Question 1

Average physical product measures the increase in total output that results from a one-unit increase in an input.

Accepted Answer

A) True 
 B)False

Question 2

Firms should use a resource up to a point where MRP = P.

Accepted Answer

A) True 
 B)False

Question 3

Figure 7-16  
-In Figure 7-16, as we move from A to B,

Accepted Answer

A) the relative price of machines falls. 
B) total cost falls. 
C) output increases. 
D) labor becomes less productive relative to capital. 
A) the relative price of machines falls. 
B) total cost falls. 
C) output increases. 
D) labor becomes less productive relative to capital.

Question 4

Figure 7-6  
-Which of the lines in Figure 7-6 represents a typical average fixed cost curve?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 5

Table 7-5
  
-Table 7-5 shows short-run total cost figures for a stereo manufacturer.The short-run average variable cost of producing five stereos is

Accepted Answer

A) $92. 
B) $110. 
C) $132. 
D) $460. 
A) $92. 
B) $110. 
C) $132. 
D) $460.

Question 6

A firm's production process shows constant returns to scale.It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of

Accepted Answer

A) $10,000. 
B) $5,000. 
C) $2,000. 
D) $0.50. 
A) $10,000. 
B) $5,000. 
C) $2,000. 
D) $0.50.

Question 7

A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more we sell." This firm is experiencing

Accepted Answer

A) decreasing returns to scale. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) abnormal demand patterns. 
A) decreasing returns to scale. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) abnormal demand patterns.

Question 8

Economies of scale lead to declining long-run average cost curves.

Accepted Answer

A) True 
 B)False

Question 9

Table 7-5
  
-Table 7-5 shows short-run total cost figures for a stereo manufacturer.The manufacturer's short-run fixed cost is

Accepted Answer

A) 0. 
B) $75. 
C) $200. 
D) $400. 
A) 0. 
B) $75. 
C) $200. 
D) $400.

Question 10

A firm will tend to select the least costly input combination to produce its output.

Accepted Answer

A) True 
 B)False

Question 11

The "law" of diminishing returns rests on the "law" of variable input proportions.

Accepted Answer

A) True 
 B)False

Question 12

A firm is operating with an optimal combination of inputs.Suddenly the price of one input rises.The firm should

Accepted Answer

A) buy less of that input and more of the other input. 
B) change its input mix so that the marginal physical product of the input whose price has risen falls and the marginal physical product of the other input rises. 
C) buy less of whichever input now has the highest money price and more of the other input. 
D) reduce its output. 
A) buy less of that input and more of the other input. 
B) change its input mix so that the marginal physical product of the input whose price has risen falls and the marginal physical product of the other input rises. 
C) buy less of whichever input now has the highest money price and more of the other input. 
D) reduce its output.

Question 13

Marginal revenue product is essentially the additional revenue generating from selling one additional unit of output.

Accepted Answer

A) True 
 B)False

Question 14

Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.The last worker hired picked 100 peppers, and the last machine added 1,000 peppers.If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?

Accepted Answer

Optimal use of two variable inputs calls

Question 15

With regard to the characteristics of production indifference curves, which of the following statements is/are NOT true?

Accepted Answer

A) ​Higher curves correspond to larger outputs. 
B) ​An indifference curve will generally have a negative slope. 
C) ​An indifference curve is typically assumed to curve inward toward the origin near its middle. 
D) ​All of the above are true for production indifference curves, but not for isoquants. 
E) ​b and c 
A) ​Higher curves correspond to larger outputs. 
B) ​An indifference curve will generally have a negative slope. 
C) ​An indifference curve is typically assumed to curve inward toward the origin near its middle. 
D) ​All of the above are true for production indifference curves, but not for isoquants. 
E) ​b and c

Question 16

A change in one input price will cause the slope of the budget line to change.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following equations defines marginal revenue product?

Accepted Answer

A) MRP = P times Q. 
B) MRP = total cost. 
C) MRP = total revenue minus total cost. 
D) MRP = MPP times price of the product. 
A) MRP = P times Q. 
B) MRP = total cost. 
C) MRP = total revenue minus total cost. 
D) MRP = MPP times price of the product.

Question 18

Differentiate between the short run and the long run.

Accepted Answer

The short run is a period of time during

Question 19

Table 7-6
  
-Table 7-6 shows a baker's daily production relationship for bread.Diminishing returns to labor begin when the baker goes from

Accepted Answer

A) one hour of labor to two hours of labor. 
B) three hours of labor to four hours of labor. 
C) six hours of labor to seven hours of labor. 
D) seven hours of labor to eight hours of labor. 
A) one hour of labor to two hours of labor. 
B) three hours of labor to four hours of labor. 
C) six hours of labor to seven hours of labor. 
D) seven hours of labor to eight hours of labor.

Question 20

The long-run average cost curve

Accepted Answer

A) is a composite of short-run AC curves. 
B) shows the lowest possible short-run AC corresponding to each output level. 
C) depends on the firm's planning horizon. 
D) All of the above are correct. 
A) is a composite of short-run AC curves. 
B) shows the lowest possible short-run AC corresponding to each output level. 
C) depends on the firm's planning horizon. 
D) All of the above are correct.

Exam 7: Production Inputs and Cost Building Blocks for Supply Analysis

Average physical product measures the increase in total output that results from a one-unit increase in an input.

Firms should use a resource up to a point where MRP = P.

Figure 7-16 -In Figure 7-16, as we move from A to B,

Figure 7-6 -Which of the lines in Figure 7-6 represents a typical average fixed cost curve?

Table 7-5 -Table 7-5 shows short-run total cost figures for a stereo manufacturer.The short-run average variable cost of producing five stereos is

A firm's production process shows constant returns to scale.It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of

A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more we sell." This firm is experiencing

Economies of scale lead to declining long-run average cost curves.

Table 7-5 -Table 7-5 shows short-run total cost figures for a stereo manufacturer.The manufacturer's short-run fixed cost is

A firm will tend to select the least costly input combination to produce its output.

The "law" of diminishing returns rests on the "law" of variable input proportions.

A firm is operating with an optimal combination of inputs.Suddenly the price of one input rises.The firm should

Marginal revenue product is essentially the additional revenue generating from selling one additional unit of output.

Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.The last worker hired picked 100 peppers, and the last machine added 1,000 peppers.If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?

With regard to the characteristics of production indifference curves, which of the following statements is/are NOT true?

A change in one input price will cause the slope of the budget line to change.

Which of the following equations defines marginal revenue product?

Differentiate between the short run and the long run.

Table 7-6 -Table 7-6 shows a baker's daily production relationship for bread.Diminishing returns to labor begin when the baker goes from

The long-run average cost curve

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Output Price and Profit the Importance of Marginal Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

Filters