Question 1

Diminishing marginal product of labour is said to exist when there is

Accepted Answer

A) an increase in the amount of capital available for each unit of labour. 
B) a reduction in the level of labour input that causes output to increase. 
C) an increase in the division and specialization of labour. 
D) technological advancement. 
E) a successively smaller increase in output with each successive unit increase in labour input. 
A) an increase in the amount of capital available for each unit of labour. 
B) a reduction in the level of labour input that causes output to increase. 
C) an increase in the division and specialization of labour. 
D) technological advancement. 
E) a successively smaller increase in output with each successive unit increase in labour input.

Question 2

In the short run,the firmʹs product curves show

Accepted Answer

A) AP is at its minimum when MP = AP. 
B) TP is at its maximum when MP is at its maximum. 
C) TP begins to decrease when AP begins to decrease. 
D) when MP < AP,AP is increasing. 
E) when the MP curve cuts the AP curve from above,the AP curve begins to fall. 
A) AP is at its minimum when MP = AP. 
B) TP is at its maximum when MP is at its maximum. 
C) TP begins to decrease when AP begins to decrease. 
D) when MP < AP,AP is increasing. 
E) when the MP curve cuts the AP curve from above,the AP curve begins to fall.

Question 3

Which of the following statements about the organization of firms is true?

Accepted Answer

A) Partnerships are the most common form of business organization in Canada. 
B) Owners of a corporation have unlimited liability. 
C) Corporations have limited access to money markets. 
D) Owners of a corporation are not personally liable for the firmʹs actions,though its directors may be. 
E) Crown corporations are never interested in increasing profits because they have other goals. 
A) Partnerships are the most common form of business organization in Canada. 
B) Owners of a corporation have unlimited liability. 
C) Corporations have limited access to money markets. 
D) Owners of a corporation are not personally liable for the firmʹs actions,though its directors may be. 
E) Crown corporations are never interested in increasing profits because they have other goals.

Question 4

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.At what level of output is this firm at its capacity?

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 5

The table below provides the total revenues and costs for a small landscaping company in a recent year.   TABLE 7-2
-Refer to Table 7-2.The explicit costs for this firm are

Accepted Answer

A) $178 500. 
B) $186 500. 
C) $186 900. 
D) $217 300. 
E) $217 700. 
A) $178 500. 
B) $186 500. 
C) $186 900. 
D) $217 300. 
E) $217 700.

Question 6

The diagram below shows some short-run cost curves for a firm.
   FIGURE 7-2
-Refer to Figure 7-2.Which of the following choices correctly identifies the cost curves in part (ii)of the figure?

Accepted Answer

A) Curve 4 is the marginal cost curve.Curve 5 is the average fixed cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average total cost curve. 
B) Curve 4 is the average total cost curve.Curve 5 is the marginal cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average fixed cost curve. 
C) Curve 4 is the average fixed cost curve.Curve 5 is the average total cost curve.Curve 6 is the marginal cost curve. Curve 7 is the average variable cost curve. 
D) Curve 4 is the marginal cost curve.Curve 5 is the average total cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average fixed cost curve. 
E) Curve 4 is the marginal cost curve. Curve 5 is the average variable cost curve.Curve 6 is the average fixed cost curve.
Curve 7 is the average total cost curve. 
A) Curve 4 is the marginal cost curve.Curve 5 is the average fixed cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average total cost curve. 
B) Curve 4 is the average total cost curve.Curve 5 is the marginal cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average fixed cost curve. 
C) Curve 4 is the average fixed cost curve.Curve 5 is the average total cost curve.Curve 6 is the marginal cost curve. Curve 7 is the average variable cost curve. 
D) Curve 4 is the marginal cost curve.Curve 5 is the average total cost curve. Curve 6 is the average variable cost curve.Curve 7 is the average fixed cost curve. 
E) Curve 4 is the marginal cost curve. Curve 5 is the average variable cost curve.Curve 6 is the average fixed cost curve.
Curve 7 is the average total cost curve.

