978-1259723223 Test Bank TBChap009 Part 6

172.

Refer to the diagram. Constant returns to scale

173.

The long-run average total cost curve

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174.

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent,

then

175.

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then

176.

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

177.

Suppose a firm is in a range of production where it is experiencing economies of

scale. Knowing this, we can predict that

178.

Because of higher gasoline prices, firms using gasoline intensively in the production

or distribution of their goods have experienced

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Di ffi cul ty: 02 Medium

Learning Objective: 09–05 Give business examples of short-run costs, economies of scale, and

minimum efficient scale MES.

Test Bank: I

Topic: Applications and Illustrations

179.

Which of the following types of firms are least likely to have their MC, AVC, and ATC

curves affected by fluctuations in gasoline prices?

180.

Introduction of the Verson Stamping Machine helped firms in the automobile industry

181.

In which of the following industries are economies of scale exhausted at relatively low

levels of output?

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C. concrete mixing

D. newspaper printing

182.

Daily newspapers have been rising in price in recent years because

183.

(Consider This) If the law of diminishing returns applies to study time,

184.

(Consider This) In order to apply the concept of diminishing returns to study time,

185.

(Consider This) Past costs that are not affected by new decisions are known as

186.

(Consider This) Which of the following is an example of a sunk cost, as it relates to a

firm?

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Di ffi cul ty: 02 Medium

Learning Objective: 09–01 Explain why economic costs include both explicit revealed and

expressed costs and implicit present but not obvious costs.

Test Bank: I

Topic: Economic Costs

187.

(Consider This) Susie purchased a nonrefundable ticket to a soccer match for $20. It will

cost her $10 worth of gas and wear and tear to drive to the match and $5 to park her car. On the

day

of the match, Susie’s boss offers her $100 to come to work instead. In considering what

to do, which of the above would be considered a sunk cost?

188.

(Last Word) Which of the following is a predicted result of the increased use of additive

manufacturing (using 3-D printers)?

189.

(Last Word) Which of the following is predicted to deliver a Third Industrial

Revolution characterized by low production and transportation costs?

190.

(Last Word) The development of additive manufacturing technology (3-D printers) is

expected to lower prices by doing which of the following?

True / False Questions

191.

The real opportunity cost of producing product X is the amounts of products Y, Z, and so

forth, that might have been produced if resources had not been used to produce X.

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

Di ffi cul ty: 02 Medium

Learning Objective: 09–01 Explain why economic costs include both explicit revealed and

expressed costs and implicit present but not obvious costs.

Test Bank: I

Topic: Economic Costs

192.

The short run is a period of time during which all costs are fixed costs.

193.

Variable costs are costs that change directly with output.

194.

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a

large-scale business enterprise.

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Blooms: Apply

Difficul ty: 03 Hard

Learning Objective: 09–04 Use economies of scale to link a firms size and its average costs in

the long run.

Test Bank: I

Topic: Long-Run Production Costs

Type: Graph

195.

At zero units of output, a firm’s variable costs are zero.

196.

Average fixed costs diminish continuously as output increases.

197.

Economic profit is found by subtracting accounting costs from total revenue.

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Test Bank: I

Topic: Economic Costs

198.

A firm’s economic profit is usually higher than its accounting profit.

199.

The law of diminishing returns explains why short-run marginal cost curves are

upsloping.

200.

The law of diminishing returns explains diseconomies of scale.

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the long run.

Test Bank: I

Topic: Long-Run Production Costs

Topic: Short-Run Production Relationships

201.

Minimum efficient scale varies by industry.

Multiple Choice Questions

202.

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist

to prepare it for you in 2 hours. You value your time at $11.00 an hour; the tax specialist will

charge you $55 an hour. The opportunity cost of preparing your own tax return is

203.

Implicit costs are

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D. always greater than accounting costs.

204.

Cash expenditures a firm incurs to pay for resources are called

205.

Which of the following would be an implicit cost for a firm? The cost

206.

Harvey quit his job at State University, where he earned $45,000 a year. He figures his

entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business,

he

cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software

company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for

each unit.

Of the $75 per unit, $55 goes for the costs of production, packaging, marketing,

employee wages and benefits, and rent on a building.

The total revenues of Harvey’s firm in the first year were

207.

Harvey quit his job at State University, where he earned $45,000 a year. He figures his

entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business,

he

cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software

company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for

each unit.

Of the $75 per unit, $55 goes for the costs of production, packaging, marketing,

employee wages and benefits, and rent on a building.

The explicit costs of Harvey’s firm in the first year were

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Topic: Economic Costs

208.

Harvey quit his job at State University, where he earned $45,000 a year. He figures his

entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the

business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a

software company, Extreme Gaming. In the first year, the firm sold 11,000 units of

software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production,

packaging, marketing, employee wages and benefits, and rent on a building.

The implicit costs of Harvey’s firm in the first year were

209.

Harvey quit his job at State University, where he earned $45,000 a year. He figures his

entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business,

he

cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software

company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for

each unit.

Of the $75 per unit, $55 goes for the costs of production, packaging, marketing,

employee wages and benefits, and rent on a building.

The normal profits for Harvey in the first year were

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Di ffi cul ty: 02 Medium

Learning Objective: 09–01 Explain why economic costs include both explicit revealed and

expressed costs and implicit present but not obvious costs.

Test Bank: II

Topic: Economic Costs

210.

Harvey quit his job at State University, where he earned $45,000 a year. He figures his

entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business,

he

cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software

company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for

each unit.

Of the $75 per unit, $55 goes for the costs of production, packaging, marketing,

employee wages and benefits, and rent on a building.

The economic profits of Harvey‘s firm in the first year were

211. Economic costs are equal to

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Topic: Economic Costs

212.

Economic profits are

213. If economic profits in an industry are zero and implicit costs are greater than zero,

then

214.

If a firm’s revenues just cover all its implicit costs, then

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Blooms: Understand

Di ffi cul ty: 02 Medium

Learning Objective: 09–01 Explain why economic costs include both explicit revealed and

expressed costs and implicit present but not obvious costs.

Test Bank: II

Topic: Economic Costs

215. An industry is expected to expand if firms in the industry are earning positive

216. Suppose a firm sells its product at a price lower than the per-unit implicit costs of

producing it. Which of the following statements is definitely true?

217. Normal profits are

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C.

determined by subtracting total costs from total revenues.

D. considered an implicit cost by economists.

218.

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The

explicit costs of production are $1,500,000 and the implicit costs of production are $300,000.

The firm

earns an accounting profit of

219.

The sole proprietor of the Milwaukee Machine Company receives all accounting profits

earned by her firm. She has a standing salary offer of $35,000 a year to work for a large

corporation.

If she had invested her capital outside her own company, she estimates that

would have returned $22,000 this year. If accounting profits for the year were $50,000, then

her economic profits

were (based solely on the given figures)

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Blooms: Understand

Di ffi cul ty: 02 Medium

Learning Objective: 09–01 Explain why economic costs include both explicit revealed and

expressed costs and implicit present but not obvious costs.

Test Bank: II

Topic: Economic Costs

220. Zero economic profits mean that the firm is earning

221.

In the short run, total output in an industry

222.

The main difference between the short run and the long run is that