CH22 - CHAPTER 22 The Costs of Production Topic 1. 2. 3. 4....

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CHAPTER 22 The Costs of Production Topic Question numbers ___________________________________________________________________________________________________ 1. Costs: explicit and implicit 1-9 2. Profits 10-23 3. Short run versus long run 24-31 4. Law of diminishing returns 32-55 5. Short-run costs 56-150 6. Long-run costs 151-183 Last Word 184-186 True-False 187-200 ___________________________________________________________________________________________________ Multiple Choice Questions Costs: explicit and implicit 1. Economic cost can best be defined as: A) any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers. B) any contractual obligation to labor or material suppliers. C) compensations that must be received by resource owners to insure their continued supply. D) all costs exclusive of payments to fixed factors of production. 2. 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 3. Which of the following is most likely to be an implicit cost for Company X? A) depreciation charges on company-owned equipment B) rental payments on IBM equipment C) payments for raw materials purchased from Company Y D) transportation costs paid to a nearby trucking firm 4. Costs to an economist: A) consist only of explicit costs. Page 1
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B) may or may not involve monetary outlays. C) never reflect monetary outlays. D) always reflect monetary outlays. 5. What do wages paid to blue-collar workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? A) None are either implicit or explicit costs. B) All are opportunity costs. C) All are implicit costs. D) All are explicit costs. 6. To the economist total cost includes: A) explicit and implicit costs, including a normal profit. B) neither implicit nor explicit costs. C) implicit, but not explicit, costs. D) explicit, but not implicit, costs. 7. Implicit and explicit costs are different in that: A) explicit costs are relevant only in the short run. B) implicit costs are relevant only in the short run. C) the latter refer to nonexpenditure costs and the former to out-of-pocket costs. D) the former refer to nonexpenditure costs and the latter to out-of-pocket costs. 8. Implicit costs are: A) regarded as costs by accountants but not by economists. B) payments that a firm makes to other firms or individuals who supply resources to it. C) nonexpenditure costs. D) costs that vary proportionately with output. 9.
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CH22 - CHAPTER 22 The Costs of Production Topic 1. 2. 3. 4....

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