Correct AnswerverifiedShow Answer

The marginal cost curve crosses the average total cost curve at

Correct AnswerverifiedD

​​​Table 13-7 -Refer to Table 13-7. At which number of workers does diminishing marginal product begin?

Correct AnswerverifiedShow Answer

Average variable cost is equal to total variable cost divided by quantity of output.

Correct AnswerverifiedShow Answer

When a firm is operating at an efficient scale,

Correct AnswerverifiedShow Answer

Analyzing the behavior of the firm enhances our understanding of

Correct AnswerverifiedShow Answer

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Correct AnswerverifiedTrue

Correct AnswerverifiedShow Answer

Which of the following expressions is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

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Marginal cost is equal to

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Figure 13-5 -Refer to Figure 13-5. Curve D intersects curve C

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D

Table 13-7 -Refer to Table 13-7. At which number of workers does diminishing marginal product begin?

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True

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A

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