Question 1

The equation Q = 0.5KL - (0.4)L + 2L2 is an example of

Accepted Answer

A)  a factor of production equation. 
B)  an arithmetic expression of output quantities. 
C)  a technological change equation. 
D)  a production function. 
E)  an economic input function. 
A)  a factor of production equation. 
B)  an arithmetic expression of output quantities. 
C)  a technological change equation. 
D)  a production function. 
E)  an economic input function. D

Question 2

The diagram below shows some short-run cost curves for a firm.   FIGURE 7-2
-Refer to Figure 7-2. Which of the following choices correctly identifies the cost curves in part (ii) of the figure?

Accepted Answer

A)  Curve 4 is the average total cost curve. Curve 5 is the marginal cost curve.
Curve 6 is the average variable cost curve. Curve 7 is the average fixed cost curve. 
B)  Curve 4 is the marginal cost curve. Curve 5 is the average total cost curve.
Curve 6 is the average variable cost curve. Curve 7 is the average fixed cost curve. 
C)  Curve 4 is the marginal cost curve. Curve 5 is the average variable cost curve.
Curve 6 is the average fixed cost curve. Curve 7 is the average total cost curve. 
D)  Curve 4 is the marginal cost curve. Curve 5 is the average fixed cost curve.
Curve 6 is the average variable cost curve. Curve 7 is the average total cost curve. 
E)  Curve 4 is the average fixed cost curve. Curve 5 is the average total cost curve.
Curve 6 is the marginal cost curve.
Curve 7 is the average variable cost curve. 
A)  Curve 4 is the average total cost curve. Curve 5 is the marginal cost curve.
Curve 6 is the average variable cost curve. Curve 7 is the average fixed cost curve. 
B)  Curve 4 is the marginal cost curve. Curve 5 is the average total cost curve.
Curve 6 is the average variable cost curve. Curve 7 is the average fixed cost curve. 
C)  Curve 4 is the marginal cost curve. Curve 5 is the average variable cost curve.
Curve 6 is the average fixed cost curve. Curve 7 is the average total cost curve. 
D)  Curve 4 is the marginal cost curve. Curve 5 is the average fixed cost curve.
Curve 6 is the average variable cost curve. Curve 7 is the average total cost curve. 
E)  Curve 4 is the average fixed cost curve. Curve 5 is the average total cost curve.
Curve 6 is the marginal cost curve.
Curve 7 is the average variable cost curve. B

Question 3

Consider a firm in the short run. Average product is at its maximum when

Accepted Answer

A)  the maximum quantity of the variable input is employed. 
B)  diminishing returns cease to operate. 
C)  average product equals marginal product and marginal product is falling. 
D)  marginal product is maximized. 
E)  total product is maximized. 
A)  the maximum quantity of the variable input is employed. 
B)  diminishing returns cease to operate. 
C)  average product equals marginal product and marginal product is falling. 
D)  marginal product is maximized. 
E)  total product is maximized. C

Question 4

Jodi recently went into business producing widgets. Which of the following would be a fixed cost for her firm?1. labour costs are $1000 per month2. raw material costs are $5000 per month3. a one-year lease on a building is $12 000

Accepted Answer

A)  1 only 
B)  2 only 
C)  3 only 
D)  1 and 2 
E)  2 and 3 
A)  1 only 
B)  2 only 
C)  3 only 
D)  1 and 2 
E)  2 and 3

Question 5

In the short run, if average total cost is increasing as output rises, then

Accepted Answer

A)  marginal cost must be below average total cost. 
B)  average total cost is no longer equal to the sum of average variable cost and average fixed cost. 
C)  average variable cost must be increasing. 
D)  average fixed costs must be increasing. 
E)  total fixed costs must be increasing. 
A)  marginal cost must be below average total cost. 
B)  average total cost is no longer equal to the sum of average variable cost and average fixed cost. 
C)  average variable cost must be increasing. 
D)  average fixed costs must be increasing. 
E)  total fixed costs must be increasing.

Question 6

Which of the following statements is NOT true of a corporation?

Accepted Answer

A)  It can incur debt that is an obligation of the corporation but not of its individual owners. 
B)  It has the right to sue and be sued. 
C)  It is an entity separate from the individuals who own it. 
D)  It is legally obliged to distribute all profits to shareholders. 
E)  It can enter into contracts. 
A)  It can incur debt that is an obligation of the corporation but not of its individual owners. 
B)  It has the right to sue and be sued. 
C)  It is an entity separate from the individuals who own it. 
D)  It is legally obliged to distribute all profits to shareholders. 
E)  It can enter into contracts.

Question 7

If Michelle used $1000 from her savings account, which was paying 6 percent interest annually, to invest in her brother's new sporting-goods store, the opportunity cost of her investment on an annual basis would be

Accepted Answer

A)  her share of the store's profits. 
B)  $60. 
C)  $1060. 
D)  $1000. 
E)  the dividend paid to her by her brother. 
A)  her share of the store's profits. 
B)  $60. 
C)  $1060. 
D)  $1000. 
E)  the dividend paid to her by her brother.

Question 8

Which of the following statements about the relationship between marginal product and average product is correct?

Accepted Answer

A)  When average product exceeds marginal product, marginal product must be rising. 
B)  When marginal product is falling, average product is falling. 
C)  When marginal product exceeds average product, average product must be rising. 
D)  Average product equals marginal product when marginal product is at its maximum. 
E)  Average product equals marginal product at marginal product's lowest point. 
A)  When average product exceeds marginal product, marginal product must be rising. 
B)  When marginal product is falling, average product is falling. 
C)  When marginal product exceeds average product, average product must be rising. 
D)  Average product equals marginal product when marginal product is at its maximum. 
E)  Average product equals marginal product at marginal product's lowest point.

