Deck 8: Costs and the Supply of Goods

Question 1

Which of the following factors are likely to lead to an increase in the female/male earnings ratio in the future?

A) As the labor force participation of women increases, their years of work experience will become more similar to men.
B) In recent years, a higher proportion of women have been preparing for careers in the professions.
C) As the proportion of families headed by a female parent increases, the average hours worked per week of female employees will decline.
D) Both a and b are correct.

Answer 1

Both a and b are correct.

Question 2

Since 1980, the female/male annual earnings ratio of full-time workers has been ____, while the labor force participation rate of women has been ____ during this same period.

A) rising; declining
B) rising; increasing
C) falling; increasing
D) falling; declining

Answer 2

rising; increasing

Question 3

The earnings difference between men who have never been married and women is

A) significantly less than the earnings difference between married men and women.
B) about the same as the earnings difference between married men and women.
C) significantly more than the earnings difference between married men and women.
D) modestly more than the earnings difference between married men and women.

Answer 3

significantly less than the earnings difference between married men and women.

Question 4

When employment discrimination results from the personal prejudices of employers, economic theory suggests that

A) employers who discriminate will have lower production costs.
B) the wages of employees who are discriminated against will rise.
C) employers who discriminate will have the same production costs as those who do not discriminate.
D) employers who discriminate will have lower profits.

Question 5

Traditionally, men have been more willing to accept jobs that

A) required continuous employment in the labor force.
B) require relocation if necessary to get a higher paying job.
C) have long working hours.
D) All of the above are correct.

Question 6

Which of the following would constitute the strongest evidence of employment discrimination against female employees?

A) The average wage of female workers is lower than the average wage of males.
B) The average wage of female employees is lower than the average wage of males with similar productive characteristics.
C) The mean number of years of schooling of female workers is lower than that of males.
D) The average hours worked by female employees is less than the average hours worked by males.

Question 7

If a firm refuses to hire any females due to a personal prejudice, its profits will

A) increase markedly.
B) decrease.
C) not be affected.
D) increase slightly.

Question 8

Between 1960 and 1980, the female/male annual earnings ratio of full-time workers ____. Since 1980, the female/male annual earnings ratio of full-time workers ____.

A) changed very little; fell
B) changed very little; rose
C) fell; changed very little
D) rose; changed very little

Question 9

Concerning marital status and the earnings of women, which of the following is true?

A) Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity).
B) On average, the number of hours worked per year by women in the labor force is greater than the hours worked by men in the labor force.
C) The female/male earnings ratio is substantially higher for never married persons than for those married with a spouse present.
D) As the proportion of women preparing for careers as professionals has increased in recent decades, the earnings of women have declined relative to those for men.

Question 10

Which of the following is true about employment discrimination?

A) Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity).
B) If employers can hire equally productive female employees at a lower wage than males, the profit motive gives them a strong incentive to do so.
C) The female/male earnings ratio is higher for persons who are married than for those who remain single.
D) Both a and c are true.

Question 11

Which of the following is true about employment discrimination?

A) Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity).
B) If employers can hire equally productive female employees at a lower wage than males, the profit motive gives them a strong incentive to do so.
C) The female/male earnings ratio is higher for persons who are married than for those who remain single.
D) Both a and c are true.

Question 12

When female/male earnings differentials are adjusted for age, education, language, and locational characteristics, the

A) differential between the earnings of males and those of females increases substantially.
B) differential between the earnings of males and those of females does not change much.
C) corrected earnings of males are equal to those of similar females.
D) corrected earnings of females are greater than those of similar males.

Question 13

Women earn less on average than men. Which of the following would be the logical conclusion?

A) Women must be the victim of employment discrimination.
B) Women must be less productive.
C) Men must be more highly motivated and materialistic.
D) Without consideration of preferences and productivity factors, differences in unadjusted mean earnings do not necessarily reflect employment discrimination.

