Question 1

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total revenue is

Accepted Answer

A)   $8,000.
B)   $12,000.
C)   $20,000.
D)   $32,000.E) A) and B)
F) A) and C)

Question 2

If a firm produces nothing, it still incurs its fixed costs.

Accepted Answer

A) True 
 B)False

Question 3

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) A) and B)
F) None of the above

Question 4

Describe how a study group of economics students could experience economies of scale as they study for an economics exam.

Accepted Answer

In this example, the costs of production...

Question 5

Economists normally assume that the goal of a firm is to

Accepted Answer

A)   (i)  only
B)   (i)  and (ii)  only
C)   (ii)  and (iii)  only
D)   (i) , (ii) , and (iii) E) B) and C)
F) A) and D)

Question 6

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

Accepted Answer

A) True 
 B)False

Question 7

A total-cost curve shows the relationship between the

Accepted Answer

A)   quantity of an input used and the total cost of production.
B)   quantity of output produced and the total cost of production.
C)   total cost of production and profit.
D)   total cost of production and total revenue.E) C) and D)
F) A) and B)

Question 8

What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Accepted Answer

The opportunity cost of an ite...

Question 9

Profit equals total revenue minus total cost.

Accepted Answer

A) True 
 B)False

Question 10

In the long run, a firm that produces and sells textbooks gets to choose

Accepted Answer

A)   how many workers to hire.
B)   the size of its factories.
C)   which short-run average-total-cost curve to use.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 11

What might cause diseconomies of scale?

Accepted Answer

coordinati...

Question 12

The opportunity cost of capital is an implicit cost almost every business incurs.

Accepted Answer

A) True 
 B)False

Question 13

Economists assume that the goal of the firm is to maximize total

Accepted Answer

A)   revenue.
B)   profits.
C)   costs.
D)   satisfaction.E) B) and C)
F) None of the above

Question 14

Table 13-17
Consider the following table of long-run total cost for four different firms: 
-Refer to Table 13-17. Which firm has constant returns to scale over the entire range of output?

Accepted Answer

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

Question 15

Economists assume that the typical person who starts her own business does so with the intention of

Accepted Answer

A)   donating the profits from her business to charity.
B)   capturing the highest number of sales in her industry.
C)   maximizing profits.
D)   minimizing costs.E) All of the above
F) None of the above

Question 16

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Accepted Answer

A)   The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.
B)   The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers.
C)   The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers.
D)   Any of the above could be correct.E) B) and D)
F) All of the above

Question 17

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Accepted Answer

A) True 
 B)False

Question 18

Economies of scale occur when

Accepted Answer

A)   long-run average total costs rise as output increases.
B)   long-run average total costs fall as output increases.
C)   average fixed costs are falling.
D)   average fixed costs are constant.E) A) and B)
F) A) and C)

Question 19

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a

Accepted Answer

A)   car factory.
B)   pin factory.
C)   washing machine factory.
D)   farm.E) A) and B)
F) A) and C)

Question 20

Suppose that a firm's long­run average total costs of producing hand­crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing

Accepted Answer

A)   economies of scale.
B)   constant returns to scale.
C)   specialization.
D)   coordination problems.E) A) and D)
F) B) and C)

Exam 13: The Costs of Production

Economies of scale occur when

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

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Describe how a study group of economics students could experience economies of scale as they study for an economics exam.

Correct AnswerverifiedIn this example, the costs of production...View AnswerShow Answer

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Correct AnswerverifiedShow Answer

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

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Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has constant returns to scale over the entire range of output?

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Economists assume that the goal of the firm is to maximize total

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In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a

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A total-cost curve shows the relationship between the

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What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Correct AnswerverifiedThe opportunity cost of an ite...View AnswerShow Answer

Profit equals total revenue minus total cost.

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If a firm produces nothing, it still incurs its fixed costs.

Correct AnswerverifiedShow Answer

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Correct AnswerverifiedShow Answer

Economists normally assume that the goal of a firm is to

Correct AnswerverifiedShow Answer

In the long run, a firm that produces and sells textbooks gets to choose

Correct AnswerverifiedShow Answer

What might cause diseconomies of scale?

Correct Answerverifiedcoordinati...View AnswerShow Answer

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total revenue is

Correct AnswerverifiedShow Answer

The opportunity cost of capital is an implicit cost almost every business incurs.

Correct AnswerverifiedShow Answer

Economists assume that the typical person who starts her own business does so with the intention of

Correct AnswerverifiedShow Answer

Suppose that a firm's long­run average total costs of producing hand­crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing

Correct AnswerverifiedShow Answer

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In this example, the costs of production...
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The opportunity cost of an ite...
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coordinati...
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Correct Answer
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Correct Answer
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Suppose that a firm's longrun average total costs of producing handcrafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing

Correct Answer
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