Principles of Microeconomics

Refer to the above diagram. At output level Q total cost is: A.0BEQ. B. BCDE. C. 0BEQ plus BCDE. D. 0AFQ plus BCDE.

C. 0BEQ plus BCDE.

Which of the following curves is not U-shaped? A. MC B. AFC C. AVC D. ATC

b. AFC

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.

Refer to the below 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. For Marginal Product, subtract unit 6 from 5: 180-165 = 15

The construction of a production possibilities curve assumes: A. the quantities of all resources are unlimited. B. technology is fixed. C. some resources are unemployed.

B. technology is fixed

Refer to the below diagram. This production possibilities curve is A. convex to the origin because opportunity costs are constant. B. linear because opportunity costs are constant. C. concave to the origin because of increasing opportunity costs. D. convex to the origin because of increasing opportunity costs.

C. Concave to the origin because of increasing opportunity costs

Refer to the below data. The average fixed cost of producing 3 units of output is: a. $8. b. $7.40. c. $5.50. d. $6.

a. $8. The average fixed cost of producing 3 units of output is:The average fixed cost of producing 3 units of output = 24/3 = 8

Refer to the below diagram. At output level Q total variable cost is: a. 0BEQ. b. BCDE. c. 0CDQ. d. 0AFQ.

a. 0BEQ.

Average total cost is very high when a small amount of output is produced because: a. average fixed cost is high. b. average variable cost is high. c. marginal product is high. d. marginal cost is high.

a. average fixed cost is high.

A production function describes: a. how a firm turns inputs into output. b. the minimal cost of producing a given level of output. c. how a firm maximizes profits. d. the relationship between cost and output.

a. how a firm turns inputs into output.

The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. The shape of each individual curve reflects: a. increasing marginal product, followed by diminishing marginal product. b. economies of scale, followed by diseconomies of scale. c. constant costs. d. increasing costs, followed by decreasing costs.

a. increasing marginal product, followed by diminishing marginal

Refer to the below 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. is 5. the marginal product of the fourth worker is given by The total output for 4th worker - the total product for 3rd worker=30-25=5

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: a. $100,000 and its economic profits were zero. b. $200,000 and its economic profits were zero. c. $100,000 and its economic profits were $100,000. d. zero and its economic loss was $200,000.

b. $200,000 and its economic profits were zero. Accounting profit = total revenue - explicit costs = units sold * price per unit - $1,000,000 = 4,000 * $300 - $1,000,000 = $1,200,000 - $1,000,000 = $200,000

Refer to the below diagram. At output level Q total fixed cost is: a. 0BEQ. b. BCDE. c. 0BEQ - 0AFQ. d. 0CDQ.

b. BCDE.

As the firm in the above diagram expands from plant size #1 to plant size #3, it experiences: a. diminishing returns. b. economies of scale. c. diseconomies of scale. d. constant costs.

b. economies of scale.

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.

Refer to the above diagram. The vertical distance between ATC and AVC reflects: a. the law of diminishing returns. b. the average fixed cost at each level of output. c. marginal cost at each level of output. d. the presence of economies of scale.

b. the average fixed cost at each level of output.

The basic characteristic of the short run is that: a. barriers to entry prevent new firms from entering the industry. b. the firm does not have sufficient time to change the size of its plant. c. the firm does not have sufficient time to cut its rate of output to zero. d. a firm does not have sufficient time to change the amounts of any of the resources it employs.

b. the firm does not have sufficient time to change the size of its plant.

Refer to the below 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.

​What is the total output when 1 worker is hired? a. ​85 b. ​40 c. ​0 d. 45

b. ​40

A person should consume more of something when it's marginal

benefit exceeds its marginal cost

Refer to the below data. The total variable cost of producing 5 units is: a. $61. b. $48. c. $37. d. $24.

c. $37. Total fix cost=24 Total cost=61 for 5 quantity Total variable cost=Total cost-Total Fixed cost TVC=61-24=37

Which of the following definitions is correct? a. Accounting profit + economic profit = normal profit. b. Economic profit - accounting profit = explicit costs. c. Economic profit = accounting profit - implicit costs. d. Economic profit - implicit costs = accounting profits.

c. Economic profit = accounting profit - implicit costs.

