16.

Accounting profit is equal to

d. 75,000.

e. economic profit and accounting

total revenue minus

e. 80,000.

profit will be equal.

19. Nicole owns a small pottery

21. If a production function

factory. She can make 1,000

exhibits diminishing marginal

pieces of pottery per year and sell

product, its slope

a. implicit costs.
b. variable costs.
c. the sum of implicit and explicit
costs.
d. explicit costs.
e. marginal costs.

them for 100 each. It costs

Nicole 20,000 for the raw
materials to produce the 1,000

17. Economic profit is equal to

pieces of pottery. She has

total revenue minus

invested 100,000 in her factory

a. variable costs.

and equipment: 50,000 from her

c. explicit costs.

savings and 50,000 borrowed at

b. implicit costs.

10 percent (assume that she

d. marginal costs.

could have loaned her money out

18. Nicole owns a small pottery

factory. She can make 1,000
pieces of pottery per year and sell
them for 100 each. It costs
Nicole 20,000 for the raw
materials to produce the 1,000
pieces of pottery. She has
invested 100,000 in her factory
and equipment: 50,000 from her
savings and 50,000 borrowed at

at 10 percent, too). Nicole can

c. could be any of these answers.

d. becomes flatter as the quantity
of the input increases.
22. If a production function
exhibits diminishing marginal
product, the slope of the

factory for 40,000 per year. The

a. is linear (a straight line).

economic profit at Nicole's pottery

factory is
a. 30,000.
b. 35,000.
c. 70,000.
d. 75,000.
e. 80,000.

could have loaned her money out

production,

at 10 per cent, too.) Nicole can

a. accounting profit will exceed

work at a competing pottery

economic profit.

factory for 40,000 per year. The

b. economic profit will always be

accounting profit at Nicole's

zero.

pottery factory is

c. economic profit will exceed

c. 70,000.

quantity of the input increases.

corresponding total-cost curve

20. If there are implicit costs of

b. 35,000.

b. becomes steeper as the

work at a competing pottery

10 per cent. (Assume that she

a. 30,000.

a. is linear (a straight line).

accounting profit.
d. accounting profit will always be
zero.

b. is negative throughout its length

c. becomes steeper as the
quantity of output increases.
d. becomes flatter as the quantity
of output increases.
23. Refer to Figure 13-1. The
marginal product of labor as
production moves from employing
one worker to employing two
workers is
Figure 13-1
Number of Workers

Output

23

40

50

a. 0

a. rent on the factory

32. In the long run, if a very small

b. 10

b. wages paid to factory labor

factory were to expand its scale of

c. 17

c. interest payments on borrowed

operations, it is likely that it would

d. 23

financial capital

initially experience

e. 40

d. payment on the lease for

factory equipment

24. Refer to Figure 13-1. The

e. salaries paid to upper

production process described

management

above exhibits
Figure 13-1

30. When marginal costs are

Number of Workers

Output

below average total costs,

a. average fixed costs are rising.

23

40

50

a. constant marginal product of

labor.
b. diminishing marginal product of
labor.
c. increasing returns to scale.
d. increasing marginal product of
labor.
e. decreasing returns to scale.

variable cost in the short run?

costs.
c. economies of scale.
b. diseconomies of scale.
d. constant returns to scale.
33. The efficient scale of
production is the quantity of output
that minimizes

c. average total costs are rising.

b. average total costs are falling.
d. average total costs are
minimized.
31. If marginal costs equal
average total costs,
a. average total costs are falling.
c. average total costs are
maximized.
b. average total costs are rising.
d. average total costs are

25. Which of the following is a

a. an increase in average total

minimized.

a. average fixed cost.

c. average variable cost.
b. average total cost.
d. marginal cost.
34. Which of the following
statements is true?
a. All costs are fixed in the short
run.
c. All costs are variable in the
short run.
b. All costs are variable in the
long run.
d. All costs are fixed in the long
run.