Question 1

When a firmʹs total-product curve is increasing at a decreasing rate

Accepted Answer

A) average product is zero. 
B) marginal product is positive but declining. 
C) the marginal-product curve lies below the average-product curve. 
D) marginal product is negative and decreasing. 
E) average product is falling. 
A) average product is zero. 
B) marginal product is positive but declining. 
C) the marginal-product curve lies below the average-product curve. 
D) marginal product is negative and decreasing. 
E) average product is falling.

Question 2

It is assumed in standard economic theory that a firm makes decisions in an effort to

Accepted Answer

A) become as large as possible. 
B) have a highly diversified product. 
C) be favoured politically. 
D) maximize its revenue. 
E) maximize its profits. 
A) become as large as possible. 
B) have a highly diversified product. 
C) be favoured politically. 
D) maximize its revenue. 
E) maximize its profits.

Question 3

Churches,the YMCA,the Salvation Army,and the Nature Conservancy are examples of

Accepted Answer

A) single proprietorship. 
B) partnership. 
C) non-profit organizations. 
D) limited partnership. 
E) corporations. 
A) single proprietorship. 
B) partnership. 
C) non-profit organizations. 
D) limited partnership. 
E) corporations.

Question 4

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.   TABLE 7-3
-Refer to Table 7-3.The average total cost when this firm is producing zero units of output is

Accepted Answer

A) $50. 
B) $0. 
C) undefined. 
D) $1. 
E) There is not enough information to determine this. 
A) $50. 
B) $0. 
C) undefined. 
D) $1. 
E) There is not enough information to determine this.

Question 5

Short-run cost curves for a firm are eventually upward-sloping because of the effects of

Accepted Answer

A) the increasing price of variable inputs. 
B) diminishing marginal product. 
C) increasing fixed costs. 
D) increasing marginal productivity of the variable inputs. 
E) decreasing total product. 
A) the increasing price of variable inputs. 
B) diminishing marginal product. 
C) increasing fixed costs. 
D) increasing marginal productivity of the variable inputs. 
E) decreasing total product.

Question 6

Consider a firmʹs short-run cost curves.If average total cost is increasing as output rises,then

Accepted Answer

A) total fixed costs must be increasing. 
B) average fixed costs must be increasing. 
C) average variable cost must be increasing. 
D) marginal cost must be below average total cost. 
E) average total cost is no longer equal to the sum of average variable cost and average fixed cost. 
A) total fixed costs must be increasing. 
B) average fixed costs must be increasing. 
C) average variable cost must be increasing. 
D) marginal cost must be below average total cost. 
E) average total cost is no longer equal to the sum of average variable cost and average fixed cost.

Question 7

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

Accepted Answer

A) The firm has passed the point of diminishing marginal productivity. 
B) The marginal productivity of the fourth worker is 9. 
C) The firm has passed the point of diminishing average productivity. 
D) With 4 workers,the average product is greater than the marginal product. 
E) With 4 workers,the marginal product is greater than the average product. 
A) The firm has passed the point of diminishing marginal productivity. 
B) The marginal productivity of the fourth worker is 9. 
C) The firm has passed the point of diminishing average productivity. 
D) With 4 workers,the average product is greater than the marginal product. 
E) With 4 workers,the marginal product is greater than the average product.

Question 8

A firmʹs short-run cost curves,as conventionally drawn,show that

Accepted Answer

A) AFC increases as output increases. 
B) ATC = TFC + TVC. 
C) AVC decreases as long as MC > AVC. 
D) the MC curve intersects the AVC and ATC curves at their maximum points. 
E) ATC decreases and then increases as output increases. 
A) AFC increases as output increases. 
B) ATC = TFC + TVC. 
C) AVC decreases as long as MC > AVC. 
D) the MC curve intersects the AVC and ATC curves at their maximum points. 
E) ATC decreases and then increases as output increases.

Question 9

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.   TABLE 7-3
-Refer to Table 7-3.The average product of labour is highest when the firm hires

Accepted Answer

A) 1 unit of labour. 
B) 2 units of labour. 
C) 3 units of labour. 
D) 4 units of labour. 
E) 5 units of labour. 
A) 1 unit of labour. 
B) 2 units of labour. 
C) 3 units of labour. 
D) 4 units of labour. 
E) 5 units of labour.

Question 10

Which of the following is the best example of an input to production that is an intermediate product?

Accepted Answer

A) 40 acres of farmland 
B) the skills and training of a web designer 
C) computer circuit boards 
D) a textile factory 
E) a sewing machine 
A) 40 acres of farmland 
B) the skills and training of a web designer 
C) computer circuit boards 
D) a textile factory 
E) a sewing machine

Question 11

Suppose that when a firm hires one additional unit of labour,total product increases from 100 to 110 units of output per month.Marginal product must therefore be

Accepted Answer

A) increasing. 
B) positive. 
C) decreasing. 
D) constant. 
E) zero. 
A) increasing. 
B) positive. 
C) decreasing. 
D) constant. 
E) zero.

Question 12

Economists use the notation Q = f(L,K)to describe

Accepted Answer

A) the flow of labour (L)and capital (K)services that are available when output is (Q). 
B) the financial relationship between the inputs that a firm uses and the outputs that it produces. 
C) the arithmetic relationship between the outputs that a firm uses and the inputs that it produces. 
D) the technological relationship between the inputs that a firm uses and the outputs that it produces. 
E) the level of output (Q)required to fully employ labour (L)and capital (K). 
A) the flow of labour (L)and capital (K)services that are available when output is (Q). 
B) the financial relationship between the inputs that a firm uses and the outputs that it produces. 
C) the arithmetic relationship between the outputs that a firm uses and the inputs that it produces. 
D) the technological relationship between the inputs that a firm uses and the outputs that it produces. 
E) the level of output (Q)required to fully employ labour (L)and capital (K).

