Micro quiz 5

3. To the economist, total cost includes: A. explicit and implicit costs, including a normal profit. B. neither implicit nor explicit costs. C. implicit, but not explicit, costs. D. explicit, but not implicit, costs.

A. explicit and implicit costs, including a normal profit

33. Refer to the above data. The average fixed cost of producing 3 units of output is: A. $8. B. $7.40. C. $5.50. D. $6.

A: $8.

23. Refer to the above data. The marginal product of the fourth worker: A. is 5. B. is 7. C. is 71/2. D. cannot be calculated from the information given.

A: 5.

10. Which of the following is a short-run adjustment? A. A local bakery hires two additional bakers. B. Six new firms enter the plastics industry. C. The number of farms in the United States declines by 5 percent. D. BMW constructs a new assembly plant in South Carolina.

A: A local bakery hires two additional bakers.

16. The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

A: as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

28. Marginal cost: A. equals both average variable cost and average total cost at their respective minimums. B. is the difference between total cost and total variable cost. C. rises for a time, but then begins to decline when diminishing returns set in. D. declines continuously as output increases.

A: equals both average variable cost and average total cost at their respective minimum

20. The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, the: A. marginal product of the third worker is 9. B. total product of the three workers is 54. C. average product of the three workers is 18. D. marginal product of the first worker is 18.

A: marginal product of the third worker is 9.

45. Diseconomies of scale: A. pertain to the long run. B. pertain to the short run. C. are synonymous with diminishing returns. D. are synonymous with increasing returns.

A: pertain to the long run

15. Marginal product is: A. the increase in total output attributable to the employment of one more worker. B. the increase in total revenue attributable to the employment of one more worker. C. the increase in total cost attributable to the employment of one more worker. D. total product divided by the number of workers employed.

A: the increase in total output attributable to the employment of one more worker

1. Costs to an economist: A. consist only of explicit costs. B. may or may not involve monetary outlays. C. never reflect monetary outlays. D. always reflect monetary outlays.

B. may or may not involve monetary outlays.

41. Refer to the above data. The average variable cost of 4 units of output is: A. $33.50. B. $28.50. C. $19.00. D. $21.00.

B: $28.50

2. What do wages paid to blue-collar workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? A. None are either implicit or explicit costs. B. All are opportunity costs. C. All are implicit costs. D. All are explicit costs.

B: All are opportunity costs

38. Which of the following is correct? A. When AP is rising, AVC is rising. B. When AP is rising, AVC is falling. C. When AP is rising, AP exceeds MP. D. There is no relationship between AP and AVC.

B: When AP is rising, AVC is falling

47. Diseconomies of scale means that: A. a firm's long-run average total cost curve is declining. B. a firm's long-run average total cost curve is rising. C. the advantages of specialization are being more fully realized. D. a given increase in inputs results in a more-than-proportionate increase in output.

B: a firm's long-run average total cost is rising

6. An explicit cost is: A. omitted when accounting profits are calculated. B. a money payment made for resources not owned by the firm itself. C. an implicit cost to the resource owner who receives that payment. D. always in excess of a resource's opportunity cost.

B: a money payment made for resources not owned by the firm itself.

24. Fixed cost is: A. the cost of producing one more unit of capital, say, machinery. B. any cost which does not change when the firm changes its output. C. average cost multiplied by the firm's output. D. usually zero in the short run.

B: any cost which does not change when the firm changes its output.

37. In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's totalcosts: A. are $2.50. B. are $1,250. C. are $750. D. are $1,100.

B: are $1,250.

25. Marginal cost is the: A. rate of change in total fixed cost that results from producing one more unit of output. B. change in total cost that results from producing one more unit of output. C. change in average variable cost that results from producing one more unit of output. D. change in average total cost that results from producing one more unit of output.

B: change in total cost that results from producing one more unit of output.

46. If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: A. technological progress has occurred. B. economies of scale are being realized. C. the firm is encountering diminishing returns. D. diseconomies of scale are being encountered.

B: economies of scale are being realized

11. To economists, the main difference between the short run and the long run is that: A. the law of diminishing returns applies in the long run, but not in the short run. B. in the long run all resources are variable, while in the short run at least one resource is fixed. C. fixed costs are more important to decision making in the long run than they are in the short run. D. in the short run all resources are fixed, while in the long run all resources are variable.

B: in the long run all resources are variable, while in the short run at least one resource is fixed.

39. If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then: A. the average variable cost of 10 units is $10. B. the average variable cost of 9 units is $10. C. the marginal cost of the tenth unit is $90. D. the firm is operating in the range of increasing marginal returns.

B: the average variable cost of 9 units is $10

36. In comparing the changes in TVC and TC associated with an additional unit of output, we find that: A. no generalization about the changes in TC and TVC can be made. B. the changes in TC and TVC are equal. C. the change in TC is greater than the change in TVC. D. the change in TVC is greater than the change in TC.

B: the changes in TC and TVC are equal.

44. Economies of scale are indicated by: A. the rising segment of the average variable cost curve. B. the declining segment of the long-run average total cost curve. C. the difference between total revenue and total cost. D. a rising marginal cost curve.

B: the declining segment of the long-run average total cost curve.

