Question 1

Figure 7-5  
-Which of the following is a fixed cost to farmer McDonald?

Accepted Answer

A) gasoline 
B) fertilizer 
C) insurance 
D) seed 
A) gasoline 
B) fertilizer 
C) insurance 
D) seed

Question 2

The different points on a cost curve represent alternative production possibilities in the same time period.

Accepted Answer

A) True 
 B)False

Question 3

The optimum quantity of an input occurs when

Accepted Answer

A) diminishing returns set in. 
B) marginal revenue product equals input price. 
C) marginal physical product equals input price. 
D) marginal revenue product equals output price. 
A) diminishing returns set in. 
B) marginal revenue product equals input price. 
C) marginal physical product equals input price. 
D) marginal revenue product equals output price.

Question 4

Which of the following observations is true?

Accepted Answer

A) In the long run, more costs become variable. 
B) Fixed costs can be completely varied if the time period is sufficient. 
C) Fixed costs arise when some types of inputs can be bought only in big batches. 
D) Variable costs arise when inputs have a large productive capacity. 
A) In the long run, more costs become variable. 
B) Fixed costs can be completely varied if the time period is sufficient. 
C) Fixed costs arise when some types of inputs can be bought only in big batches. 
D) Variable costs arise when inputs have a large productive capacity.

Question 5

Total fixed cost

Accepted Answer

A) increases as output increases. 
B) declines as output increases. 
C) is always zero. 
D) remains constant even if the firm shuts down. 
A) increases as output increases. 
B) declines as output increases. 
C) is always zero. 
D) remains constant even if the firm shuts down.

Question 6

A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000.The factory's TC

Accepted Answer

A) equals $15. 
B) equals $5,005. 
C) equals $15,000. 
D) cannot be determined from the information given. 
A) equals $15. 
B) equals $5,005. 
C) equals $15,000. 
D) cannot be determined from the information given.

Question 7

Table 7-2
  
-Table 7-2 contains information on widget production.The average physical product of the seventh pound of plastic is calculated as ____.

Accepted Answer

A) 9/25 
B) 2 
C) 25/9 
D) 19/7 
A) 9/25 
B) 2 
C) 25/9 
D) 19/7

Question 8

Production technology determines the relationship of total cost to outputs.

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-5  
-Total fixed cost

Accepted Answer

A) varies with the level of output. 
B) has a downward-sloping curve. 
C) has an upward-sloping curve. 
D) is constant at all levels of output. 
A) varies with the level of output. 
B) has a downward-sloping curve. 
C) has an upward-sloping curve. 
D) is constant at all levels of output.

Question 10

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

Accepted Answer

A) short of an optimal input point. 
B) at the optimum input point. 
C) beyond the optimum input point. 
D) There isn't enough information to determine if the input point is optimal. 
A) short of an optimal input point. 
B) at the optimum input point. 
C) beyond the optimum input point. 
D) There isn't enough information to determine if the input point is optimal.

Question 11

One reason why critics argue that large firms should not be broken up is that in some cases

Accepted Answer

A) large firms have a concentration of economic power. 
B) large firms are less-efficient producers. 
C) many smaller firms would be less-efficient producers. 
D) there is no economic reason to break up large firms that may have some control over the market. 
A) large firms have a concentration of economic power. 
B) large firms are less-efficient producers. 
C) many smaller firms would be less-efficient producers. 
D) there is no economic reason to break up large firms that may have some control over the market.

Question 12

The optimal level of resource use comes when

Accepted Answer

A) MRP exceeds input price. 
B) MRP is less than input price. 
C) MRP equals input price. 
D) use of the resource exhausts the producer's funds. 
A) MRP exceeds input price. 
B) MRP is less than input price. 
C) MRP equals input price. 
D) use of the resource exhausts the producer's funds.

Question 13

In the typical AC curve, the downward-sloping part is attributable to

Accepted Answer

A) spreading fixed costs over larger outputs and increasing returns to the variable inputs. 
B) declining administrative costs as output increases. 
C) falling fixed costs. 
D) rising total product. 
A) spreading fixed costs over larger outputs and increasing returns to the variable inputs. 
B) declining administrative costs as output increases. 
C) falling fixed costs. 
D) rising total product.

Question 14

A rise in the price of an input can be expected to lead to a rise in its marginal physical product.

Accepted Answer

A) True 
 B)False

Question 15

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

Accepted Answer

A) True 
 B)False

Question 16

Figure 7-17  
-Which of the following statements must be true when a firm makes choices that put it at point A in Figure 7-17?

Accepted Answer

A) The firm is minimizing its cost of producing 100 units of output. 
B) The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land. 
C) The firm first decided how much output to produce and then decided how to produce it. 
D) All of the above are true. 
A) The firm is minimizing its cost of producing 100 units of output. 
B) The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land. 
C) The firm first decided how much output to produce and then decided how to produce it. 
D) All of the above are true.

Question 17

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

Accepted Answer

A) MRP/$ of additional labor falls below MRP/$ of additional tools. 
B) MRP/$ of additional capital increases above MRP/$ of additional tools. 
C) MRP/$ of additional labor becomes equal to MRP/$ of additional tools. 
D) MRP/$ of the additional labor falls to zero. 
A) MRP/$ of additional labor falls below MRP/$ of additional tools. 
B) MRP/$ of additional capital increases above MRP/$ of additional tools. 
C) MRP/$ of additional labor becomes equal to MRP/$ of additional tools. 
D) MRP/$ of the additional labor falls to zero.

Question 18

Figure 7-2  
-In Figure 7-2, average cost at 500 units of output equals

Accepted Answer

A) 4,000. 
B) 200. 
C) 8. 
D) 6. 
A) 4,000. 
B) 200. 
C) 8. 
D) 6.

Question 19

Production indifference curves generally have a positive slope.

Accepted Answer

A) True 
 B)False

Question 20

Table 7-4
  
-Table 7-4 shows a production relationship.Assuming the capital stock is fixed at three units and the cost per day of labor is $65, what is the most labor that it is efficient to hire if the product price is $1 per unit?

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
A) 2 
B) 3 
C) 4 
D) 5

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

Figure 7-5 -Which of the following is a fixed cost to farmer McDonald?

The different points on a cost curve represent alternative production possibilities in the same time period.

The optimum quantity of an input occurs when

Which of the following observations is true?

Total fixed cost

A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000.The factory's TC

Table 7-2 -Table 7-2 contains information on widget production.The average physical product of the seventh pound of plastic is calculated as ____.

Production technology determines the relationship of total cost to outputs.

Figure 7-5 -Total fixed cost

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

One reason why critics argue that large firms should not be broken up is that in some cases

The optimal level of resource use comes when

In the typical AC curve, the downward-sloping part is attributable to

A rise in the price of an input can be expected to lead to a rise in its marginal physical product.

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

Figure 7-17 -Which of the following statements must be true when a firm makes choices that put it at point A in Figure 7-17?

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

Figure 7-2 -In Figure 7-2, average cost at 500 units of output equals

Production indifference curves generally have a positive slope.

Table 7-4 -Table 7-4 shows a production relationship.Assuming the capital stock is fixed at three units and the cost per day of labor is $65, what is the most labor that it is efficient to hire if the product price is $1 per unit?

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

If MPP_a/P_a > MPP_b/P_b, then the proportions of these two inputs is optimal.