econ chp6

Which of the following is correct? A person who purchases a corporate bond is borrowing money from a corporation. A person who purchases a corporate stock is buying ownership in the corporation. A person who purchases a corporate bond is guaranteed to earn dividends from the stock. A person who purchases a corporate stock gets the option to buy other shares at lower prices.

A person who purchases a corporate stock is buying ownership in the corporation.

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct? AP continues to rise so long as TP is rising. AP reaches a maximum before TP reaches a maximum. TP reaches a maximum when the MP of the variable input becomes zero. MP cuts AP at the maximum AP.

AP continues to rise so long as TP is rising.

Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen? Marginal costs and average variable costs would both rise. Average fixed costs and average variable costs would rise. Average fixed costs and average total costs would rise. Average fixed costs would rise, but marginal costs would fall.

Average fixed costs and average total costs would rise.

If you operated a small bakery, which of the following would be a variable cost in the short run? Baking ovens Interest on business loans Annual lease payment for use of the building Baking supplies (flour, salt, etc.)

Baking supplies (flour, salt, etc.)

Which of the following definitions is correct? Accounting profit + Economic profit = Normal profit. Economic profit - Accounting profit = Explicit costs. Economic profit = Accounting profit - Implicit costs. Economic profit - Implicit costs = Accounting profits.

Economic profit = Accounting profit - Implicit costs.

Which of the following is most likely to be a variable cost? Fuel and power payments Interest on business loans Rental payments on IBM equipment Real estate taxes

Fuel and power payments

If you owned a small farm, which of the following would be a fixed cost? Harvest labor Hail insurance Fertilizer Seed

Hail insurance

Which of the following statements is false? The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units. The total variable cost of seven units equals the average variable cost of seven units times seven. If marginal cost is rising, then average variable cost must be rising. The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable cost of four units.

If marginal cost is rising, then average variable cost must be rising.

Refer to the information below. Total cost is:

TFC+TVC

Which of the following would not be included in the calculation of accounting profits? Wages of workers The salary the owner could have earned working elsewhere Rent Medical insurance coverage for workers

The salary the owner could have earned working elsewhere

The short run is defined as precisely one "dog year." a period in which all factors of production are variable. a period in which at least one factor of production is fixed. a period in which at least one factor of production is variable.

a period in which at least one factor of production is fixed.

In a corporation, the interests of the owners, who seek to maximize profits, may differ from the interests of the managers, who seek prestige and high income. This divergence would be considered: a free-rider problem. a rationing problem. a limited liability problem. a principal-agent problem.

a principal-agent problem.

A firm's total variable cost will depend on: the prices of variable resources. the production techniques that are used. the level of output. all of these.

all of these

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

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

When marginal cost is rising, average variable cost must be rising. must be falling. must be constant. could be rising or falling.

could be rising or falling.

If the owner of a business is receiving total revenues just enough to cover all its explicit and implicit costs, she is not earning accounting profits. enjoying a normal profits. earning economic losses. doing better than her best alternative.

enjoying a normal profits.

A conglomerate is a(an): firm with monopoly power. industry in which there is only one firm. firm that owns plants in different markets and industries. firm that owns plants at various stages of the production process.

firm that owns plants in different markets and industries.

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent. This means that initially it was producing: in the range of diseconomies of scale. in the range of economies of scale. where AP is less than MP. at the point of minimum efficient scale.

in the range of diseconomies of scale.

The law of diminishing marginal returns is a long run concept. is a short run concept. is a short and long run concept. applies only to large firms.

is a short run concept.

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then: it is encountering diseconomies of scale. it is encountering economies of scale. the law of diminishing returns is taking hold. the firm's long-run ATC curve will be rising.

it is encountering economies of scale.

Diseconomies of scale: pertain to the long run. pertain to the short run. are synonymous with diminishing returns. are synonymous with increasing returns.

pertain to the long run

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

the law of diminishing returns.

Total cost minus total variable cost equals: average fixed cost. total fixed cost. average variable cost. marginal cost.

total fixed cost

Economies and diseconomies of scale explain: the profit-maximizing level of production. why the firm's long-run average total cost curve is U-shaped. why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. the distinction between fixed and variable costs.

why the firm's long-run average total cost curve is U-shaped.