Description
Test Bank For Fundamentals of Economics International Edition 6th Edition by Melvin Boyes
Chapter 5—Costs and Profit Maximization
MULTIPLE CHOICE
1. Labor, land, and capital used in production are
| a. | resources. |
| b. | outputs. |
| c. | productivity. |
| d. | technological progress. |
| e. | innovations. |
ANS:APTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
2. The transformation of resources into economic goods and services is called
| a. | technical efficiency. |
| b. | resource. |
| c. | production. |
| d. | increasing returns. |
| e. | output. |
ANS:CPTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
3. Economic goods and services produced by business firms are
| a. | resources. |
| b. | outputs. |
| c. | innovations. |
| d. | productivity. |
| e. | technological progress. |
ANS:BPTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
4. Average total cost is calculated by dividing
| a. | the change in total cost by the change in the quantity of output. |
| b. | total output by the number of people employed. |
| c. | the change in total output by the change in the number of people employed. |
| d. | total cost by total output. |
| e. | total output by total cost. |
ANS:DPTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
5.The average total cost curve indicates that
| a. | as output rises in the short run, costs decline rapidly. |
| b. | as output rises in the short run, per unit costs initially fall but eventually rise. |
| c. | firms generally operate at a highly inefficient point of production. |
| d. | costs cannot be contained even if businesses employ the proper combination of resources. |
| e. | as more output is produced in the short run, average total costs must increase. |
ANS:BPTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
6.Average total cost is
| a. | the per-unit cost and is derived by dividing total cost by marginal cost. |
| b. | the total unit cost of production. |
| c. | the per-unit cost and is derived by dividing total cost by the quantity of output. |
| d. | just the marginal cost adjusted for the workers’ productivity level. |
| e. | derived by dividing marginal cost by the quantity of output. |
ANS:CPTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
7.Marginal cost is calculated by dividing
| a. | the change in total cost by the change in the quantity of output produced. |
| b. | total output by the number of people employed. |
| c. | the change in total output by the change in the number of people employed. |
| d. | the change in total cost by the change in change in variable cost. |
| e. | total cost by total output. |
ANS:APTS:1DIF:Easy
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
8.As output rises unit by unit, costs ____ relatively ____ at first, but then ____ more ____.
| a. | decrease; slowly; increase; rapidly |
| b. | decrease; quickly; increase; slowly |
| c. | rise; slowly; increase; rapidly |
| d. | rise; quickly; increase; slowly |
| e. | rise; quickly; increase; quickly |
ANS:CPTS:1DIF:Moderate
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Knowledge
9.After hiring three new employees, a manager sees that total output increases. If the manager hires two additional employees and discovers total output has fallen, the result is due to
| a. | diseconomies of scale. |
| b. | a poor hiring procedure. |
| c. | diminishing marginal returns. |
| d. | the lack of skills of newest employees⎯the best workers are hired first. |
| e. | economies of scale. |
ANS: C PTS: 1 DIF: Moderate NAT: BPROG: Analytic
TOP: Costs KEY: BLOOM’S: Comprehension
10.Which of the following does not refer to diminishing marginal returns?
| a. | The application of increasing amounts of fertilizer to a field of corn |
| b. | Increasing numbers of seat belts in an automobile |
| c. | Closing part of a restaurant because of a lack of servers |
| d. | Increasing the number of assistant vice presidents as the size of the firm increases |
| e. | Increasing the number of students in one classroom |
ANS:DPTS:1DIF:Moderate
NAT: BPROG: Reflective Thinking TOP: Costs KEY: BLOOM’S: Application
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