Question 1

What is the law of diminishing marginal productivity?

Accepted Answer

The law of diminishing marginal producti

Question 2

You run a small business producing picture frames. This month your total cost is $10,000, your variable cost is $5,000, and your output is 5,000 picture frames. Given this information, your:

Accepted Answer

A) average variable cost is $2. 
B) average total cost is $3. 
C) average total cost is $1. 
D) average fixed cost is $1. 
A) average variable cost is $2. 
B) average total cost is $3. 
C) average total cost is $1. 
D) average fixed cost is $1.

Question 3

Which short-run cost curve continually declines as output increases?

Accepted Answer

A) Total cost 
B) Average variable cost 
C) Average fixed cost 
D) Marginal cost 
A) Total cost 
B) Average variable cost 
C) Average fixed cost 
D) Marginal cost

Question 4

In the long run:

Accepted Answer

A) no inputs can be varied and all inputs are fixed. 
B) some inputs can be varied and some inputs are fixed. 
C) some inputs can be varied and no inputs are fixed. 
D) all inputs can be varied and no inputs are fixed. 
A) no inputs can be varied and all inputs are fixed. 
B) some inputs can be varied and some inputs are fixed. 
C) some inputs can be varied and no inputs are fixed. 
D) all inputs can be varied and no inputs are fixed.

Question 5

Suppose you operate a factory that produces 500 lawn mowers a week. If your weekly variable cost is $40,000 and your weekly total cost is $50,000, the average:

Accepted Answer

A) fixed cost of production is $80. 
B) cost of production is $80. 
C) fixed cost of production is $20. 
D) variable cost of production is $100. 
A) fixed cost of production is $80. 
B) cost of production is $80. 
C) fixed cost of production is $20. 
D) variable cost of production is $100.

Question 6

Refer to the table shown. If the number of workers is three, total output is:

$\begin{array}{|c|c|}
\hline   \text { Number of workers } & \text { Marginal product of workers } \
\hline 1 & 2 \
\hline 2 & 5 \
\hline 3 & 9 \
\hline 4 & 14 \
\hline 5 & 16 \
\hline 6 & 17 \
\hline 7 & 18 \
\hline 8 & 18 \
\hline 9 & 17 \
\hline 10 & 15 \
\hline
\end{array}$

Accepted Answer

A) 9. 
B) 16. 
C) 27. 
D) 36. 
A) 9. 
B) 16. 
C) 27. 
D) 36.

Question 7

If your cell phone bill is $40 when you use up to 300 minutes per month or $80 when you use between 300 and 400 minutes per month, the marginal cost of the 301st minute is:

Accepted Answer

A) $0.13. 
B) $0.27. 
C) $40. 
D) $80. 
A) $0.13. 
B) $0.27. 
C) $40. 
D) $80.

Question 8

(a)Calculate marginal costs,total costs,average fixed costs,average variable costs and average total costs,given the following table.Costs are $100 when there is no production.Round off to the nearest whole number.
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Output } & \begin{array} { l } 
\text { Variable } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Marginal } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Average } \
\text { Fixed } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Average } \
\text { Variable } \
\text { Cost }
\end{array} & \begin{array} { l } 
\text { Average } \
\text { Total } \
\text { Cost }
\end{array} \
\hline 0 & 0 & 0 & & & & \
\hline 1 & 60 & 60 & & & & \
\hline 2 & 90 & 30 & & & & \
\hline 3 & 110 & 20 & & & & \
\hline 4 & 150 & 40 & & & & \
\hline 5 & 230 & 80 & & & & \
\hline 6 & 350 & 120 & & & & \
\hline 7 & 510 & 160 & & & & \
\hline 8 & 710 & 200 & & & & \
\hline
\end{array}$$ (b)Between what levels of output is there increasing marginal productivity?
(c)If labor were the only input to this production process,between what levels of output is the marginal product of labor falling?

Accepted Answer

(a)See the following table:
 \[\begin{ar

Question 9

If marginal cost is less than average total cost:

Accepted Answer

A) average total cost is increasing with output. 
B) average total cost is decreasing with output. 
C) average variable cost is increasing with output. 
D) average variable cost is decreasing with output. 
A) average total cost is increasing with output. 
B) average total cost is decreasing with output. 
C) average variable cost is increasing with output. 
D) average variable cost is decreasing with output.

Question 10

When output is 20, fixed costs are $100 and variable costs are $400. When output rises to 21, fixed costs are $100 and variable costs are $450. This implies that the marginal cost of the last unit of output equals:

Accepted Answer

A) $25. 
B) $50. 
C) $500. 
D) $550. 
A) $25. 
B) $50. 
C) $500. 
D) $550.

Question 11

Refer to the table shown. The average variable cost of producing five bicycles per week is: $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { (bicycles per week) }
\end{array} & \text { Tatal cast (dallars) } \
\hline 1 & 100 \
\hline 2 & 200 \
\hline 3 & 310 \
\hline 4 & 440 \
\hline 5 & 580 \
\hline 6 & 730 \
\hline 7 & 900 \
\hline 8 & 1,200 \
\hline
\end{array}$$

Accepted Answer

A) less than or equal to $116. 
B) $116. 
C) $140. 
D) greater than or equal to $140. 
A) less than or equal to $116. 
B) $116. 
C) $140. 
D) greater than or equal to $140.