Question 14

The female to male earnings ratio for full-time workers

A) has been steadily declining.
B) has been roughly constant since 1980.
C) has increased significantly since 1980.
D) increased until 1980, but it has declined steadily during the last two decades.

Question 15

Women earn less on average than men. Which of the following would be the logical conclusion?

A) Women must be the victim of employment discrimination.
B) Women must be less productive.
C) Men must be more highly motivated and materialistic.
D) Without consideration of preferences and productivity factors, differences in unadjusted mean earnings do not necessarily reflect employment discrimination.

Question 16

If an employer could really hire women who were willing and able to do the same work as men for 20 percent less, profit-seeking employers would have

A) a strong incentive to hire more women, which would shrink this differential.
B) little incentive to hire women, since hiring men would still be more profitable.
C) a strong incentive to hire fewer women, and this would reduce the wage gap between men and women.
D) a strong incentive to hire fewer women, which would expand the wage gap between men and women to an even higher level.

Question 17

When employment discrimination results from the personal prejudices of employers, economic theory suggests that

A) competitive forces will tend to reduce discrimination.
B) the wages of employees who are discriminated against will rise.
C) an employer who discriminates will have the same costs as those who do not discriminate.
D) discrimination by an employer will reduce production costs since the employer can pay lower wages.

Question 18

Which of the following is true about those graduating with college degrees?

A) The proportion of college degrees earned by women has been declining in recent decades.
B) The proportion of college degrees earned by women has been virtually constant during the last four decades.
C) In recent years, less than 45 percent of those graduating from college were women.
D) In recent years, less than 45 percent of those graduating from college were men.

Question 19

When employment discrimination results from the personal prejudices of employers, economic theory suggests that

A) it is costless for employers to discriminate against groups they do not like.
B) the wages of employees who are discriminated against will rise.
C) an employer who discriminates will experience higher costs.
D) discrimination by an employer will reduce production costs since the employer can pay lower wages.

Question 20

Regarding employment discrimination, which of the following is true?

A) The earnings differential between men and women who never married is considerably smaller than the differential between married men and married women.
B) After adjusting for education, age, language, and location, the earnings of women are almost identical with the earnings of men.
C) Between 1980 and 2000, the female/male annual earnings ratio of full-time workers was virtually unchanged.
D) The hourly earnings of women were approximately 60 percent of their male counterparts in recent years.

Question 21

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be

A) $25.
B) $2,500.
C) $5,000.
D) $7,500.

Question 22

During the last two or three decades, the educational and career choices of women have become

A) more like those of men, and the earnings of women have declined relative to those of men.
B) more like those of men, and the earnings of women have increased relative to those of men.
C) less like those of men, and the earnings of women have increased relative to those of men.
D) less like those of men, and the earnings of women have declined relative to those of men.

Question 23

Since the 1970s, the percentage of women preparing for careers in professions has been ____, while the female/male earnings ratio has been ____ during this same period.

A) rising; declining
B) rising; increasing
C) falling; increasing
D) falling; declining

Question 24

In 1964 civil rights legislation was passed

A) that made it illegal for women to make less than the minimum wage.
B) that created the No Woman Left Behind Commission.
C) prohibiting employers from discriminating based on race and gender.
D) requiring fields traditionally dominated by male workers to hire more female candidates.

Question 25

"If it were not for employment discrimination against women, the average earnings of men and women would be equal." Is this statement true or false?

Question 26

Which of the following is most likely to be an implicit cost of production?

A) property taxes on a building owned by the firm
B) transportation costs paid to a trucking supplier
C) rental payments for a building utilized by the company and rented from another party
D) interest income foregone on funds invested in the firm by the owners

Question 27

During the last two decades, the number of women preparing for careers as professionals has ____, and the proportion of those completing college degrees has ____.

A) increased; decreased
B) increased; increased
C) decreased; decreased
D) decreased; increased

Question 28

The share of college degrees earned by women was ____ in recent years compared to ____ in 1961.

