Question 1

If AFC is falling then MC must be

Accepted Answer

A) rising. 
B) falling. 
C) above AFC. 
D) below AFC. 
E) none of the above. 
A) rising. 
B) falling. 
C) above AFC. 
D) below AFC. 
E) none of the above.

Question 2

Marginal cost is equal to

Accepted Answer

A) total cost divided by output. 
B) the increase in total cost divided by the increase in output. 
C) the increase in total cost divided by the increase in labour input, given the amount of capital. 
D) total variable cost minus total fixed cost. 
E) the increase in total cost divided by the increase in variable cost. 
A) total cost divided by output. 
B) the increase in total cost divided by the increase in output. 
C) the increase in total cost divided by the increase in labour input, given the amount of capital. 
D) total variable cost minus total fixed cost. 
E) the increase in total cost divided by the increase in variable cost.

Question 3

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed.What is Ernie's average variable cost?

Accepted Answer

A) $400 
B) $8 
C) $2 
D) $2,400 
E) $1,600 
A) $400 
B) $8 
C) $2 
D) $2,400 
E) $1,600

Question 4

Use the figure below to answer the following questions.
   
Figure 11.2.1
-Refer to Figure 11.2.1 which illustrates Tania's total product curve.Which one of the following statements is true?

Accepted Answer

A) The points above the curve are attainable and inefficient. 
B) The points below the curve are attainable and inefficient. 
C) The points below the curve are inefficient and unattainable. 
D) The points on the curve are efficient and unattainable. 
E) Marginal product is equal at every point on the total product curve. 
A) The points above the curve are attainable and inefficient. 
B) The points below the curve are attainable and inefficient. 
C) The points below the curve are inefficient and unattainable. 
D) The points on the curve are efficient and unattainable. 
E) Marginal product is equal at every point on the total product curve.

Question 5

Use the table below to answer the following questions.
Table 11.4.1
Swanky's output levels
  
-Refer to Table 11.4.1,which represents Swanky's production possibilities as the firm varies the quantities of knitting machines and workers per day.If Swanky increases the number of knitting machines from 1 to 2 and increases the number of workers employed from 1 to 2,the factory experiences

Accepted Answer

A) economies of scale. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) constant marginal product. 
E) minimum efficient scale. 
A) economies of scale. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) constant marginal product. 
E) minimum efficient scale.

Question 6

Which of the following statements by a restaurant owner refers to the law of diminishing marginal returns?

Accepted Answer

A) "The higher the quality of the ingredients we use, the higher the cost of producing each meal." 
B) "If we double the size of our premises and double everything else - kitchen staff, serving staff, equipment - we can increase the number of meals we serve, but not to double the current levels." 
C) "We can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds less meals than the previous worker because traffic in the kitchen will get worse." 
D) "We can serve the same number of meals with fewer kitchen staff, but we would have to buy more labour-saving kitchen equipment." 
E) "We can serve the same number of meals with less kitchen equipment, but we would have to hire more kitchen staff." 
A) "The higher the quality of the ingredients we use, the higher the cost of producing each meal." 
B) "If we double the size of our premises and double everything else - kitchen staff, serving staff, equipment - we can increase the number of meals we serve, but not to double the current levels." 
C) "We can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds less meals than the previous worker because traffic in the kitchen will get worse." 
D) "We can serve the same number of meals with fewer kitchen staff, but we would have to buy more labour-saving kitchen equipment." 
E) "We can serve the same number of meals with less kitchen equipment, but we would have to hire more kitchen staff."

Question 7

Choose the correct statement.

Accepted Answer

A) Expenditure on a plant that has no resale value is a sunk cost. 
B) A sunk cost is irrelevant to a firm's current decisions. 
C) A cost that influences a firm's current decisions is the short-run cost of changing its labour inputs. 
D) A cost that influences a firm's current decisions is the long-run cost of changing its plant. 
E) All of the above. 
A) Expenditure on a plant that has no resale value is a sunk cost. 
B) A sunk cost is irrelevant to a firm's current decisions. 
C) A cost that influences a firm's current decisions is the short-run cost of changing its labour inputs. 
D) A cost that influences a firm's current decisions is the long-run cost of changing its plant. 
E) All of the above.

