Question 1

Industrial organization is the study of

Accepted Answer

A)   how labor unions organize workers in industries.
B)   which managers are the most successful.
C)   how industries organize for political advantage.
D)   how firms' decisions regarding prices and quantities depend on the market conditions they face.E) A) and B)
F) C) and D)

Question 2

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

Accepted Answer

A)   Tyler says his costs are $25,900, and Greg says his costs are $66,500.
B)   Tyler says his costs are $25,000, and Greg says his costs are $65,000.
C)   Tyler says his costs are $66,500, and Greg says his costs are $66,500.
D)   Tyler says his costs are $75,000, and Greg says his costs are $41,500.E) A) and B)
F) A) and D)

Question 3

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?

Accepted Answer

A)   2 cases
B)   3 cases
C)   5 cases
D)   7 casesE) None of the above
F) A) and D)

Question 4

When a firm is experiencing diseconomies of scale, long-run

Accepted Answer

A)   average total cost is minimized.
B)   average total cost is greater than long-run marginal cost.
C)   average total cost is less than long-run marginal cost.
D)   marginal cost is minimized.E) B) and C)
F) A) and D)

Question 5

Accountants keep track of the money that flows into and out of firms.

Accepted Answer

A) True 
 B)False

Question 6

In the long run,

Accepted Answer

A)   inputs that were fixed in the short run remain fixed.
B)   inputs that were fixed in the short run become variable.
C)   inputs that were variable in the short run become fixed.
D)   variable inputs are rarely used.E) B) and C)
F) None of the above

Question 7

Table 13-19 
-Refer to Table 13-19. What is the shape of the average-variable-cost curve?

Accepted Answer

AVC = VC/Q, where VC is graphed on the v...

Question 8

Scenario 13-4
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%.
-Refer to Scenario 13-4. Abdul's implicit cost of capital is

Accepted Answer

A)   $8,000.
B)   $4,000.
C)   $2,000.
D)   $1,000.E) B) and C)
F) None of the above

Question 9

The field of industrial organization addresses how the number of firms affects prices in a market and the efficiency of the market outcome.

Accepted Answer

A) True 
 B)False

Question 10

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L=6,Q=147)  and (L=7,Q=184) . The marginal product of the seventh worker is

Accepted Answer

A)   25 units of output.
B)   27 units of output.
C)   37 units of output.
D)   184 units of output.E) A) and B)
F) None of the above

Question 11

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Accepted Answer

ATC = AVC + AFC, so the vertical distanc...

Question 12

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

Accepted Answer

A)   economies of scale.
B)   constant returns to scale.
C)   diseconomies of scale.
D)   efficient scale.E) None of the above
F) All of the above

Question 13

Total revenue minus only explicit costs is called

Accepted Answer

A)   accounting profit.
B)   economic profit.
C)   average total cost.
D)   implicit profit.E) B) and D)
F) B) and C)

Question 14

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Accepted Answer

A)   output is not variable.
B)   the number of workers used to produce the firm's product is fixed.
C)   the size of the factory is fixed.
D)   there are no fixed costs.E) A) and D)
F) None of the above

Question 15

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9. At levels of output between M and N, the firm experiences

Accepted Answer

A)   economies of scale.
B)   diseconomies of scale.
C)   constant returns to scale.
D)   both the benefits of specialization and diminishing marginal productivity.E) B) and D)
F) A) and B)

Question 16

Economists normally assume that the goal of a firm is to earn

Accepted Answer

A)   (i)  and (ii)  only
B)   (i)  and (iii)  only
C)   (ii)  and (iii)  only
D)   (i) , (ii) , and (iii) E) B) and C)
F) None of the above

Question 17

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

Accepted Answer

A) True 
 B)False

Question 18

Scenario 13-5
Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
-Refer to Scenario 13-5. Emily's explicit cost of capital is

Accepted Answer

A)   $2,000.
B)   $4,000.
C)   $12,000.
D)   $14,000.E) None of the above
F) All of the above

Question 19

Constant returns to scale occur when the firm's long­run

Accepted Answer

A)   total costs are constant as output increases.
B)   average total costs are constant as output increases.
C)   average cost curve is falling as output increases.
D)   average cost curve is rising as output increases.E) All of the above
F) A) and B)

Question 20

Figure 13-3 
-Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Accepted Answer

A)   Producing an additional cookie is always more costly than producing the previous cookie.
B)   Total production of cookies decreases with additional units of input.
C)   Producing additional cookies is equally costly, regardless of how many cookies are already being produced.
D)   Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large.E) All of the above
F) B) and C)

Exam 13: The Costs of Production

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L=6,Q=147) and (L=7,Q=184) . The marginal product of the seventh worker is

Correct Answer
verified

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At levels of output between M and N, the firm experiences

Correct Answer
verified

The field of industrial organization addresses how the number of firms affects prices in a market and the efficiency of the market outcome.

Correct Answer
verified

Industrial organization is the study of

Correct Answer
verified

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

Correct Answer
verified

Table 13-19 -Refer to Table 13-19. What is the shape of the average-variable-cost curve?

Correct Answer
verified
AVC = VC/Q, where VC is graphed on the v...
View Answer

In the long run,

Correct Answer
verified

Economists normally assume that the goal of a firm is to earn

Correct Answer
verified

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

Correct Answer
verified

Accountants keep track of the money that flows into and out of firms.

Correct Answer
verified

Constant returns to scale occur when the firm's longrun

Correct Answer
verified

When a firm is experiencing diseconomies of scale, long-run

Correct Answer
verified

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?

Correct Answer
verified

Correct Answer
verified

Total revenue minus only explicit costs is called

Correct Answer
verified

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Correct Answer
verified

Correct Answer
verified

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Correct Answer
verified
ATC = AVC + AFC, so the vertical distanc...
View Answer

Figure 13-3 -Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Correct Answer
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Correct Answer
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Exam 13: The Costs of Production

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L=6,Q=147) and (L=7,Q=184) . The marginal product of the seventh worker is

Correct AnswerverifiedShow Answer

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At levels of output between M and N, the firm experiences

Correct AnswerverifiedShow Answer

The field of industrial organization addresses how the number of firms affects prices in a market and the efficiency of the market outcome.

Correct AnswerverifiedShow Answer

Industrial organization is the study of

Correct AnswerverifiedShow Answer

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

Correct AnswerverifiedShow Answer

Table 13-19 -Refer to Table 13-19. What is the shape of the average-variable-cost curve?

Correct AnswerverifiedAVC = VC/Q, where VC is graphed on the v...View AnswerShow Answer

In the long run,

Correct AnswerverifiedShow Answer

Economists normally assume that the goal of a firm is to earn

Correct AnswerverifiedShow Answer

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

Correct AnswerverifiedShow Answer

Accountants keep track of the money that flows into and out of firms.

Correct AnswerverifiedShow Answer

Constant returns to scale occur when the firm's long­run

Correct AnswerverifiedShow Answer

When a firm is experiencing diseconomies of scale, long-run

Correct AnswerverifiedShow Answer

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Total revenue minus only explicit costs is called

Correct AnswerverifiedShow Answer

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Correct AnswerverifiedATC = AVC + AFC, so the vertical distanc...View AnswerShow Answer

Figure 13-3 -Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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AVC = VC/Q, where VC is graphed on the v...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Constant returns to scale occur when the firm's longrun

Correct Answer
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ATC = AVC + AFC, so the vertical distanc...
View Answer

Correct Answer
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Correct Answer
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