A) less than 40 percent; 50 percent
B) less than 50 percent; 60 percent
C) greater than 55 percent; 39 percent
D) greater than 65 percent; 48 percent

Question 29

Which of the following explains most clearly why business owners have a strong incentive to strive for operational efficiency?

A) They recognize that operational efficiency promotes the public interest.
B) As residual claimants, owners will receive a higher income from increased efficiency.
C) The owners will be able to keep production costs low by providing free managerial services to the firm.
D) The owners will be able to gain by paying employees below market wages, which will improve the overall efficiency of the economy.

Question 30

Why is it NOT surprising that men make up the minority of college graduates?

A) Because of discrimination against women, men are able to get good jobs with only a high school degree.
B) Men are smarter than women and they do not need a higher education to be attractive to employers.
C) Given their greater physical strength, many men accept high-paying but physically demanding jobs instead of going to college.
D) Many men decide to pursue jobs in professional sports and this significantly reduces the number of males who go to college.

Question 31

Evaluate the following: "Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity)."

Question 32

The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because

A) larger firms always have lower per-unit costs than smaller firms.
B) at low levels of output, AFC will be high, while at high levels of output, MC will be high as the result of diminishing returns.
C) diminishing returns will be present when output is small, and high AFC will push per-unit cost to high levels when output is large.
D) diseconomies of scale will be present at both small and large output rates.

Question 33

Concerning the earnings difference between men and women, which of the following is true?

A) Due to anti-employment discrimination legislation that was passed in the early 1960s, there was a large increase in the earnings of women relative to men in the 1960s and 1970s.
B) The female/male earnings ratio for full-time workers rose substantially between 1980 and 2010.
C) The number of women preparing for careers as professionals has declined during the last two decades.
D) In recent years, less than half of those completing college degrees were women.

Question 34

The law of diminishing returns

A) explains why marginal cost eventually increases as output expands.
B) implies that average fixed cost will remain unchanged as output expands.
C) is true for physical production activities but not for activities such as studying.
D) applies to a capitalist economy but would be irrelevant if the means of production were owned by the state.

Question 35

Which of the following is true about the career objectives of women?

A) The proportion of college degrees earned by women has been virtually unchanged during the last four decades.
B) There was a substantial increase in the earnings of women relative to men in the 1960s and 1970s following the passage of legislation prohibiting employment discrimination against women.
C) The number of women preparing for careers as professionals has declined during the last two decades.
D) In recent years, more than half of those completing college degrees were women.

Question 36

Which of the following would shift a firm's short-run cost curves downward?

A) an advance in technology
B) an increase in employees' wages
C) an increase in the demand for the firm's product
D) an increase in excise taxes levied on the firm's product

Question 37

As the proportion of women preparing for careers as professionals increases,

A) their years of work experience will become more similar to men.
B) the female/male earnings ratio will rise.
C) their level of human capital will become more similar to men.
D) all of the above.

Question 38

A student bought a used car for $10,000 and resold it one year later for $6,500. Insurance, license, and operating costs for the year were $1,500. What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?

A) $3,500
B) $5,000
C) $6,000
D) $8,500

Question 39

Which of the following is true about the changing career objectives of women?

A) Due to anti-employment discrimination legislation that was passed in the early 1960s, there was a large increase in the earnings of women relative to men in the 1960s and 1970s.
B) The female/male earnings ratio for full-time workers has been virtually constant since 1980.
C) The number of women preparing for careers as professionals has increased substantially since the 1980s.
D) In recent years only about 40 percent of those completing college degrees were women.

Question 40

In the years ahead we can expect the female to male earnings ratio to

A) remain constant.
B) continue to increase.
C) continue to increase until 2020, when the 'baby boom" generation retires" and then level off.
D) decline.

Question 41

Which of the following represents a long-run adjustment?

