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172.
Refer to the diagram. Constant returns to scale
173.
The long-run average total cost curve
9-102
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
9-104
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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?
9-105
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written consent of McGraw-Hill Education.
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?
9-107
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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.
9-109
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written consent of McGraw-Hill Education.
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.
9-110
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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.
9-111
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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.
9-112
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written consent of McGraw-Hill Education.
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
9-113
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written consent of McGraw-Hill Education.
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
9-115
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
9-116
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
9-117
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written consent of McGraw-Hill Education.
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
9-118
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
9-119
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written consent of McGraw-Hill Education.
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)
9-120
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