Question 13

The table below provides information on output per month and short-run costs for a firm producing outdoor wooden lounge chairs.All costs are in dollars.   TABLE 7-5
-Refer to Table 7-5.Given the information in the table about short-run costs,this firm would minimize the average variable cost of production when producing

Accepted Answer

A) 10 chairs. 
B) 15 chairs. 
C) 20 chairs. 
D) 25 chairs. 
E) 30 chairs. 
A) 10 chairs. 
B) 15 chairs. 
C) 20 chairs. 
D) 25 chairs. 
E) 30 chairs.

Question 14

Which of the following statements describes an advantage to the owner of a single proprietorship?

Accepted Answer

A) The ownerʹs liability is limited to the amount he or she actually invests in the firm. 
B) He or she has limited liability. 
C) The owner can readily maintain full and complete control over every aspect of the firmʹs operation. 
D) The firm has a legal existence separate from its owner. 
E) Shares of the firm can be traded on any stock exchange. 
A) The ownerʹs liability is limited to the amount he or she actually invests in the firm. 
B) He or she has limited liability. 
C) The owner can readily maintain full and complete control over every aspect of the firmʹs operation. 
D) The firm has a legal existence separate from its owner. 
E) Shares of the firm can be traded on any stock exchange.

Question 15

Suppose a firm is producing 10 000 units of output.At this level of output,average total cost is $200 and average fixed cost is $20.It can be concluded that total variable cost is

Accepted Answer

A) $180. 
B) $1800. 
C) $18 000. 
D) $180 000. 
E) $1 800 000. 
A) $180. 
B) $1800. 
C) $18 000. 
D) $180 000. 
E) $1 800 000.

Question 16

Suppose NHL hockey player Jarome Iginla is averaging three points per game going into the last game of the season in which he collects four points,thereby changing his average for the season.To use an analogy in economics,it could be said that average product increases

Accepted Answer

A) when total product increases. 
B) when marginal product exceeds average product. 
C) when average product exceeds marginal product. 
D) when marginal product increases. 
E) whenever marginal product is positive. 
A) when total product increases. 
B) when marginal product exceeds average product. 
C) when average product exceeds marginal product. 
D) when marginal product increases. 
E) whenever marginal product is positive.

Question 17

Which of the following factors of production is most likely to be variable in the short run?

Accepted Answer

A) capital equipment 
B) land 
C) labour 
D) entrepreneurship 
E) technology 
A) capital equipment 
B) land 
C) labour 
D) entrepreneurship 
E) technology

Question 18

The table below provides the annual revenues and costs for a family-owned firm producing catered meals.   TABLE 7-1
-Refer to Table 7-1.The implicit costs for this family-owned firm are

Accepted Answer

A) $35 000. 
B) $80 000. 
C) $100 000. 
D) $115 000. 
E) $490 000. 
A) $35 000. 
B) $80 000. 
C) $100 000. 
D) $115 000. 
E) $490 000.

Question 19

Suppose a firm is producing 500 units of output,incurring a total cost of $700 000 and total fixed cost of $100 000.It can be concluded that average variable cost is

Accepted Answer

A) $200. 
B) $600. 
C) $1200. 
D) $1400. 
E) $1600. 
A) $200. 
B) $600. 
C) $1200. 
D) $1400. 
E) $1600.

Question 20

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars.   TABLE 7-6
-Refer to Table 7-6.Suppose there are no fixed costs.The firm reaches itʹs capacity level of output when its output is equal to ________ units.

Accepted Answer

A) 50 
B) 110 
C) 150 
D) 190 
E) 210 
A) 50 
B) 110 
C) 150 
D) 190 
E) 210

Exam 7: Producers in the Short Run

When a firmʹs total-product curve is increasing at a decreasing rate

It is assumed in standard economic theory that a firm makes decisions in an effort to

Churches,the YMCA,the Salvation Army,and the Nature Conservancy are examples of

Short-run cost curves for a firm are eventually upward-sloping because of the effects of

Consider a firmʹs short-run cost curves.If average total cost is increasing as output rises,then

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

A firmʹs short-run cost curves,as conventionally drawn,show that

Which of the following is the best example of an input to production that is an intermediate product?

Suppose that when a firm hires one additional unit of labour,total product increases from 100 to 110 units of output per month.Marginal product must therefore be

Economists use the notation Q = f(L,K)to describe

Which of the following statements describes an advantage to the owner of a single proprietorship?

Suppose a firm is producing 10 000 units of output.At this level of output,average total cost is $200 and average fixed cost is $20.It can be concluded that total variable cost is

Suppose NHL hockey player Jarome Iginla is averaging three points per game going into the last game of the season in which he collects four points,thereby changing his average for the season.To use an analogy in economics,it could be said that average product increases

Which of the following factors of production is most likely to be variable in the short run?

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1.The implicit costs for this family-owned firm are

Suppose a firm is producing 500 units of output,incurring a total cost of $700 000 and total fixed cost of $100 000.It can be concluded that average variable cost is

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars. TABLE 7-6 -Refer to Table 7-6.Suppose there are no fixed costs.The firm reaches itʹs capacity level of output when its output is equal to ________ units.

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