Question 8

If MC is rising then ATC must be

Accepted Answer

A) rising. 
B) falling. 
C) above MC. 
D) below MC. 
E) none of the above. 
A) rising. 
B) falling. 
C) above MC. 
D) below MC. 
E) none of the above.

Question 9

A production function is the relationship between the maximum output attainable and the

Accepted Answer

A) price of output. 
B) change in technology. 
C) demand for output. 
D) quantities of inputs used. 
E) amount of labour used. 
A) price of output. 
B) change in technology. 
C) demand for output. 
D) quantities of inputs used. 
E) amount of labour used.

Question 10

Table 11.2.1
  
-Refer to Table 11.2.1 which gives Tania's total product schedule.The marginal product when the number of workers increases from 1 to 2 is

Accepted Answer

A) 3 teapots. 
B) 12 teapots. 
C) 7 teapots. 
D) 9 teapots. 
E) 6 teapots. 
A) 3 teapots. 
B) 12 teapots. 
C) 7 teapots. 
D) 9 teapots. 
E) 6 teapots.

Question 11

Use the figure below to answer the following questions.
   
Figure 11.3.2
-Refer to Figure 11.3.2,which illustrates the short-run average and marginal cost curves.The average variable cost curve is curve

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
E) none of the above. 
A) A. 
B) B. 
C) C. 
D) D. 
E) none of the above.

Question 12

The long-run average cost curve is the relationship between the lowest attainable average total cost and output,when plant size is ________ and labour is ________.The long-run average cost curve is made up of the segments of individual average ________ cost curves with the lowest average ________ cost for a given output.

Accepted Answer

A) varied;varied;variable;variable 
B) varied;varied;total;total 
C) varied;held constant;variable;variable 
D) held constant;varied;total;total 
E) held constant;varied;variable;variable 
A) varied;varied;variable;variable 
B) varied;varied;total;total 
C) varied;held constant;variable;variable 
D) held constant;varied;total;total 
E) held constant;varied;variable;variable

Question 13

Economies of scale refer to the range of output over which

Accepted Answer

A) long-run average cost rises as output increases. 
B) marginal cost exceeds average cost. 
C) long-run average cost falls as output increases. 
D) the marginal product of labour decreases. 
E) marginal product equals average product. 
A) long-run average cost rises as output increases. 
B) marginal cost exceeds average cost. 
C) long-run average cost falls as output increases. 
D) the marginal product of labour decreases. 
E) marginal product equals average product.

Question 14

Which of the following quotes best illustrates the idea of marginal product?

Accepted Answer

A) "If I have 10 workers on my assembly line, I can produce 13 tables a day." 
B) "If I add an 11th worker, I can produce 1 extra table a day." 
C) "Each worker produces 2 tables a day." 
D) "I find if I add an extra shift at night, table production only rises by 80 percent because I need more maintenance time on the assembly line." 
E) "If I double workers and double the assembly line, I can make 120 percent more tables." 
A) "If I have 10 workers on my assembly line, I can produce 13 tables a day." 
B) "If I add an 11th worker, I can produce 1 extra table a day." 
C) "Each worker produces 2 tables a day." 
D) "I find if I add an extra shift at night, table production only rises by 80 percent because I need more maintenance time on the assembly line." 
E) "If I double workers and double the assembly line, I can make 120 percent more tables."

Question 15

Marginal cost ________.

