Question 1

Exhibit 7-13 The Total Product of Labor   Given the information in Exhibit 7-13, what is the marginal product of the third unit of labor?

Accepted Answer

A) slightly less than 2 units of output but more than 1.5 units of output 
B) less than the marginal product of the second unit of labor 
C) more than the marginal product of the second unit of labor 
D) more than the marginal product of the fourth unit of labor 
E) cannot be determined from the graph of total product 
A) slightly less than 2 units of output but more than 1.5 units of output 
B) less than the marginal product of the second unit of labor 
C) more than the marginal product of the second unit of labor 
D) more than the marginal product of the fourth unit of labor 
E) cannot be determined from the graph of total product C

Question 2

In recent years, the number of farms has fallen while the average farm size has increased.What concept may explain this phenomenon?

Accepted Answer

A) diminishing marginal returns 
B) declining productivity 
C) diseconomies of scale 
D) economies of scale 
E) good weather in midwestern states 
A) diminishing marginal returns 
B) declining productivity 
C) diseconomies of scale 
D) economies of scale 
E) good weather in midwestern states D

Question 3

As a firm expands into overseas markets, information problems and the complexity of operating within many varied cultures and economies may result in

Accepted Answer

A) constant returns to scale 
B) diminishing marginal returns 
C) declining long-run marginal cost 
D) diseconomies of scale 
E) economies of scale 
A) constant returns to scale 
B) diminishing marginal returns 
C) declining long-run marginal cost 
D) diseconomies of scale 
E) economies of scale D

Question 4

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers   If the firm represented in Exhibit 7-15 wants to produce output level Q4, then in the long run it should build a plant size with average total cost curve of

Accepted Answer

A) A 
B) B 
C) C 
D) B or C 
E) the question cannot be answered with the information given 
A) A 
B) B 
C) C 
D) B or C 
E) the question cannot be answered with the information given

Question 5

Maryann and Don want to open their own deli.To do so, Maryann must give up her job, at which she earns $20, 000 per year, and Don must give up his part-time job, at which he earns $10, 000 per year.They must liquidate their money market fund, which earns $1, 000 interest annually.The rent on the building is $10, 000 per year, and expenses for such necessities as utilities, corned beef, and pickles are $35, 000 annually.What minimum amount of revenue per year would make it worthwhile, financially, for Maryann and Don to operate the deli?

Accepted Answer

A) $10, 000 
B) $35, 000 
C) $45, 000 
D) $31, 000 
E) $76, 000 
A) $10, 000 
B) $35, 000 
C) $45, 000 
D) $31, 000 
E) $76, 000

Question 6

Which of the following is a fixed cost of preparing meals?

Accepted Answer

A) dishwasher detergent 
B) chicken 
C) salad 
D) a microwave oven 
E) electricity 
A) dishwasher detergent 
B) chicken 
C) salad 
D) a microwave oven 
E) electricity

Question 7

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers   The firm represented in Exhibit 7-15 experiences diseconomies of scale from

Accepted Answer

A) Q1 to Q3 only 
B) Q2 to Q3 only 
C) Q2 to Q4 only 
D) Q3 to Q5 only 
E) the question cannot be answered with the information given 
A) Q1 to Q3 only 
B) Q2 to Q3 only 
C) Q2 to Q4 only 
D) Q3 to Q5 only 
E) the question cannot be answered with the information given

Question 8

If a firm's economic profit is positive, its accounting profit must also be positive.

Accepted Answer

A) True 
 B)False

Question 9

If labor is a firm's only variable input, marginal cost ultimately depends on

Accepted Answer

A) fixed cost 
B) how much profit is made 
C) the price of the good produced 
D) how much output each worker produces 
E) fixed cost per unit 
A) fixed cost 
B) how much profit is made 
C) the price of the good produced 
D) how much output each worker produces 
E) fixed cost per unit

Question 10

Exhibit 7-9   If the firm represented in Exhibit 7-9 wants to produce output level q, then in the long run it should build a plant size with average total cost curve of

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) the question cannot be answered with the information given 
A) 1 
B) 2 
C) 3 
D) 4 
E) the question cannot be answered with the information given

Question 11

Which of the following best explains why marginal cost eventually increases as output increases?

Accepted Answer

A) economies of scale occur 
B) average cost increases 
C) total cost increases 
D) marginal product decreases 
E) fixed cost is constant 
A) economies of scale occur 
B) average cost increases 
C) total cost increases 
D) marginal product decreases 
E) fixed cost is constant

Question 12

Suppose I have $1, 000 to put into a one-year CD.Community Bank offers 5 percent interest, Floatbank offers 5.25 percent, and Squidbank offers 5.40 percent.If I place my money in Squidbank, my economic profit on the investment is

Accepted Answer

A) 5.40 percent 
B) 5 percent 
C) 0.40 percent 
D) 0.15 percent 
E) -0.40 percent 
A) 5.40 percent 
B) 5 percent 
C) 0.40 percent 
D) 0.15 percent 
E) -0.40 percent

Question 13

Exhibit 7-13 The Total Product of Labor   Given the information in Exhibit 7-13, at what point do diminishing marginal returns set in?

