Microeconomics [ch. 13]

26 Questions  I  By Emy_2
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 Microeconomics [ch. 13]
The Costs of Production

  
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Questions and Answers

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  • 1. 
    Total revenue equals the quantity of output the firm produces times the price at which it sells its output
    • A. 

      True

    • B. 

      False


  • 2. 
    Wages and salaries paid to workers are an example of implicit costs of production
    • A. 

      True

    • B. 

      False


  • 3. 
    If total revenue is $100, explicit costs are $50, and implicit costs are $30, then accounting profit equals $50
    • A. 

      True

    • B. 

      False


  • 4. 
    If there are implicit costs of production, accounting profits will exceed economic profits
    • A. 

      True

    • B. 

      False


  • 5. 
    When a production function gets flatter, the marginal product is increasing
    • A. 

      True

    • B. 

      False


  • 6. 
    If a firm continues to employ more workers within the same size factory, it will eventually experience diminishing marginal product 
    • A. 

      True

    • B. 

      False


  • 7. 
    If the production function for a firm exhibits diminishing marginal product, the corresponding total-cost curve for the firm will become flatter as the quantity of output expands
    • A. 

      True

    • B. 

      False


  • 8. 
    Fixed cost plus variable costs equal total costs
    • A. 

      True

    • B. 

      False


  • 9. 
    Average total costs are total costs divided by marginal costs
    • A. 

      True

    • B. 

      False


  • 10. 
    When marginal costs are below average total costs, average total costs must be falling
    • A. 

      True

    • B. 

      False


  • 11. 
    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 be U-shaped
    • A. 

      True

    • B. 

      False


  • 12. 
    The average-total-cost curve crosses the marginal-cost curve at the minimum of the marginal-cost curve
    • A. 

      True

    • B. 

      False


  • 13. 
    The average-total-cost curve in the long run is flatter than the average-total-cost curve in the short run
    • A. 

      True

    • B. 

      False


  • 14. 
    The efficient scale for a firm is the quantity of output the minimizes marginal cost
    • A. 

      True

    • B. 

      False


  • 15. 
    In the long run, as a firm expands its production facilities, it generally first experiences diseconomies of scale then constant returns to scale, and finally economies of scale
    • A. 

      True

    • B. 

      False


  • 16. 
    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


  • 17. 
    Economic profit is equal to total revenue minus
    • A. 

      Implicit costs

    • B. 

      Explicit costs

    • C. 

      The sum of the implicit and explicit costs

    • D. 

      Marginal costs

    • E. 

      Variable costs


  • 18. 
    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


  • 19. 
    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


  • 20. 
    If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve
    • A. 

      Becomes flatter as the quantity of output increases

    • B. 

      Become steeper as the quantity of output increases

    • C. 

      Is linear (a straight line)

    • D. 

      Could be any of the above


  • 21. 
    Which of the following is a variable cost in the short run?
    • A. 

      Wages paid to factory labor

    • 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


  • 22. 
    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 are rising

    • D. 

      average total costs are minimized


  • 23. 
    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)


  • 24. 
    In the long run, if a very 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


  • 25. 
    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


  • 26. 
    Which of the following statements is true? 
    • A. 

      All costs are fixed in the long run

    • B. 

      All 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


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