Chp. 13 multiple choice

*Use the following information to answer the following question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory factory for $40,000 per year. The economic profit at Madelyn's pottery factory is A. $30,000 B. $35,000 C. $70,000 D. $75,000 E. $80,000

A. $30,000

The efficient scale of production is the quantity of output that minimizes A. Average total cost B. Marginal cost C. Average fixed cost D. Average variable cost

A. Average total cost

If a production function exhibits diminishing marginal product, its slope A. Becomes flatter as the quantity of the input increases B. Becomes steeper as the quantity of the input increases C. Is linear (a straight line) D. Could be any of the above

A. Becomes flatter as the quantity of the input increases

In the long run, if a small factory were to expand its scale of operations, it is likely that it would initially experience A. Economies of scale B. Constant returns to scale C. Diseconomies of scale D. An increase in average total costs

A. Economies of scale

Which of the following is a variable cost in the short run? A. Wages paid to factory B. Payment on the lease for factory equipment C. Rent on the factory D. Interest payments on borrowed financial capital E. Salaries paid to upper management

A. Wages paid to factory

If there are implicit costs of production, A. economic profit will exceed accounting profit B. Accounting profit will exceed economic profit C. Economic profit and accounting profit will be equal D. Economic profit will always be zero E. Accounting profit will always be zero

B. Accounting profit will exceed economic profit

Which of the following statements is true? A. All costs are fixed in the long run B. Al costs are variable in the long run C. All costs are fixed in the short run D. All costs are variable in the short run

B. All costs are variable in the long run

When marginal costs are below average total costs, A. Average fixed costs are rising B. Average total costs are falling C. Average total costs are rising D. Average total costs are minimized

B. Average total costs are falling

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will A. Slope upward B. Be U-shaped C. Slope downward D. Be flat (horizontal)

B. Be U-shaped

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve A. Becomes flatter as the quantity of the input increases B. Becomes steeper as the quantity of the input increases C. Is linear (a straight line) D. Could be any of the above

B. Becomes steeper as the quantity of the input increases

Accounting profit is equal to total revenue minus A. Implicit costs B. Explicit costs C. The sum of implicit and explicit costs D. Marginal costs E. Variable costs

B. Explicit costs

*Use the following information to answer the following questions Number of Workers ----Output 0 0 1 23 2 40 3 50 The marginal product of labor as production moves from employing one worker to employing two workers is A. 0 B. 10 C. 17 D. 23 E. 40

C. 17

If marginal costs equal equal average total costs, A. Average total costs are rising B. Average total costs are falling C. Average total costs are rising D. Average total costs are minimized

C. Average total costs are rising

*Use the following information to answer the following questions Number of Workers ----Output 0 0 1 23 2 40 3 50 The production process described above exhibits A. Constant marginal product of labor B. Increasing marginal product of labor C. Diminishing marginal product of labor D. Increasing returns

C. Diminishing marginal product of labor

Economic profit is equal to total revenue minus A. Implicit costs B. Explicit costs C. The sum of implicit and explicit costs D. Marginal costs E. Variable costs

C. The sum of implicit and explicit costs

*Use the following information to answer the following question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory factory for $40,000 per year. The accounting profit at Madelyn's pottery factory is A. $30,000 B. $35,000 C. $70,000 D. $75,000 E. $80,000

D. $75,000