Question 1

When a firm adds physical capital,labor will become more productive in the short run.

Accepted Answer

A) True 
 B)False

Question 2

As more labor is added to a fixed amount of capital,eventually the marginal product of labor decreases.

Accepted Answer

A) True 
 B)False

Question 3

When a firm has to increase its output,average total costs will decrease in the short run and then increase in the long run after the firm has time to add physical capital.

Accepted Answer

A) True 
 B)False

Question 4

The slope of the total product curve is equal to the average product of labor.

Accepted Answer

A) True 
 B)False

Question 5

The idea of diminishing returns to an input in production suggests that,if a local college adds more custodians,the marginal product of labor for the custodial staff will:

Accepted Answer

A) increase at an increasing rate. 
B) increase at a decreasing rate. 
C) decrease. 
D) not change. 
A) increase at an increasing rate. 
B) increase at a decreasing rate. 
C) decrease. 
D) not change.

Question 6

Use the following to answer question:  
-(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average variable cost of 4 cakes?

Accepted Answer

A) $38.00 
B) $10.00 
C) $9.50 
D) $8.00 
A) $38.00 
B) $10.00 
C) $9.50 
D) $8.00

Question 7

Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,_____ must be _____ and _____ must be _____.

Accepted Answer

A) marginal product;increasing;average fixed cost;zero 
B) average variable cost;decreasing;average fixed cost;increasing 
C) average total cost;increasing;marginal cost;decreasing 
D) marginal product;increasing;average variable cost;decreasing 
A) marginal product;increasing;average fixed cost;zero 
B) average variable cost;decreasing;average fixed cost;increasing 
C) average total cost;increasing;marginal cost;decreasing 
D) marginal product;increasing;average variable cost;decreasing

Question 8

Use the following to answer question:  
-(Figure: The Total Product)Use Figure: The Total Product.When L2 labor is hired,the total product is at a _____ and the marginal product of labor is _____.

Accepted Answer

A) minimum;zero 
B) maximum;zero 
C) maximum;positive 
D) minimum;positive but falling 
A) minimum;zero 
B) maximum;zero 
C) maximum;positive 
D) minimum;positive but falling

Question 9

Use the following to answer question:  
-(Figure and Table: Variable,Fixed,and Total Costs)Use Figure and Table: Variable,Fixed,and Total Costs.When 51 bushels of wheat is produced,the average fixed cost is _____,average variable cost is _____,and average total cost is _____.

Accepted Answer

A) $7.84;$11.76;$19.60 
B) $133.33;$200.00;$333.33 
C) $400.00;$600.00;$1,000.00 
D) $5.33;$13.33;$18.67 
A) $7.84;$11.76;$19.60 
B) $133.33;$200.00;$333.33 
C) $400.00;$600.00;$1,000.00 
D) $5.33;$13.33;$18.67

Question 10

Use the following to answer question:  
-(Table: Costs of Producing Bagels)Use Table: Cost of Producing Bagels.The total cost of producing 2 bagels is:

Accepted Answer

A) $0.10. 
B) $0.20. 
C) $0.40. 
D) $0.50. 
A) $0.10. 
B) $0.20. 
C) $0.40. 
D) $0.50.

Question 11

When a firm has to increase its output,average total costs will increase in the short run and then decrease in the long run,after the firm has time to add physical capital.

Accepted Answer

A) True 
 B)False

Question 12

If output increases,a firm will move along its short-run average total cost curve in the short run until it has time to adjust its fixed cost.

Accepted Answer

A) True 
 B)False

Question 13

The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curves.

Accepted Answer

A) total 
B) marginal 
C) average variable 
D) average total 
A) total 
B) marginal 
C) average variable 
D) average total

Question 14

In the short run,the average total cost curve slopes upward because of:

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) increasing returns. 
D) diminishing returns. 
A) economies of scale. 
B) diseconomies of scale. 
C) increasing returns. 
D) diminishing returns.

Question 15

Use the following to answer question:  
-(Table: Workers and Output)Use Table: Workers and Output.After graduation,you achieve your dream of opening an art shop that specializes in selling mud statues.You pay $10 per day on a loan from your uncle,regardless of how much you produce.You also pay $10 per day to each of the workers who you hire to make the mud statues.The total cost of producing 48 statues is:

Accepted Answer

A) $240. 
B) $60. 
C) $50. 
D) $10. 
A) $240. 
B) $60. 
C) $50. 
D) $10.