Question 7

The equation Q = 0.5KL - (0.4)L + 2L2 is an example of

Accepted Answer

A) a factor of production equation. 
B) an economic input function. 
C) a technological change equation. 
D) an arithmetic expression of output quantities. 
E) a production function. 
A) a factor of production equation. 
B) an economic input function. 
C) a technological change equation. 
D) an arithmetic expression of output quantities. 
E) a production function.

Question 8

Which of the following statements is NOT true of a corporation?

Accepted Answer

A) It can enter into contracts. 
B) It is an entity separate from the individuals who own it. 
C) It can incur debt that is an obligation of the corporation but not of its individual owners. 
D) It has the right to sue and be sued. 
E) It is legally obliged to distribute all profits to shareholders. 
A) It can enter into contracts. 
B) It is an entity separate from the individuals who own it. 
C) It can incur debt that is an obligation of the corporation but not of its individual owners. 
D) It has the right to sue and be sued. 
E) It is legally obliged to distribute all profits to shareholders.

Question 9

Consider a firm in the short run.If AP = MP and both are positive,then total product

Accepted Answer

A) is at a maximum. 
B) is decreasing as extra units of the variable factor are employed. 
C) is increasing as extra units of the variable factor are employed. 
D) may be either increasing or decreasing as extra units of the variable factor are employed. 
E) is at its minimum. 
A) is at a maximum. 
B) is decreasing as extra units of the variable factor are employed. 
C) is increasing as extra units of the variable factor are employed. 
D) may be either increasing or decreasing as extra units of the variable factor are employed. 
E) is at its minimum.

Question 10

When a plant is operating at the level of output where its short-run average total cost is at its minimum,

Accepted Answer

A) average fixed cost is at a minimum. 
B) marginal cost is at a minimum. 
C) average variable cost is at a minimum. 
D) the plant is operating at its capacity. 
E) more of the variable factor of production should be employed. 
A) average fixed cost is at a minimum. 
B) marginal cost is at a minimum. 
C) average variable cost is at a minimum. 
D) the plant is operating at its capacity. 
E) more of the variable factor of production should be employed.

Question 11

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.If this firm is producing 111 units of output per period,its marginal cost is

Accepted Answer

A) $1.00. 
B) 16.7 cents. 
C) 76 cents. 
D) 24 cents. 
E) 38 cents. 
A) $1.00. 
B) 16.7 cents. 
C) 76 cents. 
D) 24 cents. 
E) 38 cents.

Question 12

Which of the following is most likely a long-run decision for a firm?

Accepted Answer

A) The hours a store should stay open. 
B) How many warehouses to build. 
C) The number of workers to hire. 
D) The amount of inventory to stock. 
E) The price at which to sell the product. 
A) The hours a store should stay open. 
B) How many warehouses to build. 
C) The number of workers to hire. 
D) The amount of inventory to stock. 
E) The price at which to sell the product.

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.What is the average variable cost of producing 20 chairs?

Accepted Answer

A) $22 
B) $23 
C) $260 
D) $460 
E) $13 
A) $22 
B) $23 
C) $260 
D) $460 
E) $13

Question 14

Suppose that a firmʹs capital is fixed and one more unit of labour is hired,thereby increasing the firmʹs total output.Which of the following statements can be correct? 1.Marginal cost would remain constant.
2.Marginal cost would increase.
3.Marginal cost would decrease.

Accepted Answer

A) 1 only 
B) 2 only 
C) 3 only 
D) Any of 1,2,and 3 is possible. 
E) None are possible. 
A) 1 only 
B) 2 only 
C) 3 only 
D) Any of 1,2,and 3 is possible. 
E) None are possible.

Question 15

The table below provides the total revenues and costs for a small landscaping company in a recent year.   TABLE 7-2
-Refer to Table 7-2.The economic profits for this firm are

Accepted Answer

A) $63 500. 
B) $32 700. 
C) $33 500. 
D) $31 200. 
E) $32 300. 
A) $63 500. 
B) $32 700. 
C) $33 500. 
D) $31 200. 
E) $32 300.

