Chapter 13 The Costs of Production1. 2. 3. 4. 5. 6. 7. 8. 9. 10. _ __11. 12. 13. 14. 15. 16. 17. 18. 19. 20. _ __1. Which of the following is an implicit cost? ( )a.Salaries paid to workers who work for the firm.b.Interest on money borrowed to finance equipment purchases.c.Cash payments for raw materials.d.Foregone rent on office space owned and used by the firm.2. Sarah has been working for a law firm and earning an annual salary of $90,000. She decides to open her own practice. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Sarah will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $1,000. Assuming that there are no additional expenses, Sarah’s annual implicit costs wil l equal ( )a.$55,200.b. $221,400.c. $91,000.d. $146,200.3. Economists assume that the goal of the firm is to ( )a.maximize total revenue. c. minimize costs.b.maximize profits. d. do all of the above.4. The difference between accounting profit and economic profit relates to ( )a.the manner in which revenues are defined.b.how total revenue is calculated.c.the manner in which costs are defined.d.the price of the good in the market.5. As Al’s Radiator Co. continues to add workers, while keeping the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this o ccurs, Al’s Radiator Co. encounters ( )a.economies of scale. c. increasing marginal product.b.diseconomies of scale. d. diminishing marginal product.6. Which of the following is the best example of a variable cost? ( )a.Monthly payments for hired labor.b.Property tax payments.c.Monthly rent payments for a warehouse.d.Pension payments to retired workers.7. Smith Tire Co. has total fixed costs of $100,000 per year. The firm’s average vari able cost is $80 for 10,000 tires. At that level of output, the firm’s average total costs equal ( )a.$90.b. $100.c. $110.d. $120.8. Miller Technologies has average variable costs of $6 and average total costs of $10 when it produces 1,000 units of output. The firm’s total fixed costs equal ( )a.$2,000.b. $3,000.c. $4,000.d. $5,000.9. At a firm’s current output level of 200 units per week, it has 10 employ ees at a weekly wage of $500 each. Raw materials, which are ordered and delivered daily, cost $1,000 per week. The weekly cost of the firm’s capital is $1,250. Which of the following statements is correct? ( )TOTAL VARIABLE COST TOTAL FIXED COST TOTAL COSTa. $5,000 $2,250 $7,250b. $6,000 $1,250 $7,250c. $1,250 $6,000 $7,250d. $2,250 $ 500 $2,75010. If marginal cost is greater than average total cost then ( )a.profits are increasing.b.economies of scale are becoming greater.c.average total cost remains constant.d.average total cost is increasing.11. When the marginal product of labor falls, the marginal cost of output ( )a.falls, then rises. c. rises.b.becomes negative. d. remains constant.12. The minimum points of the average variable cost and average total cost curves occur where ( )a.the marginal cost curve lies below the average variable cost and average totalcost curves.b.the marginal cost curve intersects those curves.c.wages are the lowest.d.the slope of total cost is the smallest.13. If Franco’s Pizza Parlor knows that the marginal cost of the 500th pizza is $3.00 and that the average total cost of making 499 pizzas is $3.30, then ( )a.average costs are rising at Q = 500.b.average costs are falling at Q = 500.c.total costs are falling at Q = 500.d.average variable costs must be falling.14. Economies of scale ( )a.requires a change in the size of operations and therefore is a long-runconsideration.b.requires a more intensive use of existing plant and therefore is a short-runconsideration.c.means that a doubling of plant size will double output.d.requires a change in the size of plant and therefore is a short-run consideration.15. Some reasons that firms may experience diseconomies of scale include ( )a.the firm is too small to take advantage of specialization.rge management structures may be bureaucratic and inefficient.c.if there are too many employees, the work place becomes crowded and peoplebecome less productive.d.average fixed costs begin to rise again.16. A local bagel company plans to keep and maintain its bagel factory, which is estimated to last 25 years. All cost decisions it makes during the 25-year period ( )a.are short-run decisions.b.are long-run decisions.c.involve only maintenance of the factory.d.are zero, since the cost decisions were made at the beginning of the business.。