Chapter 20 � Costs of Production, Form A by qv98Vk7G

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									 Ch 20, Costs of Production - Practice Quiz
1. Which of the following constitutes an implicit cost to the
    Johnston Manufacturing Company?
    A) payments of wages to its office workers
    B) rent paid for the use of equipment owned by the
      Schultz Machinery Company
    C) depreciation charges on company-owned
      equipment
    D) economic profits resulting from current production
    E) costs of health benefits for employees

2. To the economist total cost includes:
    A) explicit and implicit costs, including a normal
      profit.
    B) neither implicit nor explicit costs.
    C) what is reported to the IRS
    D) explicit, but not implicit, costs.
    E) implicit, but not explicit, costs.

3. Which of the following represents a long-run
    adjustment?
    A) a farmer uses an extra dose of fertilizer on his corn
      crop
    B) unable to meet foreign competition, a U.S. watch
      manufacturer sells one of its branch plants
    C) a steel manufacturer cuts back on its purchases of
      coke and iron ore
    D) a supermarket hires four additional clerks
    E) a technology company lays off engineers
4. Which of the following is a short-run adjustment?
    A) A local bakery hires two additional bakers.
    B) A technology company moves its plant to India.
    C) The number of farms in the United States declines
      by 5 percent.
    D) BMW constructs a new assembly plant in South
      Carolina.
    E) Six new firms enter the plastics industry.

Answer the next question(s) on the basis of the following
output data for a firm. Assume that the amounts of all non-
labor resources are fixed.



                    5. Refer to the data at right.
                    Diminishing marginal returns become
                    evident with the addition of the:
                        A) sixth worker.
                        B) fourth worker.
                        C) third worker.
                        D) second worker.
                        E) first worker.

6. Refer to the above data. The marginal product of the
    sixth worker is:
    A) 180 units of output.
    B) 30 units of output.
    C) 15 units of output.
    D) 165 units of output.
    E) negative.
7. Refer to the above data. Average product is at a
    maximum when:
    A) five workers are hired.
    B) four workers are hired.
    C) three workers are hired.
    D) two workers are hired.
    E) one worker is hired.

8. If a firm decides to produce no output in the short run,
     its costs will be:
     A) its marginal costs.
     B) equal to profits.
     C) its fixed costs.
     D) zero.
     E) its fixed plus its variable costs.

9. A firm's total variable cost will depend on:
    A) the prices of variable resources.
    B) the production techniques that are used.
    C) the level of output.
    D) the amount of labor employed.
    E) all of the above.

10. When diseconomies of scale occur:
    A) the long-run average total cost curve falls.
    B) marginal cost intersects average total cost.
    C) the long-run average total cost curve rises.
    D) sunk costs ensure efficiency.
    E) average fixed costs will rise.
Answers

 1. C
 2. A
 3. B
 4. A
 5. C
 6. C
 7. D
 8. C
 9. E
 10. C

								
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