Accepted Answer

A) is constantly increasing, but as output increases it increases by smaller and smaller amounts 
B) decreases at low outputs until it reaches its minimum value, then remains constant 
C) decreases at low outputs and increases at high outputs 
D) increases at low outputs until it reaches its maximum value, then remains constant 
E) is constantly decreasing, but as output increases it decreases by smaller and smaller amounts 
A) is constantly increasing, but as output increases it increases by smaller and smaller amounts 
B) decreases at low outputs until it reaches its minimum value, then remains constant 
C) decreases at low outputs and increases at high outputs 
D) increases at low outputs until it reaches its maximum value, then remains constant 
E) is constantly decreasing, but as output increases it decreases by smaller and smaller amounts

Question 16

The AFC curve shifts upward if

Accepted Answer

A) factor prices rise. 
B) a new technology is introduced. 
C) more workers are hired. 
D) all of the above. 
E) none of the above. 
A) factor prices rise. 
B) a new technology is introduced. 
C) more workers are hired. 
D) all of the above. 
E) none of the above.

Question 17

The law of diminishing marginal returns states:

Accepted Answer

A) As the size of a plant increases, marginal product eventually decreases. 
B) As the size of a firm's plant increases, average cost eventually decreases. 
C) As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes. 
D) As a firm uses more of a variable factor of production, its average cost eventually decreases. 
E) As a firm uses more of a variable factor or production, total product eventually decreases. 
A) As the size of a plant increases, marginal product eventually decreases. 
B) As the size of a firm's plant increases, average cost eventually decreases. 
C) As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes. 
D) As a firm uses more of a variable factor of production, its average cost eventually decreases. 
E) As a firm uses more of a variable factor or production, total product eventually decreases.

Question 18

Given an upward-sloping,straight line total variable cost curve,what does the marginal cost curve look like?

Accepted Answer

A) an upward-sloping straight line 
B) a downward-sloping straight line 
C) a U-shaped curve 
D) a horizontal line 
E) a vertical line 
A) an upward-sloping straight line 
B) a downward-sloping straight line 
C) a U-shaped curve 
D) a horizontal line 
E) a vertical line

Question 19

Choose the correct equation.

Accepted Answer

A) TFC=TC/Q 
B) TFC=TC-AVC 
C) TFC=TC-TVC 
D) TFC=TVC/Q 
E) TFC=TVC-TC 
A) TFC=TC/Q 
B) TFC=TC-AVC 
C) TFC=TC-TVC 
D) TFC=TVC/Q 
E) TFC=TVC-TC

Question 20

Diminishing marginal returns refers to a situation where the ________ of an additional worker is less than the ________ of the previous worker.

Accepted Answer

A) marginal cost;marginal cost 
B) average cost;average cost 
C) marginal product;marginal product 
D) average product;average product 
E) marginal product;average product 
A) marginal cost;marginal cost 
B) average cost;average cost 
C) marginal product;marginal product 
D) average product;average product 
E) marginal product;average product

Exam 11: Output and Costs

If AFC is falling then MC must be

Marginal cost is equal to

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed.What is Ernie's average variable cost?

Use the figure below to answer the following questions. Figure 11.2.1 -Refer to Figure 11.2.1 which illustrates Tania's total product curve.Which one of the following statements is true?

Which of the following statements by a restaurant owner refers to the law of diminishing marginal returns?

Choose the correct statement.

If MC is rising then ATC must be

A production function is the relationship between the maximum output attainable and the

Table 11.2.1 -Refer to Table 11.2.1 which gives Tania's total product schedule.The marginal product when the number of workers increases from 1 to 2 is

Use the figure below to answer the following questions. Figure 11.3.2 -Refer to Figure 11.3.2,which illustrates the short-run average and marginal cost curves.The average variable cost curve is curve

Economies of scale refer to the range of output over which

Which of the following quotes best illustrates the idea of marginal product?

Marginal cost ________.

The AFC curve shifts upward if

The law of diminishing marginal returns states:

Given an upward-sloping,straight line total variable cost curve,what does the marginal cost curve look like?

Choose the correct equation.

Diminishing marginal returns refers to a situation where the ________ of an additional worker is less than the ________ of the previous worker.

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Diminishing marginal returns refers to a situation where the of an additional worker is less than the of the previous worker.