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AP Microeconomics Production, Costs and Industry Structure — practice questions

Explore 21 free Production, Costs and Industry Structure questions in AP Microeconomics Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Production, Costs and Industry Structure questions and exercises with answers

Showing questions 1–21 of 21.

Out-of-pocket costs, meaning actual payments a firm makes, are called:Read the answer and worked solution →Costs that involve no actual payment but still represent something given up are:Read the answer and worked solution →Total revenue minus total cost, counting both explicit and implicit costs, is:Read the answer and worked solution →Costs can be decomposed into variable costs and:Read the answer and worked solution →Fixed costs are described as the costs of the:Read the answer and worked solution →Short run costs and long run costs are treated separately because in the long run:Read the answer and worked solution →The falling extra output from each additional unit of an input illustrates:Read the answer and worked solution →The cost of producing a firm's output depends on how much it uses of labour and:Read the answer and worked solution →Once a firm has chosen its least costly production technology, it next considers the:Read the answer and worked solution →Breaking total costs into fixed and variable parts provides the basis for calculating:Read the answer and worked solution →Accounting profit differs from economic profit because accounting profit leaves out:Read the answer and worked solution →A firm reporting positive accounting profit could still be making:Read the answer and worked solution →Implicit costs are described as more subtle than explicit costs but:Read the answer and worked solution →Economies of scale become relevant only after a firm has settled its:Read the answer and worked solution →The reason capital is treated as the fixed input in the short run is that it:Read the answer and worked solution →Diminishing marginal returns is described as the general concept behind:Read the answer and worked solution →Stop on the right cost measureRead the answer and worked solution →Explicit or implicit cost?Read the answer and worked solution →Match each cost idea to its meaningRead the answer and worked solution →True or false: costs and profitRead the answer and worked solution →Complete the profit rulesRead the answer and worked solution →

Worked practice questions

Out-of-pocket costs, meaning actual payments a firm makes, are called:

  1. Explicit costs
  2. Implicit costs
  3. Marginal costs
  4. Average costs
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Correct answer: A. Explicit costs

1. A firm gives up two different kinds of thing when it produces. 2. Explicit costs are out-of-pocket costs, that is, actual payments. 3. Wages paid and rent handed over are examples. 4. Implicit costs are more subtle, but just as important. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 7 'Production, Costs and Industry Structure', sections 7.1-7.4_

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Costs that involve no actual payment but still represent something given up are:

  1. Total costs
  2. Implicit costs
  3. Explicit costs
  4. Variable costs
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Correct answer: B. Implicit costs

1. Not everything a firm sacrifices shows up on an invoice. 2. Explicit costs are out-of-pocket costs, that is, actual payments. 3. Implicit costs are more subtle, but just as important. 4. An owner's forgone salary is the standard example of an implicit cost. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 7 'Production, Costs and Industry Structure', sections 7.1-7.4_

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Total revenue minus total cost, counting both explicit and implicit costs, is:

  1. Gross revenue
  2. Marginal revenue
  3. Economic profit
  4. Accounting profit
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Correct answer: C. Economic profit

1. The two profit measures differ in which costs they subtract. 2. Economic profit is total revenue minus total cost, including both explicit and implicit costs. 3. Accounting profit subtracts only the explicit costs. 4. Economic profit is therefore always the smaller of the two. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 7 'Production, Costs and Industry Structure', sections 7.1-7.4_

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