Accepted Answer

A) after the first unit of labor 
B) after the second unit of labor 
C) after the third unit of labor 
D) after the fourth unit of labor 
E) after the fifth unit of labor 
A) after the first unit of labor 
B) after the second unit of labor 
C) after the third unit of labor 
D) after the fourth unit of labor 
E) after the fifth unit of labor

Question 14

Exhibit 7-4   In Exhibit 7-4, marginal returns begin to diminish with the hiring of the __________ worker.

Accepted Answer

A) second 
B) third 
C) fourth 
D) fifth 
E) sixth 
A) second 
B) third 
C) fourth 
D) fifth 
E) sixth

Question 15

If a firm is experiencing diminishing marginal returns to labor, which of the following must be true?

Accepted Answer

A) The first workers the firm hired were better than the workers hired later on. 
B) The firm is experiencing decreasing returns to scale. 
C) The positive effect of specialization in production is being offset by the negative effect of crowding of inputs. 
D) Output is decreasing. 
E) The firm should buy more nonlabor inputs. 
A) The first workers the firm hired were better than the workers hired later on. 
B) The firm is experiencing decreasing returns to scale. 
C) The positive effect of specialization in production is being offset by the negative effect of crowding of inputs. 
D) Output is decreasing. 
E) The firm should buy more nonlabor inputs.

Question 16

The reason economists assume that firms try to maximize economic profit is

Accepted Answer

A) over time, firms that don't earn profits will have difficulty securing financing to survive 
B) firms in the real world always maximize profit 
C) profit is easier to calculate than revenues 
D) if a firm fails to earn a profit in its first year, it will go out of business 
E) profit maximization is easier for firms than revenue maximization 
A) over time, firms that don't earn profits will have difficulty securing financing to survive 
B) firms in the real world always maximize profit 
C) profit is easier to calculate than revenues 
D) if a firm fails to earn a profit in its first year, it will go out of business 
E) profit maximization is easier for firms than revenue maximization

Question 17

The shape of the long-run average cost curve reflects

Accepted Answer

A) market demand 
B) economies and diseconomies of scale 
C) increasing and diminishing marginal returns 
D) productivity of fixed inputs 
E) all of the above 
A) market demand 
B) economies and diseconomies of scale 
C) increasing and diminishing marginal returns 
D) productivity of fixed inputs 
E) all of the above

Question 18

Exhibit 7-4   In Exhibit 7-4, marginal returns increase with the hiring of up to __________ worker(s).

Accepted Answer

A) one 
B) two 
C) three 
D) four 
E) five 
A) one 
B) two 
C) three 
D) four 
E) five

Question 19

Exhibit 7-8   In Exhibit 7-8, when output is 10,

Accepted Answer

A) total cost equals $80 
B) fixed cost equals $10 
C) variable cost equals $70 
D) marginal cost equals $10 
E) fixed cost equals $7 
A) total cost equals $80 
B) fixed cost equals $10 
C) variable cost equals $70 
D) marginal cost equals $10 
E) fixed cost equals $7

Question 20

The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called

Accepted Answer

A) total revenue 
B) utility 
C) economic profit 
D) cost 
E) production efficiency 
A) total revenue 
B) utility 
C) economic profit 
D) cost 
E) production efficiency

Exam 7: Production and Cost in the Firm

Exhibit 7-13 The Total Product of Labor Given the information in Exhibit 7-13, what is the marginal product of the third unit of labor?

In recent years, the number of farms has fallen while the average farm size has increased.What concept may explain this phenomenon?

As a firm expands into overseas markets, information problems and the complexity of operating within many varied cultures and economies may result in

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers If the firm represented in Exhibit 7-15 wants to produce output level Q4, then in the long run it should build a plant size with average total cost curve of

Which of the following is a fixed cost of preparing meals?

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers The firm represented in Exhibit 7-15 experiences diseconomies of scale from

If a firm's economic profit is positive, its accounting profit must also be positive.

If labor is a firm's only variable input, marginal cost ultimately depends on

Exhibit 7-9 If the firm represented in Exhibit 7-9 wants to produce output level q, then in the long run it should build a plant size with average total cost curve of

Which of the following best explains why marginal cost eventually increases as output increases?

Suppose I have $1, 000 to put into a one-year CD.Community Bank offers 5 percent interest, Floatbank offers 5.25 percent, and Squidbank offers 5.40 percent.If I place my money in Squidbank, my economic profit on the investment is

Exhibit 7-13 The Total Product of Labor Given the information in Exhibit 7-13, at what point do diminishing marginal returns set in?

Exhibit 7-4 In Exhibit 7-4, marginal returns begin to diminish with the hiring of the __________ worker.

If a firm is experiencing diminishing marginal returns to labor, which of the following must be true?

The reason economists assume that firms try to maximize economic profit is

The shape of the long-run average cost curve reflects

Exhibit 7-4 In Exhibit 7-4, marginal returns increase with the hiring of up to __________ worker(s).

Exhibit 7-8 In Exhibit 7-8, when output is 10,

The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters

Exhibit 7-15 Long and Short-Run cost of Producing Color Printers If the firm represented in Exhibit 7-15 wants to produce output level Q₄, then in the long run it should build a plant size with average total cost curve of