Question 16

(Table: Bonnie's Production Function for Good Z)Use Table: Bonnie's Production Function for Good Z.Suppose Bonnie spends $300 per month to rent the building,$100 per month on insurance,and $100 per worker per month.Given this information,Bonnie's monthly fixed costs equal:

Accepted Answer

A) $400. 
B) $300. 
C) $500. 
D) $100. 
A) $400. 
B) $300. 
C) $500. 
D) $100.

Question 17

Use the following to answer question:  
-(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average total cost of 2 cakes?

Accepted Answer

A) $35.00 
B) $25.00 
C) $17.50 
D) $12.50 
A) $35.00 
B) $25.00 
C) $17.50 
D) $12.50

Question 18

Darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day.Darren shuts down every year during the last week of July and the first week of August (meaning it is open 50 weeks a year).What is his annual fixed cost if he is open six days per week?

Accepted Answer

A) $18,000 
B) $3,000 
C) $60 
D) The answer cannot be determined with the information available. 
A) $18,000 
B) $3,000 
C) $60 
D) The answer cannot be determined with the information available.

Question 19

Use the following to answer question:  
-(Figure: Short-Run Costs II)Use Figure: Short-Run Costs II.At 6 units of output,marginal cost is approximately:

Accepted Answer

A) $100. 
B) $120. 
C) $250. 
D) $200. 
A) $100. 
B) $120. 
C) $250. 
D) $200.

Question 20

Use the following to answer question:  
-(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average total cost of 4 cakes?

Accepted Answer

A) $35.00 
B) $25.00 
C) $9.50 
D) $12.00 
A) $35.00 
B) $25.00 
C) $9.50 
D) $12.00

Exam 11: Behind the Supply Curve: Inputs and Costs

When a firm adds physical capital,labor will become more productive in the short run.

As more labor is added to a fixed amount of capital,eventually the marginal product of labor decreases.

When a firm has to increase its output,average total costs will decrease in the short run and then increase in the long run after the firm has time to add physical capital.

The slope of the total product curve is equal to the average product of labor.

The idea of diminishing returns to an input in production suggests that,if a local college adds more custodians,the marginal product of labor for the custodial staff will:

Use the following to answer question: -(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average variable cost of 4 cakes?

Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,_____ must be _____ and _____ must be _____.

Use the following to answer question: -(Figure: The Total Product)Use Figure: The Total Product.When L2 labor is hired,the total product is at a _____ and the marginal product of labor is _____.

Use the following to answer question: -(Figure and Table: Variable,Fixed,and Total Costs)Use Figure and Table: Variable,Fixed,and Total Costs.When 51 bushels of wheat is produced,the average fixed cost is _____,average variable cost is _____,and average total cost is _____.

Use the following to answer question: -(Table: Costs of Producing Bagels)Use Table: Cost of Producing Bagels.The total cost of producing 2 bagels is:

When a firm has to increase its output,average total costs will increase in the short run and then decrease in the long run,after the firm has time to add physical capital.

If output increases,a firm will move along its short-run average total cost curve in the short run until it has time to adjust its fixed cost.

The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curves.

In the short run,the average total cost curve slopes upward because of:

(Table: Bonnie's Production Function for Good Z)Use Table: Bonnie's Production Function for Good Z.Suppose Bonnie spends $300 per month to rent the building,$100 per month on insurance,and $100 per worker per month.Given this information,Bonnie's monthly fixed costs equal:

Use the following to answer question: -(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average total cost of 2 cakes?

Darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day.Darren shuts down every year during the last week of July and the first week of August (meaning it is open 50 weeks a year).What is his annual fixed cost if he is open six days per week?

Use the following to answer question: -(Figure: Short-Run Costs II)Use Figure: Short-Run Costs II.At 6 units of output,marginal cost is approximately:

Use the following to answer question: -(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average total cost of 4 cakes?

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,___ must be _ and _ must be ___.

Use the following to answer question: -(Figure: The Total Product)Use Figure: The Total Product.When L₂ labor is hired,the total product is at a _ and the marginal product of labor is _.

Use the following to answer question: -(Figure and Table: Variable,Fixed,and Total Costs)Use Figure and Table: Variable,Fixed,and Total Costs.When 51 bushels of wheat is produced,the average fixed cost is ___,average variable cost is _,and average total cost is ___.