Question 12

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production.   In the graph shown, the marginal cost curve is represented by which curve?

Accepted Answer

A) I 
B) II 
C) III 
D) IV 
A) I 
B) II 
C) III 
D) IV

Question 13

Robert withdrew $100,000 from an account that paid 10 percent annual interest and used the funds to purchase real estate. After one year he sold the property for $120,000. The accounting profit on this deal was:

Accepted Answer

A) $120,000. 
B) $100,000. 
C) $20,000. 
D) $10,000. 
A) $120,000. 
B) $100,000. 
C) $20,000. 
D) $10,000.

Question 14

Refer to the table shown. Marginal cost: $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { (bicycles per week) }
\end{array} & \text { Tatal cast (dallars) } \
\hline 1 & 100 \
\hline 2 & 200 \
\hline 3 & 310 \
\hline 4 & 440 \
\hline 5 & 580 \
\hline 6 & 730 \
\hline 7 & 900 \
\hline 8 & 1,200 \
\hline
\end{array}$$

Accepted Answer

A) never increases. 
B) decreases and then increases. 
C) increases and then decreases. 
D) never decreases. 
A) never increases. 
B) decreases and then increases. 
C) increases and then decreases. 
D) never decreases.

Question 15

In the short run, average variable cost equals:

Accepted Answer

A) output divided by total cost. 
B) total cost divided by output. 
C) total cost minus total fixed cost. 
D) average total cost minus average fixed cost. 
A) output divided by total cost. 
B) total cost divided by output. 
C) total cost minus total fixed cost. 
D) average total cost minus average fixed cost.

Question 16

The law of diminishing marginal productivity states that as more units of a variable input are added, holding other inputs constant (ceteris paribus), the additional output obtained from each new unit of the variable input eventually falls.

Accepted Answer

A) True 
 B)False

Question 17

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production.   Marginal cost is minimized when output equals:

Accepted Answer

A) 6 units. 
B) 12 units. 
C) 21 units. 
D) 25 units. 
A) 6 units. 
B) 12 units. 
C) 21 units. 
D) 25 units.

Question 18

Refer to the graph shown, which shows total product. At point A:

Accepted Answer

A) marginal product is at its minimum point. 
B) marginal product is at its maximum point. 
C) marginal product is zero. 
D) average product is at its maximum point. 
A) marginal product is at its minimum point. 
B) marginal product is at its maximum point. 
C) marginal product is zero. 
D) average product is at its maximum point.

Question 19

Refer to the graph shown.   Marginal product is negative at point:

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 20

The U shape of the average total cost curve is because:

Accepted Answer

A) average productivity falls and then rises. 
B) average productivity rises and then falls. 
C) average productivity is constant. 
D) marginal product falls and then rises. 
A) average productivity falls and then rises. 
B) average productivity rises and then falls. 
C) average productivity is constant. 
D) marginal product falls and then rises.

Exam 11: Production and Cost Analysis I

What is the law of diminishing marginal productivity?

You run a small business producing picture frames. This month your total cost is $10,000, your variable cost is $5,000, and your output is 5,000 picture frames. Given this information, your:

Which short-run cost curve continually declines as output increases?

In the long run:

Suppose you operate a factory that produces 500 lawn mowers a week. If your weekly variable cost is $40,000 and your weekly total cost is $50,000, the average:

Refer to the table shown. If the number of workers is three, total output is: Number of workers Marginal product of workers 1 2 2 5 3 9 4 14 5 16 6 17 7 18 8 18 9 17 10 15

If your cell phone bill is $40 when you use up to 300 minutes per month or $80 when you use between 300 and 400 minutes per month, the marginal cost of the 301st minute is:

If marginal cost is less than average total cost:

When output is 20, fixed costs are $100 and variable costs are $400. When output rises to 21, fixed costs are $100 and variable costs are $450. This implies that the marginal cost of the last unit of output equals:

Refer to the table shown. The average variable cost of producing five bicycles per week is: Output (bicycles per week) Tatal cast (dallars) 1 100 2 200 3 310 4 440 5 580 6 730 7 900 8 1,200

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. In the graph shown, the marginal cost curve is represented by which curve?

Robert withdrew $100,000 from an account that paid 10 percent annual interest and used the funds to purchase real estate. After one year he sold the property for $120,000. The accounting profit on this deal was:

Refer to the table shown. Marginal cost: Output (bicycles per week) Tatal cast (dallars) 1 100 2 200 3 310 4 440 5 580 6 730 7 900 8 1,200

In the short run, average variable cost equals:

The law of diminishing marginal productivity states that as more units of a variable input are added, holding other inputs constant (ceteris paribus), the additional output obtained from each new unit of the variable input eventually falls.

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. Marginal cost is minimized when output equals:

Refer to the graph shown, which shows total product. At point A:

Refer to the graph shown. Marginal product is negative at point:

The U shape of the average total cost curve is because:

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