Question 1

A key decision that all firms make is which technology to use in the production of their products.

Accepted Answer

A) True 
 B)False

Question 2

The additional output that can be produced by adding one additional unit of a specific input is called marginal product.

Accepted Answer

A) True 
 B)False

Question 3

At the point where total product is ________, marginal product is zero, but average product is still positive.

Accepted Answer

A)  maximized 
B)  minimized 
C)  zero 
D)  negative 
A)  maximized 
B)  minimized 
C)  zero 
D)  negative

Question 4

The formula q/L represents

Accepted Answer

A)  total product. 
B)  the average product of labor. 
C)  the capital-to-labor ratio. 
D)  the marginal product of labor. 
A)  total product. 
B)  the average product of labor. 
C)  the capital-to-labor ratio. 
D)  the marginal product of labor.

Question 5

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.   Figure 7.8
-Refer to Figure 7.8. The firm is currently along isocost CE. If the price of labor is $60, then the price of labor is

Accepted Answer

A)  $40. 
B)  $60. 
C)  $80. 
D)  $90. 
A)  $40. 
B)  $60. 
C)  $80. 
D)  $90.

Question 6

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow.   Figure 7.10
-Refer to Figure 7.10. If this firm's cost of capital is $40 per unit and its cost of labor is $20 per unit, the isocost line represents a total cost of

Accepted Answer

A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000. 
A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000.

Question 7

A firm ________ if it earns zero economic profit.

Accepted Answer

A)  earns a negative rate of return 
B)  will leave the industry 
C)  earns a positive but below normal rate of return 
D)  earns exactly a normal rate of return 
A)  earns a negative rate of return 
B)  will leave the industry 
C)  earns a positive but below normal rate of return 
D)  earns exactly a normal rate of return

Question 8

Refer to the information provided in Figure 7.4 below to answer the question(s) that follow.   Figure 7.4
-Refer to Figure 7.4. The marginal product of the second worker is

Accepted Answer

A)  10. 
B)  16. 
C)  20. 
D)  32. 
A)  10. 
B)  16. 
C)  20. 
D)  32.

Question 9

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow.   Figure 7.10
-Refer to Figure 7.10. The slope of the isocost line (in absolute value) is

Accepted Answer

A)  greater than 1. 
B)  less than one. 
C)  equal to 1. 
D)  equal to 0. 
A)  greater than 1. 
B)  less than one. 
C)  equal to 1. 
D)  equal to 0.

Question 10

Refer to the information provided in Figure 7.1 below to answer the following question(s).   Figure 7.1
-Refer to Figure 7.1. A corn producer's total revenue is $1,000. If she sells each bushel of corn for $5, she must be selling ________ bushels of corn.

Accepted Answer

A)  200 
B)  450 
C)  900 
D)  4,500 
A)  200 
B)  450 
C)  900 
D)  4,500

Question 11

To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following except

Accepted Answer

A)  the market price of output. 
B)  the technologies of production that are available to the firm. 
C)  the prices of inputs. 
D)  the prices charged by its rivals. 
A)  the market price of output. 
B)  the technologies of production that are available to the firm. 
C)  the prices of inputs. 
D)  the prices charged by its rivals.

Question 12

Refer to Scenario 7.7 below to answer the question(s) that follow.
SCENARIO 7.7: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively.
-Refer to Scenario 7.7. The average product of labor with three workers is

Accepted Answer

A)  3. 
B)  3.5. 
C)  4. 
D)  12. 
A)  3. 
B)  3.5. 
C)  4. 
D)  12.

Question 13

Assume the total product of two workers is 160 and the total product of three workers is 180. The three worker's average product is ________ while the third worker's marginal product is ________.

Accepted Answer

A)  20; 60 
B)  60; 20 
C)  20; 26.67 
D)  320; 540 
A)  20; 60 
B)  60; 20 
C)  20; 26.67 
D)  320; 540

Question 14

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.   Figure 7.8
-Refer to Figure 7.8. The slope of isocost CD is

Accepted Answer

A)  greater than the slope of isocost AB. 
B)  less than the slope of isocost AB. 
C)  equal to the slope of isocost AB. 
D)  indeterminate from this information, as the prices of capital and labor are not given. 
A)  greater than the slope of isocost AB. 
B)  less than the slope of isocost AB. 
C)  equal to the slope of isocost AB. 
D)  indeterminate from this information, as the prices of capital and labor are not given.