A) the hiring of four additional cashiers by a supermarket
B) a cutback on purchases of coke and iron ore by a steel manufacturer
C) construction of a new assembly-line plant by a car manufacturer
D) the extra dose of fertilizer used by a farmer on his wheat crop

Question 42

Use the figure to answer the following question(s).
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?

A) 2
B) 3
C) 4
D) 5

Question 43

Use the figure to answer the following question(s).
Figure 8-2
Using Figure 8-2, calculate the firm's total cost of producing 20 units of output.

A) $8
B) $120
C) $180
D) $240

Question 44

Use the figure to answer the following question(s).
Figure 8-3
According to Figure 8-3, at what output would a properly constructed marginal cost curve cross the ATC curve?

A) 3
B) 4
C) 5
D) 6

Question 45

Use the figure to answer the following question(s).
Figure 8-2
The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-2. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

A) 10
B) 15
C) 20
D) 25

Question 46

Figure 8-5
Refer to Figure 8-5. Which of the following would most likely cause the average total cost curve of a firm producing steel bolts to shift from ATC₁ to ATC₂?

A) an increase in demand for steel bolts
B) an increase in the market price of steel bolts
C) diminishing returns for the variable factors used to produce steel bolts
D) an increase in the price of steel

Question 47

Use the figure to answer the following question(s).
Figure 8-1
At what output in Figure 8-1 would the firm's per-unit cost of production be minimized?

A) 3
B) 4
C) 5
D) 6

Question 48

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

A) economies of scale.
B) diseconomies of scale.
C) diminishing returns.
D) the existence of fixed resources.

Question 49

Use the figure to answer the following question(s).
Figure 8-2
Using Figure 8-2, calculate the firm's total cost of producing 30 units of output.

A) $8
B) $120
C) $180
D) $240

Question 50

Use the figure to answer the following question(s).
Figure 8-2
According to Figure 8-2, at what output would a properly constructed marginal cost curve cross the ATC curve?

A) 15
B) 20
C) 25
D) 30

Question 51

Use the figure to answer the following question(s).
Figure 8-1
According to Figure 8-1, what is the firm's approximate total cost when it produces three units?

A) 10
B) 16
C) 48
D) 60

Question 52

Use the figure to answer the following question(s).
Figure 8-1
What is the firm's total cost in Figure 8-1 when it produces four units?

A) 11
B) 15
C) 60
D) 75

Question 53

When costs that vary with the level of output are divided by the output, you have calculated

A) total changing cost.
B) total fixed cost.
C) average fixed cost.
D) average variable cost.

Question 54

Use the figure to answer the following question(s).
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?

A) q₁
B) q₂
C) q₃
D) an output beyond q₃

Question 55

Use the figure to answer the following question(s).
Figure 8-3
Using Figure 8-3, calculate the total cost of producing four units.

A) $10
B) $15
C) $60
D) $75

Question 56

Use the figure to answer the following question(s).
Figure 8-4
The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-4. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

A) 1
B) 2
C) 3
D) 4

Question 57

Use the figure to answer the following question(s).
Figure 8-4
Using Figure 8-4, calculate the firm's total cost of producing four units of output.

A) $4
B) $8
C) $12
D) $16

Question 58

Use the figure to answer the following question(s).
Figure 8-4
According to Figure 8-4, at what output would a properly constructed marginal cost curve cross the ATC curve?

A) 2
B) 3
C) 4
D) 5

Question 59

Use the figure to answer the following question(s).
Figure 8-3
Using Figure 8-3, calculate the total variable cost of producing three units.

A) $10
B) $15
C) $30
D) $45

Question 60

Use the figure to answer the following question(s).
Figure 8-6
At what output does the firm depicted in Figure 8-6 minimize its per-unit cost of production?

