Topic: Accounting versus Economic Profits
79. Accounting profits are calculated as:
80. Economic profits are calculated as:
81. Accounting profits can tell a business _______________________, and economic profits can tell a
business ______________________.
82. The relationship between the quantity of inputs and the quantity of outputs is called:
83. A production function represents:
12–19
84. When a firm doubles its inputs, its output:
85. The marginal product of any input into the production process:
86. The increase in output that is generated by an additional unit of input is called the:
87.
Labor (# of
employees)
Total Output
0
0
1
10
2
50
3
110
4
160
5
200
6
230
7
255
8
275
9
290
10
300
11
305
12–20
Assume the table shown is for a hat factory, and shows the total production of hats given various
numbers of employees. What is the marginal product of the fifth worker?
88.
Labor (# of
employees)
Total Output
0
0
1
10
2
50
3
110
4
160
5
200
6
230
7
255
8
275
9
290
10
300
11
305
Assume the table shown is for a hat factory, and shows the total production of hats given various
numbers of employees. What is the marginal product of the ninth worker?
89.
12–21
Labor (# of
employees)
Total Output
0
0
1
10
2
50
3
110
4
160
5
200
6
230
7
255
8
275
9
290
10
300
11
305
Assume the table shown is for a hat factory, and shows the total production of hats given various
numbers of employees. Adding a seventh employee adds:
12–22
90.
Labor (# of
employees)
Total Output
0
0
1
10
2
50
3
110
4
160
5
200
6
230
7
255
8
275
9
290
10
300
11
305
Assume the table shown is for a hat factory, and shows the total production of hats given various
numbers of employees. Adding a third worker increases production:
91.
Labor (# of
employees)
Total Output
0
0
1
10
2
50
3
110
4
160
5
200
6
230
7
255
8
275
9
290
10
300
11
305
Assume the table shown is for a hat factory, and shows the total production of hats given various
numbers of employees. Diminishing marginal product sets in with the:
92. The principle of diminishing marginal product states:
93. The principle that states the marginal product of an input decreases as the quantity of the input
increases is called:
94. Marginal product is represented by:
95. The additional output produced by adding one more unit of an input is the:
96. The slope of the total production curve becomes:
97. The slope of the total production curve becomes:
98. When the slope of the total production curve begins to flatten:
99. When the slope of the total production curve steepens, it means:
100. The marginal product curve:
101. Average product measures:
102. When marginal product __________ average product, average product must be ______________.
103. Assume a company is at a point in production where marginal product is above average product.
12–26
104. Assume a company is at a point in production where marginal product is below average product.
Which of the following must be true?
105. Suppose that an accounting firm with 10 employees hires another accountant. By doing so, it goes
from serving 30 customers each week to serving 32 customers each week. What is the marginal product
of labor for the new accountant?
106. Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an
hour. A fifth worker gets hired and the shop now produces 15 sandwiches per hour. Which of the
following is true?
107. A bracelet making company has three employees, and together they produce 10 bracelets an hour.
When a fourth worker joins them, the output for the company is now 11 bracelets an hour. Which of the
following is true?
108. A soda factory employs seven workers and produces 500 bottles of soda a day. The company
reduces the workforce to six workers and output is now 450 bottles a day. The seventh worker:
109. A cigar factory employs 20 workers and produces 1,000 cigars a day. The company reduces the
workforce to 19 workers and produces 912 cigars a day. The 20th worker:
110. In general, the cost of an input:
111. Average product curve tells us:
112. Total costs:
113. Diminishing marginal product:
114. The fixed cost curve:
115. The total cost curve:
116. Average fixed costs:
117. Average variable costs:
118. Average variable costs:
119. Average total cost:
120. Average total cost:
121. Marginal cost is:
122. The additional cost a firm will incur by producing one additional unit of output is the:
123. Marginal cost:
124. The marginal cost curve:
125. If the marginal cost of hiring another worker to produce sandwiches is $4 per sandwich, and
sandwiches sell for $5 each, then:
126. A firm currently employs four workers in a sandwich shop, and produces sandwiches at a total cost
per sandwich (ATC) of $3. The sandwiches sell for $5. If the marginal cost of hiring another worker to
produce sandwiches is $5.50 per sandwich, then:
127. Costs that are “fixed”:
128. How long is the long run?
129. A sandwich shop has six months left on its lease to its storefront and equipment and currently
employs three workers who work on an on-call basis, with no contract. Ingredients are bought daily. How
long is the long run for the sandwich shop?
130. The short run:
131. The short run:
132. Returns to scale describes the long-run relationship between:
133. Economies of scale refers to when:
134. Diseconomies of scale refers to when in the long run:
135. Constant returns to scale refers to when:
136. In the long run, when an increase in the quantity of output decreases average total cost, this is
called:
137. In the long run when an increase in the quantity of output increases average total cost, this is called:
138. In the long run when average total cost does not depend on the quantity of output, this is called:
12–33
139. A long-run ATC curve shows:
140. When a firm can achieve economies of scale by expanding, its long-run ATC curve:
141. When a firm is on the portion of its long run ATC curve that slopes upward, it is experiencing:
142. When a firm is on the flat portion of its long-run ATC curve,
Chapter 12 Test Bank Summary
12–34
Category
# of Questi
ons
AACSB: Knowledge Application
22
AACSB: Reflective Thinking
120
Accessibility: Keyboard Navigation
137
Blooms: Apply
22
Blooms: Remember
72
Blooms: Understand
48
Difficulty: 01 Easy
71
Difficulty: 02 Medium
48
Difficulty: 03 Hard
22
Learning Objective: 12-01 Define total revenue, total cost, and profit.
26
Learning Objective: 12-
02 Explain the difference between fixed and variable costs, and give examples of each.
21
Learning Objective: 12-
03 Explain the difference between explicit and implicit costs, and give examples of eac
h.
12
Learning Objective: 12-
04 Calculate economic and accounting profit, and explain the importance of the differe
nce.
22
Learning Objective: 12-
05 Define marginal product, and show why there is diminishing marginal product.
28
Learning Objective: 12-
06 Define and graph total cost, average costs, and marginal cost.
17
Learning Objective: 12-
07 Explain why firms face different costs in the long run than in the short run.
5
Learning Objective: 12-
08 Understand what economies and diseconomies of scale are and their implications fo
r production decisions
11
Topic: Accounting versus Economic Profits
22
Topic: Costs and Average Costs
11
Topic: Explicit and Implicit Costs
12
Topic: Fixed Costs and Variable Costs
21
Topic: Long Run versus Short Run
5
Topic: Marginal Cost
6
Topic: Marginal Product
28
Topic: Returns to Scale
11
Topic: Total Revenue, Total Cost, and Profit
24
Topic: TR, TC, and Profit
2