Question 1

A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.

Accepted Answer

A) True 
 B)False

Question 2

Figure 7-11  
-Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels.Which of the following statements must be wrong?

Accepted Answer

A) The firm's technology may show increasing marginal returns as production increases from A to B. 
B) The firm may have positive fixed costs. 
C) As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently. 
D) The firm's average fixed cost may rise as production increases from B to C. 
A) The firm's technology may show increasing marginal returns as production increases from A to B. 
B) The firm may have positive fixed costs. 
C) As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently. 
D) The firm's average fixed cost may rise as production increases from B to C.

Question 3

Table 7-2
  
-Table 7-2 contains information on widget production.The marginal physical product of the sixth pound of plastic is ____.

Accepted Answer

A) (19/7) − (17/6) 
B) 1/3 
C) 2 
D) 3 
A) (19/7) − (17/6) 
B) 1/3 
C) 2 
D) 3

Question 4

The least costly way to produce a given level of output is indicated by the point of tangency between a budget line and the production indifference curve corresponding to that level of output.

Accepted Answer

A) True 
 B)False

Question 5

The law of diminishing marginal returns is the same as increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 6

The average cost curve

Accepted Answer

A) is the vertical summation of the AFC and the AVC curves. 
B) lies below the AVC curve. 
C) lies below the AFC curve. 
D) is the vertical summation of the MC and AVC curves. 
A) is the vertical summation of the AFC and the AVC curves. 
B) lies below the AVC curve. 
C) lies below the AFC curve. 
D) is the vertical summation of the MC and AVC curves.

Question 7

A change in input prices will change the location of the budget line.

Accepted Answer

A) True 
 B)False

Question 8

Figure 7-7  
-In Figure 7-7 at 100 units, AFC equals

Accepted Answer

A) 10. 
B) 100. 
C) 180. 
D) 1,000. 
A) 10. 
B) 100. 
C) 180. 
D) 1,000.

Question 9

If in some range of production average cost is falling, the firm is experiencing

Accepted Answer

A) increasing returns to scale. 
B) decreasing returns to scale. 
C) constant returns to scale. 
D) increasing costs per unit of output. 
A) increasing returns to scale. 
B) decreasing returns to scale. 
C) constant returns to scale. 
D) increasing costs per unit of output.

Question 10

Economies of scale

Accepted Answer

A) require inputs' MPP to fall as output increases (everything else equal). 
B) pertain to the long run only. 
C) refer to increased output generalized by an increase in the quantity of a single input. 
D) imply that the AC curve will fall continuously as output increases in the short run. 
A) require inputs' MPP to fall as output increases (everything else equal). 
B) pertain to the long run only. 
C) refer to increased output generalized by an increase in the quantity of a single input. 
D) imply that the AC curve will fall continuously as output increases in the short run.

Question 11

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should

Accepted Answer

A) reduce the labor used and increase the machinery used if labor costs half as much as machinery. 
B) reduce the labor used and increase the machinery used if labor and machinery cost the same amount. 
C) reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery. 
D) reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery. 
A) reduce the labor used and increase the machinery used if labor costs half as much as machinery. 
B) reduce the labor used and increase the machinery used if labor and machinery cost the same amount. 
C) reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery. 
D) reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery.

Question 12

In the short run the firm has at least one fixed input.

Accepted Answer

A) True 
 B)False

Question 13

If significant economies of scale are present, large firms will be much more efficient producers than small firms.

Accepted Answer

A) True 
 B)False

Question 14

Are returns to a single input and returns to scale one and the same? Explain.

Accepted Answer

No.Returns to a single input refers to c

Question 15

Figure 7-13  
-Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?

Accepted Answer

A) all of them 
B) only 2 
C) only 3 
D) cannot determine with information given 
A) all of them 
B) only 2 
C) only 3 
D) cannot determine with information given

Question 16

If the MRP per dollar is greater for labor than that for tools, a producer should spend more money on labor than originally planned and less on tools.How long can he continue this switch in spending? Why?

Accepted Answer

By the "law" of diminishing returns, whe

Question 17

If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its inputs

Accepted Answer

A) output will be below optimal. 
B) the MRP of the input will be below its price. 
C) costs will not be minimal. 
D) relative input prices need to change. 
A) output will be below optimal. 
B) the MRP of the input will be below its price. 
C) costs will not be minimal. 
D) relative input prices need to change.

Question 18

Figure 7-9  
-Of the graphs in Figure 7-9, which represents total fixed cost?

Accepted Answer

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

Question 19

Table 7-1
  
-In Table 7-1, the marginal physical product of labor after the addition of the fourth worker is

Accepted Answer

A) 8. 
B) 7. 
C) 10. 
D) 5. 
A) 8. 
B) 7. 
C) 10. 
D) 5.

Question 20

Figure 7-8  
-Of the graphs in Figure 7-8, which represents fixed cost?

Accepted Answer

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

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

A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.

Figure 7-11 -Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels.Which of the following statements must be wrong?

Table 7-2 -Table 7-2 contains information on widget production.The marginal physical product of the sixth pound of plastic is ____.

The least costly way to produce a given level of output is indicated by the point of tangency between a budget line and the production indifference curve corresponding to that level of output.

The law of diminishing marginal returns is the same as increasing returns to scale.

The average cost curve

A change in input prices will change the location of the budget line.

Figure 7-7 -In Figure 7-7 at 100 units, AFC equals

If in some range of production average cost is falling, the firm is experiencing

Economies of scale

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should

In the short run the firm has at least one fixed input.

If significant economies of scale are present, large firms will be much more efficient producers than small firms.

Are returns to a single input and returns to scale one and the same? Explain.

Figure 7-13 -Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?

If the MRP per dollar is greater for labor than that for tools, a producer should spend more money on labor than originally planned and less on tools.How long can he continue this switch in spending? Why?

If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its inputs

Figure 7-9 -Of the graphs in Figure 7-9, which represents total fixed cost?

Table 7-1 -In Table 7-1, the marginal physical product of labor after the addition of the fourth worker is

Figure 7-8 -Of the graphs in Figure 7-8, which represents fixed cost?

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

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