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Exam 8: A: Costs and the Supply of Goods

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Question 61

Multiple Choice

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Profit-sharing plans, where employees receive bonuses in proportion to the company's profits,

A) reduce the principal-agent problem.
B) are intended to reduce the number of employees who are residual claimants.
C) eliminate shirking problems.
D) are essentially gifts to employees and do not generate any benefit for the firm's owners.

E) B) and C)
F) All of the above

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Question 62

Multiple Choice

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The average fixed costs of a firm equal

A) implicit costs divided by output.
B) explicit costs divided by output.
C) total cost minus variable cost.
D) (total cost minus variable cost) divided by output.

E) None of the above
F) C) and D)

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Question 63

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In 1632, the Virginia Legislature decreed that all love apples must be sold for $1 per bushel (no more, no less) . At the time, Mr. McKintoch had 1,000 bushels of love apples ready for harvesting. His sunk costs were $1,100, and his total costs (including sunk costs) would have been $1,800 if he harvested. If McKintoch decided not to harvest because he did not think he could cover his total costs, he

A downward-sloping portion of a long-run average total cost curve is the result of

If a firm's per-unit costs fall as it produces a larger output,

Which of the following is a difference between corporations and partnerships?

Approximately three-fourths of all U.S. firms are

Marginal cost is best defined as

An activity known as shirking is least likely to occur when

In the short run, the marginal cost curve crosses the average total cost curve at

A family has decided to go away for the summer. The monthly mortgage payment on the family's house is $1,000. Water, electricity, natural gas, and maintenance bills, to be paid by the family, will be $700 per month if the house is occupied and zero otherwise. If the family wishes to minimize losses from being away, it should rent the house for as much as the market will bear, as long as the monthly rent is above which of the following? (Assume wear and tear to be the same whether or not the house is occupied.)

Mary owns her own business and works full time in the store without paying herself a salary. She has $20,000 of her own money invested in the store that she withdrew from her savings account, which earned 10 percent interest. She was offered a job last year making $28,000 per year but turned it down. If Mary's accounting statements show revenues of $100,000 and accounting costs of $60,000, then Mary's

As output is expanded, if MC is less than ATC,

Figure 8-13 -Movement from point b to point c in Figure 8-13 indicates that the firm is experiencing

Which of the following represents a long-run adjustment?

Figure 8-6 -At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production?

Where marginal cost is less than average cost,

If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be

Figure 8-3 -The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-3. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Sunk costs