Econ Chapter 7

e. increases at a decreasing rate

When diminishing marginal returns set in, total product a. is negative b. decreases at an increasing rate c. decreases at a decreasing rate d. increases at an increasing rate e. increases at a decreasing rate

a. True

When marginal product is negative, the slope of the total product curve must be negative. a. True b. False

c. the long-run average cost curve

Which of the following is also known as the firm's planning curve? a. the average total cost curve b. the total cost curve c. the long-run average cost curve d. the long-run marginal cost curve e. the fixed cost curve

c. fourth worker

# of Workers = 0, Total Output = 0 1, 10 2, 40 3, 100 4, 140 5, 160 6, 170 7, 150 In Exhibit 7-3, diminishing marginal returns set in with the addition of the a. first worker b. third worker c. fourth worker d. fifth worker e. seventh worker

d. $52,000

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs? a. $26,000 b. $66,000 c. $78,000 d. $52,000 e. $72,000

c. explicit costs

Cash payments for steel to be used in production would be an example of a. sunk costs b. fixed costs c. explicit costs d. implicit costs e. entrepreneurial costs

e. long-run average cost curve

Diseconomies of scale are pictured on a graph by the upward-sloping portion of the a. marginal product curve b. short-run marginal cost curve c. long-run marginal cost curve d. short-run average cost curve e. long-run average cost curve

d. minus total costs

Economic profit is defined as total revenue a. plus total costs b. minus marginal costs c. minus variable costs d. minus total costs e. minus fixed costs

c. long-run average cost falls as one firm expands plant size

Economies of scale occur where a. long-run average cost falls as new firms enter the industry b. short-run average cost falls as new firms enter the industry c. long-run average cost falls as one firm expands plant size d. short-run average cost falls as one firm expands plant size e. long-run average cost rises as one firm expands plant size

b. it is breaking even

If General Motors is earning only a normal profit, a. it is making economic profit b. it is breaking even c. it is suffering an economic loss d. it is covering only explicit costs e. it is covering only implicit costs

d. its usage of the building precludes it from renting to anyone else, there is an opportunity cost

If Ripco owns the building where it operates, then if a. the firm pays no rent, there is no opportunity cost b. the firm does not rent the building to anyone else, there is no opportunity cost c. the firm pays no rent, there is an opportunity cost d. its usage of the building precludes it from renting to anyone else, there is an opportunity cost e. the firm could use the building for other things, there is no opportunity cost

b. False

If a firm is experiencing diminishing marginal returns, its marginal product is negative. a. True b. False

d. fixed cost at Q = 200 is $130

If fixed cost at Q = 100 is $130, then a. fixed cost at Q = 0 is $0 b. fixed cost at Q = 0 is less than $130 c. fixed cost at Q = 200 is $260 d. fixed cost at Q = 200 is $130 e. it is impossible to calculate fixed costs at any other quantity

e. Accounting profit will rise

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house. How will his profit change? a. Implicit costs fall. b. Explicit costs remain unchanged while implicit costs rise. c. Economic profit must fall. d. Explicit costs rise. e. Accounting profit will rise

c. long-run average cost stops decreasing

Minimum efficient scale is the level of output at which a. short-run average total cost stops decreasing b. short-run average total cost stops increasing c. long-run average cost stops decreasing d. long-run average cost stops increasing e. profit stops increasing

c. is involved in calculating economic profit

Opportunity cost usually a. cannot be measured Formatted: Bullets and Numbering b. applies to labor but not to capital c. is involved in calculating economic profit d. is greater than the cash payment made to a resource e. is less than the cash payment made to a resource

a. $20

Output = 0, Rent = $200, Cost of Labor = $0, Materials = $0 10, $200, $100, $100 20, $200, $200, $200 30, $200, $250, $300 40, $200, $350, $400 50, $200, $500, $500 In Exhibit 7-6, the average variable cost of producing 20 units is a. $20 b. $25 c. $22 d. $250 e. $350

b. $10

Output Per Day = 0, Workers Per Day = 0, Total Cost = $10 5, 1, $20 15, 2, $30 18, 3, $40 20, 4, $50 In Exhibit 7-5, what is fixed cost at 20 units of output? a. $0 b. $10 c. $40 d. it is impossible to calculate fixed cost unless we know the daily wage e. it is impossible to calculate fixed cost unless we know variable cost at Q = 15

a. $0

Output Per Day = 0, Workers Per Day = 0, Total Cost = $10 5, 1, $20 15, 2, $30 18, 3, $40 20, 4, $50 In Exhibit 7-5, what is variable cost when no output is being produced? a. $0 b. $10 c. infinity d. it is impossible to calculate variable cost unless we know the daily wage e. it is impossible to calculate variable cost unless we know fixed cost at Q = 0

b. economies of scale

Someone once said that Chevrolet is so large that if it shakes its tail, its takes two years for its head to notice it. This is an example of a. profit centers b. economies of scale c. diseconomies of scale d. diminishing marginal returns e. diminishing marginal cost

c. constant average costs

Suppose Toyota produces 100,000 cars per year at its California plant at an average cost of $6,000 and it doubles output and total costs by building an identical plant in Kentucky. Toyota has exhibited a. diminishing marginal returns b. economies of scale c. constant average costs d. an upward-sloping planning curve e. production inefficiency

a. $10,000

Suppose a lawyer leaves his $50,000-a-year job and starts his own firm breeding pit bulls. In the first year, his accounting profit is $70,000. The lawyer finances his new business with $100,000 from his savings account, which had earned 10 percent interest. His economic profit is a. $10,000 b. $60,000 c. $70,000 d. -$80,000 e. -$90,000

b. $41,000

TR = $100,000 Assistant's Salary = $20,000 Material & Equipment = $15,000 Forgone Salary = $30,000 Forgone Interest = $1,000 Forgone Building Rental =$10,000 Sally owns a small business that she operates in a small building she owns. Given the information in Exhibit 7-1, Sally's normal profit is a. $80,000 b. $41,000 c. $65,000 d. $35,000 e. $24,000

c. Marginal cost is positive and increasing as output increases.

The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1,400. The company can also produce 1,000 water pistols for a total cost of $3,000, but it would have costs of $200 even if it produced no water pistols. Which of the following is true? a. Total cost is increasing at a decreasing rate. b. Total cost is increasing at a constant rate. c. Marginal cost is positive and increasing as output increases. d. Variable cost is positive and decreasing as output increases. e. Fixed cost is positive and decreasing as output increases.

a. at the ATC's minimum point

The marginal cost curve intersects the average total cost curve (ATC) a. at the ATC's minimum point b. only when the ATC is sloping upward c. at the ATC's maximum point d. only when the ATC is sloping downward e. when the ATC intersects the fixed cost curve

d. during which at least one resource is fixed

The short run is a period of time a. less than one year b. greater than one year c. during which all resources are variable d. during which at least one resource is fixed e. during which at least one resource is variable

d. VC + FC

Total cost is calculated as a. FC + MC b. FC / MC c. (VC + FC) / MC d. VC + FC e. VC output

d. implicit costs

Which of the following would not appear on a firm's accounting statement? a. sunk costs b. fixed costs c. explicit costs d. implicit costs e. insurance costs