Question 16

Suppose a production function for a firm takes the following algebraic form: Q = (0.5)KL - 40L,where Q is the output of paintbrushes per week.Now suppose the firm is operating with 100 units of capital (K = 100)and 30 000 units of labour (L = 30 000).What is the output of paintbrushes per week?

Accepted Answer

A) 30 000 
B) 300 000 
C) 1 200 000 
D) 1 500 000 
E) 3 000 000 
A) 30 000 
B) 300 000 
C) 1 200 000 
D) 1 500 000 
E) 3 000 000

Question 17

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 marginal product of labour is at its maximum when the firm changes the amount of labour hired from

Accepted Answer

A) 0 to 1 unit. 
B) 1 to 2 units. 
C) 2 to 3 units. 
D) 3 to 4 units. 
E) 4 to 5 units. 
A) 0 to 1 unit. 
B) 1 to 2 units. 
C) 2 to 3 units. 
D) 3 to 4 units. 
E) 4 to 5 units.

Question 18

The choices listed below involve costs to the firm.For which is the implicit cost potentially different than its explicit cost?

Accepted Answer

A) The use of firm-owned assets. 
B) The services of hired workers. 
C) The use of rented land. 
D) The interest paid on borrowed money. 
E) The purchase of raw materials used in production. 
A) The use of firm-owned assets. 
B) The services of hired workers. 
C) The use of rented land. 
D) The interest paid on borrowed money. 
E) The purchase of raw materials used in production.

Question 19

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.If this firm is producing 20 units of output per period its marginal cost is

Accepted Answer

A) $1.00. 
B) 50 cents. 
C) $1.67. 
D) 16.7 cents. 
E) $10.00. 
A) $1.00. 
B) 50 cents. 
C) $1.67. 
D) 16.7 cents. 
E) $10.00.

Question 20

Suppose a firm producing digital cameras is operating such that marginal costs are higher than average costs.If the firm produces one more camera,average costs will

Accepted Answer

A) rise. 
B) fall. 
C) reach a point of diminishing returns. 
D) remain constant. 
E) reach their maximum. 
A) rise. 
B) fall. 
C) reach a point of diminishing returns. 
D) remain constant. 
E) reach their maximum.

Exam 7: Producers in the Short Run

Diminishing marginal product of labour is said to exist when there is

In the short run,the firmʹs product curves show

Which of the following statements about the organization of firms is true?

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.At what level of output is this firm at its capacity?

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -Refer to Table 7-2.The explicit costs for this firm are

The diagram below shows some short-run cost curves for a firm. FIGURE 7-2 -Refer to Figure 7-2.Which of the following choices correctly identifies the cost curves in part (ii)of the figure?

The equation Q = 0.5KL - (0.4)L + 2L2 is an example of

Which of the following statements is NOT true of a corporation?

Consider a firm in the short run.If AP = MP and both are positive,then total product

When a plant is operating at the level of output where its short-run average total cost is at its minimum,

Which of the following is most likely a long-run decision for a firm?

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.What is the average variable cost of producing 20 chairs?

Suppose that a firmʹs capital is fixed and one more unit of labour is hired,thereby increasing the firmʹs total output.Which of the following statements can be correct? 1.Marginal cost would remain constant. 2.Marginal cost would increase. 3.Marginal cost would decrease.

The table below provides the total revenues and costs for a small landscaping company in a recent year. TABLE 7-2 -Refer to Table 7-2.The economic profits for this firm are

Suppose a production function for a firm takes the following algebraic form: Q = (0.5)KL - 40L,where Q is the output of paintbrushes per week.Now suppose the firm is operating with 100 units of capital (K = 100)and 30 000 units of labour (L = 30 000).What is the output of paintbrushes per week?

The choices listed below involve costs to the firm.For which is the implicit cost potentially different than its explicit cost?

Suppose a firm producing digital cameras is operating such that marginal costs are higher than average costs.If the firm produces one more camera,average costs will

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Exchange Rates and the Balance of Payments

Filters