Question 15

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.   Figure 7.8
-Refer to Figure 7.8. The firm's isocost line would shift from CD to CE if

Accepted Answer

A)  the price of capital fell. 
B)  the firm's total expenditure on inputs increased. 
C)  the price of labor fell. 
D)  either the price of labor fell or the firm's total expenditure on inputs increased. 
A)  the price of capital fell. 
B)  the firm's total expenditure on inputs increased. 
C)  the price of labor fell. 
D)  either the price of labor fell or the firm's total expenditure on inputs increased.

Question 16

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow.   Figure 7.9
-Refer to Figure 7.9. The slope of isocost CE is

Accepted Answer

A)  -1/2. 
B)  -1. 
C)  -2. 
D)  indeterminate from this information, as the prices of capital and labor are not given. 
A)  -1/2. 
B)  -1. 
C)  -2. 
D)  indeterminate from this information, as the prices of capital and labor are not given.

Question 17

If the marginal product of labor is greater than the average product of labor, then the

Accepted Answer

A)  marginal product must be increasing. 
B)  average product must be increasing. 
C)  marginal product must be decreasing. 
D)  average product must be decreasing. 
A)  marginal product must be increasing. 
B)  average product must be increasing. 
C)  marginal product must be decreasing. 
D)  average product must be decreasing.

Question 18

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.   Figure 7.8
-Refer to Figure 7.8. The slope of isocost CE is

Accepted Answer

A)  -1. 
B)  -2/3. 
C)  0. 
D)  indeterminate from this information, as the prices of capital and labor are not given. 
A)  -1. 
B)  -2/3. 
C)  0. 
D)  indeterminate from this information, as the prices of capital and labor are not given.

Question 19

The flexibility of a firm's techniques of production is an important determinant of its costs.

Accepted Answer

A) True 
 B)False

Question 20

The Cakery Bakery sells 200 muffins at a price of $2 per muffin. Its explicit costs for producing 200 muffins are $350. If the bakery is earning a normal rate of return, then its implicit costs must be

Accepted Answer

A)  $0. 
B)  $50. 
C)  $350. 
D)  $400. 
A)  $0. 
B)  $50. 
C)  $350. 
D)  $400.

Exam 7: The Production Process: the Behavior of Profit-Maximizing Firms

A key decision that all firms make is which technology to use in the production of their products.

The additional output that can be produced by adding one additional unit of a specific input is called marginal product.

At the point where total product is ________, marginal product is zero, but average product is still positive.

The formula q/L represents

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The firm is currently along isocost CE. If the price of labor is $60, then the price of labor is

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow. Figure 7.10 -Refer to Figure 7.10. If this firm's cost of capital is $40 per unit and its cost of labor is $20 per unit, the isocost line represents a total cost of

A firm ________ if it earns zero economic profit.

Refer to the information provided in Figure 7.4 below to answer the question(s) that follow. Figure 7.4 -Refer to Figure 7.4. The marginal product of the second worker is

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow. Figure 7.10 -Refer to Figure 7.10. The slope of the isocost line (in absolute value) is

Refer to the information provided in Figure 7.1 below to answer the following question(s). Figure 7.1 -Refer to Figure 7.1. A corn producer's total revenue is $1,000. If she sells each bushel of corn for $5, she must be selling ________ bushels of corn.

To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following except

Assume the total product of two workers is 160 and the total product of three workers is 180. The three worker's average product is ________ while the third worker's marginal product is ________.

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The slope of isocost CD is

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The firm's isocost line would shift from CD to CE if

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost CE is

If the marginal product of labor is greater than the average product of labor, then the

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The slope of isocost CE is

The flexibility of a firm's techniques of production is an important determinant of its costs.

The Cakery Bakery sells 200 muffins at a price of $2 per muffin. Its explicit costs for producing 200 muffins are $350. If the bakery is earning a normal rate of return, then its implicit costs must be

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Assume the total product of two workers is 160 and the total product of three workers is 180. The three worker's average product is while the third worker's marginal product is .