In the above figure, curves 1, 2, 3, and 4 represent the: a. ATC, MC, AFC, and AVC curves respectively. b. MC, AFC, AVC, and ATC curves respectively. c. MC, ATC, AVC, and AFC curves respectively. d. ATC, AVC, AFC, and MC curves respectively.

c. MC, ATC, AVC, and AFC curves respectively.

A local playground equipment company plans to operate out of its current factory, which is estimated to last 30 years. All cost decisions it makes during the 30-year period a. involve only maintenance of the factory. b. are long-run decisions. c. are short-run decisions. d. are zero because the cost decisions were made at the beginning of the business.

c. are short-run decisions.

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100 a. average total cost is $4. b. average total cost is $5. c. average variable cost is $3. d. average fixed cost is $10.

c. average variable cost is $3. Total cost = FC + VC VC = 1000-100= $900 AVC= VC/Q = 900/300= $3

Refer to the above diagram. At output level Q average fixed cost: a. is equal to EF. b. is equal to QE. c. is measured by both QF and ED. d.cannot be determined from the information given

c. is measured by both QF and ED.

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.

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.

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes: a. economies and diseconomies of scale. b. X-inefficiency. c. the law of diminishing product of labor. d. the law of diminishing marginal utility.

c. the law of diminishing product of labor.

Refer to the below data. Diminishing marginal product of labor become evident with the addition of the: a. sixth worker. b. fourth worker. c. third worker. d. second worker.

c. third worker

In the above diagram curves 1, 2, and 3 represent: a. average variable cost, marginal cost, and average fixed cost respectively. b. total variable cost, total fixed cost, and total cost respectively. c. total fixed cost, total variable cost, and total cost respectively. d. marginal product, average variable cost, and average total cost respectively.

c. total fixed cost, total variable cost, and total cost respectively.

Refer to the below data. The average total cost of producing 3 units of output is: a. $14. b. $12. c. $13.50. d. $16.

d. $16. Based on given information at 3 units of output level the total cost is $48. Average Total Cost (ATC) = Total Cost / Output level => ATC = 48 / 3 => ATC = $16

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output? a. $350 b. $275 c. $340.91 d. $250

d. $250 MC(n)=TC(n)-TC(n-1)MC(n)=marginal cost of n th unitTC(n)=Total cost of n units of output MC(101)=3750-3500 =250 The marginal cost is $250

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units? a. $46.53 b. $800 c. $5,300 d. $4,800

d. $4,800 TC-$4500+MC 300 =4800

Refer to the below data. The marginal cost of producing the sixth unit of output is: a. $24. b. $12. c. $16. d. $8.

d. $8. Marginal Cost = Total cost - Total Cost Marginal cost of 6th unit= TC of 6 Units = 69 - TC of 5 units =61 $69-$61 =$8

Refer to the below 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.

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

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic: a. both in the short run and in the long run. b. neither in the short run nor in the long run. c. in the long run but not in the short run. d. in the short run but not in the long run.

d. in the short run but not in the long run.

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: a. profits were $100,000 and its economic profits were zero. b. losses were $500,000 and its economic losses were zero. c. profits were $500,000 and its economic profits were $1 million. d. profits were zero and its economic losses were $500,000.

d. profits were zero and its economic losses were $500,000.

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters: a. economies of scale. b. diseconomies of scale. c. increasing marginal product. d. diminishing marginal product.

diminishing marginal product.

A country can consume some combination of goods outside its production possibilities

specializing and engaging in international trade

A production possibilities frontier can shift outward if

there is a technological improvement