870 ? Chapter 13/The Costs of Production
65. Refer to Scenario 13-3. Tony's accountant would most likely figure the total cost of his wheat planting to
equal a. $25. b. $130. c. $300. d. $380.
ANS: B DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Explicit costs
66. Refer to Scenario 13-3. Tony's accounting profit equals
a. $-80. b. $130. c. $170. d. $260.
ANS: C DIF: LOC: Costs of production MSC: Applicative
2 REF: 13-1 NAT: Analytic TOP: Accounting profit
67. Refer to Scenario 13-3. Tony's economic profit equals
a. $-130. b. $-80. c. $130. d. $170.
ANS: B DIF: LOC: Costs of production MSC: Applicative
2 REF: 13-1 NAT: Analytic TOP: Economic profit
Scenario 13-4
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
68. Refer to Scenario 13-4. What are Wanda’s explicit costs per glass?
a. $0.18 b. $0.10 c. $0.08 d. $0.02
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Explicit costs
69. Refer to Scenario 13-4. What are Wanda’s implicit costs per glass?
a. $0.18 b. $0.10 c. $0.08 d. $0.02
ANS: B DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Implicit costs
70. Refer to Scenario 13-4. What are Wanda’s total costs per glass?
a. $0.18 b. $0.10 c. $0.08 d. $0.02
ANS: A DIF: LOC: Costs of production 2 REF: 13-1
TOP: Total cost NAT: Analytic MSC: Analytical
Chapter 13/The Costs of Production ? 871
71. Refer to Scenario 13-4. What are Wanda’s total accounting profits?
a. $150 b. $126 c. $96 d. $24
ANS: B DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Economic profit
72. Refer to Scenario 13-4. What are Wanda’s total economic profits?
a. $150 b. $126 c. $96 d. $54
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Economic profit
Scenario 13-5
Samantha has been working for a law firm and earning an annual salary of $80,000. She decides to open her own practice. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Samantha will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
73. Refer to Scenario 13-5. Samantha's annual implicit costs will equal
a. $55,200. b. $75,200. c. $80,500. d. $165,700.
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Implicit costs
74. Refer to Scenario 13-5. Samantha's annual accounting costs will equal
a. $55,200. b. $75,200. c. $80,500. d. $165,700.
ANS: A DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Explicit costs
75. Refer to Scenario 13-5. Samantha's annual economic costs will equal
a. $55,200. b. $75,200. c. $80,500. d. $135,700.
ANS: D DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-1 NAT: Analytic TOP: Explicit costs | Implicit costs
76. Refer to Scenario 13-5. According to Samantha’s accountant, which of the following revenue totals will
yield her business $50,000 in profits? a. $55,200. b. $105,200. c. $132,500. d. $185,700.
ANS: B DIF: LOC: Costs of production MSC: Analytical
3 REF: 13-1 NAT: Analytic TOP: Accounting profit
872 ? Chapter 13/The Costs of Production
77. Refer to Scenario 13-5. According to an economist, which of the following revenue totals will yield her
business $50,000 in economic profits? a. $55,200. b. $100,200. c. $132,500. d. $185,700.
ANS: D DIF: LOC: Costs of production MSC: Analytical
3 REF: 13-1 NAT: Analytic TOP: Economic profit
Sec02 - The Costs of Production - Production and Cost
MULTIPLE CHOICE1.
A production function describes a. how a firm maximizes profits. b. how a firm turns inputs into output.
c. the minimal cost of producing a given level of output. d. the relationship between cost and output.
1
REF: 13-2 NAT: Analytic TOP: Production function
ANS: B DIF:
LOC: Costs of production MSC: Definitional
2.
A production function is a relationship between inputs and a. quantity of output. b. revenue. c. costs. d. profit.
1
REF: 13-2 NAT: Analytic TOP: Production function
ANS: A DIF:
LOC: Costs of production MSC: Definitional
3.
Which of the following statements about a production function is correct for a firm that uses labor to produce output?
a. The production function depicts the relationship between the quantity of labor and the quantity of
output.
b. The slope of the production function measures marginal cost.
c. The quantity of output determines the maximum amount of labor the firm will hire. d. All of the above are correct.