A) q₁
B) q₂
C) q₃
D) an output beyond q₃

Question 61

Andy wants to maximize his grade-point average. Having spent six hours studying for his final exam in economics, Andy calculates his grade and discovers that even with a perfect score on the final, he will not pass the course. He decides to study two more hours so he will not have wasted the first six hours. Is this a good decision? Why or why not?

Question 62

Use the figure to answer the following question(s).
Figure 8-9
Using Figure 8-9, calculate the firm's approximate average total cost when it produces 50 units.

A) $10
B) $13
C) $15
D) $17

Question 63

Use the figure to answer the following question(s).
Figure 8-10
Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

A) $5
B) $10
C) $15
D) $20

Question 64

Figure 8-7
Which of the following is true for Figure 8-7?

A) Firms in this industry begin to experience diminishing returns to their variable factors at output q₁.
B) Between q₁ and q₂, firms in this industry experience economies of scale.
C) Firms producing output rates less than q₁ or more than q₂ will find it difficult to survive.
D) The largest firms in this industry have the lowest per-unit cost.

Question 65

James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?

Question 66

Use the figure to answer the following question(s).
Figure 8-10
In Figure 8-10, which output would minimize the firm's average total cost of production?

A) 4
B) 6
C) 8
D) 10

Question 67

Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.

Question 68

Use the figure to answer the following question(s).
Figure 8-9
Using Figure 8-9, calculate the firm's approximate total cost when average total cost is at a minimum.

A) $100
B) $160
C) $480
D) $600

Question 69

Use the figure to answer the following question(s).
Figure 8-11
Which of the following is true for a firm with the costs illustrated in Figure 8-11?

A) Marginal costs exceed average total cost when output is 15.
B) Marginal costs exceed average total cost when output is 20.
C) Marginal costs exceed average total cost when output is 25.
D) The firm's total fixed cost exceeds 40.

Question 70

Use the figure to answer the following question(s).
Figure 8-10
Using Figure 8-10, calculate the firm's approximate total cost when average total cost is at a minimum.

A) $60
B) $80
C) $100
D) $120

Question 71

Use the figure to answer the following question(s).
Figure 8-8
In Figure 8-8, which output level would be most closely associated with the point where diminishing marginal returns have begun?

A) 4
B) 5
C) 6
D) 8

Question 72

Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?

Question 73

Figure 8-12
In Figure 8-12, which of the following would most likely cause the average total cost curve of a firm producing molded plastic chairs to shift from ATC₁ to ATC₂?

A) an increase in demand for plastic chairs
B) an increase in the market price of plastic chairs
C) an increase in the price of the plastic used to produce the chairs
D) a reduction in corporate income taxes

Question 74

Use the figure to answer the following question(s).
Figure 8-11
The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-11. The firm's total cost of producing 20 units is

A) $6.
B) $84.
C) $120.
D) $150.

Question 75

The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?

Question 76

The boss observes that her 10 workers produce 1,000 widgets a day. She concludes that she can employ 20 workers and make 2,000 widgets, 30 to make 3,000, or 40 to make 4,000. Explain why this observation is either correct or incorrect.

Question 77

Kim used to work at "The Big One" accounting firm, and she earned $50,000 a year. She saved her money and has now invested $100,000 in her own firm. Profit is $20,000 a year, which Kim receives as her only compensation. She concludes that this is great because a 20 percent return is much better than the 8 percent she could get in another investment (the opportunity cost of the funds). What is wrong with this line of thinking?

Question 78

Use the figure to answer the following question(s).
Figure 8-9
In Figure 8-9, which output would minimize the firm's average total cost of production?

A) 30
B) 40
C) 50
D) 60

Question 79

Use the figure to answer the following question(s).
Figure 8-8
In Figure 8-8, which output minimizes per-unit cost?

A) 4
B) 6
C) 7
D) 8

Question 80

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

A) economies of scale.
B) increasing average cost.
C) economies of cost.
D) a decrease in average plant size.
E) diseconomies of scale.