22. Refer to the above data. When two workers are employed: A. total product is 20. B. total product is 18. C. average product is 10. D. total product cannot be determined from the information given.

B: total product is 18

12. The amount of calendar time associated with the long run: A. is less than that associated with the immediate market period. B. varies from industry to industry. C. is the same for all firms. D. is one year by definition.

B: varies from industry to industry

40. Refer to the above data. The total cost of producing 4 units of output is: A. $31. B. $87. C. $124. D. $108.

C: $124.

31. Refer to the above data. The total variable cost of producing 5 units is: A. $61. B. $48. C. $37. D. $24.

C: $37

42. Refer to the above data. The marginal cost of the fourth unit of output is: A. $2. B. $12. C. $37. D. $16.

C: $37

18. Refer to the above data. The marginal product of the sixth worker is: A. 180 units of output. B. 30 units of output. C. 15 units of output. D. negative.

C: 15 units of output

21. The total output of a firm will be at a maximum where: A. MP is at a maximum. B. AP is at a minimum. C. MP is zero. D. AP is at a maximum.

C: MP is zero

14. The short run is characterized by: A. plenty of time for firms to either enter or leave the industry. B. increasing, but not diminishing returns. C. at least one fixed resource. D. zero fixed costs.

C: at least one fixed resource.

13. The basic difference between the short run and the long run is that: A. all costs are fixed in the short run, but all costs are variable in the long run. B. the law of diminishing returns applies in the long run, but not in the short run. C. at least one resource is fixed in the short run, while all resources are variable in the long run. D. economies of scale may be present in the short run, but not in the long run.

C: at least one resource is fixed in the short run, while all resources are variable in the long run

26. For most producing firms: A. marginal cost rises as output is carried to a certain level, and then begins to decline. B. total costs rise as output is carried to a certain level, and then begin to decline. C. average total costs decline as output is carried to a certain level, and then begin to rise D. average total costs rise as output is carried to a certain level, and then begin to decline.

C: average total costs decline as output is carried to a certain level, and then begin to rise

30. If a firm decides to produce no output in the short run, its costs will be: A. its marginal costs. B. its fixed plus its variable costs. C. its fixed costs. D. zero.

C: its fixed costs

29. If average total cost is declining, then: A. marginal cost must be greater than average total cost. B. the average fixed cost curve must lie above the average variable cost curve. C. marginal cost must be less than average total cost. D. total cost must also be declining.

C: marginal cost must be less than average total cost

19. Marginal product: A. diminishes at all levels of production. B. may initially increase, then diminish, but never become negative. C. may initially increase, then diminish, and ultimately become negative. D. is always less than average product.

C: may initially increase, then diminish, and ultimately become negative

5. Implicit costs are: A. regarded as costs by accountants but not by economists. B. payments that a firm makes to other firms or individuals who supply resources to it. C. non-expenditure costs. D. costs that vary proportionately with output

C: non-expenditure costs

43. When diseconomies of scale occur: A. the long-run average total cost curve falls. B. marginal cost intersects average total cost. C. the long-run average total cost curve rises. D. average fixed costs will rise.

C: the long-run average total cost curve rises

9. Normal profit is: A. determined by subtracting implicit costs from total revenue. B. determined by subtracting explicit costs from total revenue. C. the return to the entrepreneur when economic profits are zero. D. the average profitability of an industry over the preceding 10 years.

C: the return to the entrepreneur when economic profits are zero.

17. Refer to the above data. Diminishing marginal returns become evident with the addition of the: A. sixth worker. B. fourth worker. C. third worker. D. second worker.

C: third worker

32. Refer to the above data. The average total cost of producing 3 units of output is: A. $14. B. $12. C. $13.50. D. $16.

D: $16

34. Refer to the above data. The marginal cost of producing the sixth unit of output is: A. $24. B. $12. C. $16. D. $8.

D: $8

35. Refer to the above data. The profit-maximizing output for this firm: A. is 3. B. is 4. C. is 5. D. cannot be determined from the information given.

D: cannot be determined from the information given

27. Average fixed cost: A. equals marginal cost when average total cost is at its minimum. B. may be found for any output by adding average variable cost and average total cost. C. graphs as a U-shaped curve. D. declines continually as output increases.

D: declines continually as output increases

8. Economic profits are calculated by subtracting: A. explicit costs from total revenue. B. implicit costs from total revenue. C. implicit costs from normal profits. D. explicit and implicit costs from total revenue.

D: explicit and implicit costs from total revenue

7. Accounting profits are typically: A. greater than economic profits because the former do not take explicit costs into account. B. equal to economic profits because accounting costs include all opportunity costs. C. smaller than economic profits because the former do not take implicit costs into account. D. greater than economic profits because the former do not take implicit costs into account.

D: greater than economic profits because the former do not take implicit costs into account

4. Implicit and explicit costs are different in that: A. explicit costs are relevant only in the short run. B. implicit costs are relevant only in the short run. C. the latter refer to non-expenditure costs and the former to out-of-pocket costs. D. the former refer to non-expenditure costs and the latter to out-of-pocket costs.

D: the former refer to non-expenditure costs and the latter to out-of-pocket costs