2
REF: 13-2 NAT: Analytic TOP: Production function
ANS: A DIF:
LOC: Costs of production MSC: Interpretive
4.
For a firm, the production function represents the relationship between a. implicit costs and explicit costs. b. quantity of inputs and total cost.
c. quantity of inputs and quantity of output. d. quantity of output and total cost.
1
REF: 13-2 NAT: Analytic TOP: Production function
ANS: C DIF:
LOC: Costs of production MSC: Definitional
Chapter 13/The Costs of Production ? 873
5.
For a firm, the relationship between the quantity of inputs and quantity of output is called the
a. profit function. b. production function. c. total-cost function. d. quantity function.
1
REF: 13-2 NAT: Analytic TOP: Production function
ANS: B DIF:
LOC: Costs of production MSC: Definitional
Table 13-1
Alyson’s Pet Sitting Service Number of Output (number of Workers pet visits) 0 0 1 20 2 45 3 60 4 70 6.
Refer to Table 13-1. What is the marginal product of the second worker? a. 15 b. 20 c. 22.5 d. 25
2
REF: 13-2 NAT: Analytic TOP: Marginal product
ANS: D DIF:
LOC: Costs of production MSC: Analytical
7.
Refer to Table 13-1. What is the marginal product of the third worker? a. 15 b. 20 c. 35 d. 60
2
REF: 13-2 NAT: Analytic TOP: Marginal product
ANS: A DIF:
LOC: Costs of production MSC: Analytical
8.
Refer to Table 13-1. Alyson’s pet sitting service experiences diminishing marginal productivity with the addition of the a. first worker. b. second worker. c. third worker. d. fourth worker.
3
REF: 13-2 NAT: Analytic TOP: Diminishing marginal product
ANS: C DIF: LOC: Costs of production MSC: Analytical
9.
Refer to Table 13-1. Suppose that Alyson’s pet sitting service has a fixed cost of $50 per month for her cell phone. Each worker costs Alyson $60 per day. What is the shape of Alyson’s total cost curve as output increases from 0 and 45?
a. Total cost increases but gets flatter. b. Total cost increases and gets steeper. c. Total cost decreases and gets flatter. d. Total cost decreases but gets steeper.
3
REF: 13-2 NAT: Analytic TOP: Total-cost curve
ANS: A DIF: LOC: Costs of production MSC: Interpretive
874 ? Chapter 13/The Costs of Production
10. Refer to Table 13-1. Suppose that Alyson’s pet sitting service has a fixed cost of $50 per month for her cell
phone. Each worker costs Alyson $60 per day. What is the shape of Alyson’s total cost curve as output increases from 45 to 70?
a. Total cost increases but gets flatter. b. Total cost increases and gets steeper. c. Total cost decreases and gets flatter. d. Total cost decreases but gets steeper.
ANS: B DIF: LOC: Costs of production MSC: Interpretive
3 REF: 13-2 NAT: Analytic TOP: Total-cost curve
Figure 13-1
Suppose the production function shifts from TP1 to TP2.
11. Refer to Figure 13-1. In this diagram, the shift in the total product curve represents an increase in the firm's
a. costs of production. b. productivity. c. diseconomies. d. market share.
ANS: B DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-2 NAT: Analytic TOP: Production function
12. Refer to Figure 13-1. Which of the following could explain why the total product curve shifted in this
diagram?
a. A reduction in capital equipment available to the firm. b. Labor skills have become rusty and outdated in the firm.
c. The firm has developed new technology in its production facility. d. The firm is now receiving a higher price for its product.
ANS: C DIF: LOC: Costs of production MSC: Interpretive
2 REF: 13-2 NAT: Analytic TOP: Production function
13. Which of these assumptions is often realistic for a firm in the short run?
a. The firm can vary both the size of its factory and the number of workers it employs. b. The firm can vary the size of its factory but not the number of workers it employs. c. The firm can vary the number of workers it employs but not the size of its factory. d. The firm can vary neither the size of its factory nor the number of workers it employs.
ANS: C DIF: LOC: Costs of production MSC: Definitional
1 REF: 13-2 NAT: Analytic TOP: Production function | Short run