Question 9

A family of short-run cost curves shows how

Accepted Answer

A)  the quality of the fixed factor depreciates over time. 
B)  technology is continuously changing. 
C)  each curve is associated with a different quantity of the fixed factor. 
D)  cost remains constant regardless of the factors used in production. 
E)  cost curves are always upward sloping. 
A)  the quality of the fixed factor depreciates over time. 
B)  technology is continuously changing. 
C)  each curve is associated with a different quantity of the fixed factor. 
D)  cost remains constant regardless of the factors used in production. 
E)  cost curves are always upward sloping.

Question 10

When a firm's total-product curve is increasing at a decreasing rate

Accepted Answer

A)  the marginal-product curve lies below the average-product curve. 
B)  average product is falling. 
C)  marginal product is positive but declining. 
D)  marginal product is negative and decreasing. 
E)  average product is zero. 
A)  the marginal-product curve lies below the average-product curve. 
B)  average product is falling. 
C)  marginal product is positive but declining. 
D)  marginal product is negative and decreasing. 
E)  average product is zero.

Question 11

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital. Assume that the wage per unit of labour is $10 and the cost of the capital is $50.   TABLE 7-3
-Consider a house-construction firm with fixed capital. The firm can build 8 houses per year with16 workers and 8.8 houses per year with 17 workers. If it is currently building 8.8 houses per year,which of the following is true?

Accepted Answer

A)  The firm has not yet reached the point of diminishing marginal productivity. 
B)  The firm has already passed the point of diminishing marginal productivity. 
C)  Average product is at a maximum with 16 workers. 
D)  Average product is at a maximum with 17 workers. 
E)  The marginal product is below the average product. 
A)  The firm has not yet reached the point of diminishing marginal productivity. 
B)  The firm has already passed the point of diminishing marginal productivity. 
C)  Average product is at a maximum with 16 workers. 
D)  Average product is at a maximum with 17 workers. 
E)  The marginal product is below the average product.

Question 12

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital. Assume that the wage per unit of labour is $10 and the cost of the capital is $50.   TABLE 7-3
-A firm can raise financial capital without incurring debt by issuing new shares and/or

Accepted Answer

A)  issuing bonds. 
B)  making extra dividend payments. 
C)  increasing its bank loans. 
D)  reinvesting profits. 
E)  investing in new capital equipment. 
A)  issuing bonds. 
B)  making extra dividend payments. 
C)  increasing its bank loans. 
D)  reinvesting profits. 
E)  investing in new capital equipment.

Question 13

Economists use the notation Q = f(L,K) to describe

Accepted Answer

A)  the technological relationship between the inputs that a firm uses and the outputs that it produces. 
B)  the flow of labour (L) and capital (K) services that are available when output is (Q). 
C)  the arithmetic relationship between the outputs that a firm uses and the inputs that it produces. 
D)  the financial relationship between the inputs that a firm uses and the outputs that it produces. 
E)  the level of output (Q) required to fully employ labour (L) and capital (K). 
A)  the technological relationship between the inputs that a firm uses and the outputs that it produces. 
B)  the flow of labour (L) and capital (K) services that are available when output is (Q). 
C)  the arithmetic relationship between the outputs that a firm uses and the inputs that it produces. 
D)  the financial relationship between the inputs that a firm uses and the outputs that it produces. 
E)  the level of output (Q) required to fully employ labour (L) and capital (K).

Question 14

Refer to Figure 7-1. If the firm hires the 15th unit of labour,

Accepted Answer

A)  the extra output will be zero. 
B)  average product will fall. 
C)  marginal product will be unchanged. 
D)  the firm will reach its capacity. 
E)  both A and B are correct. 
A)  the extra output will be zero. 
B)  average product will fall. 
C)  marginal product will be unchanged. 
D)  the firm will reach its capacity. 
E)  both A and B are correct.

Question 15

In the short run, the firm's product curves show

Accepted Answer

A)  TP is at its maximum when MP is at its maximum. 
B)  when MP < AP, AP is increasing. 
C)  AP is at its minimum when MP = AP. 
D)  when the MP curve cuts the AP curve from above, the AP curve begins to fall. 
E)  TP begins to decrease when AP begins to decrease. 
A)  TP is at its maximum when MP is at its maximum. 
B)  when MP < AP, AP is increasing. 
C)  AP is at its minimum when MP = AP. 
D)  when the MP curve cuts the AP curve from above, the AP curve begins to fall. 
E)  TP begins to decrease when AP begins to decrease.

Question 16

The period of time over which at least one factor of production is fixed is called the

Accepted Answer

A)  very-short run. 
B)  short run. 
C)  long run. 
D)  very-long run. 
E)  immediate run. 
A)  very-short run. 
B)  short run. 
C)  long run. 
D)  very-long run. 
E)  immediate run.

Question 17

A firm's short-run marginal cost curve is decreasing when

Accepted Answer

A)  capacity is reached. 
B)  marginal product is decreasing. 
C)  marginal product is increasing. 
D)  average fixed cost is decreasing. 
E)  total fixed cost is decreasing. 
A)  capacity is reached. 
B)  marginal product is decreasing. 
C)  marginal product is increasing. 
D)  average fixed cost is decreasing. 
E)  total fixed cost is decreasing.

Question 18

The table below provides the total revenues and costs for a small landscaping company in a recent year.   Total Costs ($)   TABLE 7-2
-Refer to Table 7-2.

Accepted Answer

A)  $800. 
B)  $31 200. 
C)  $30 800. 
D)  $400. 
E)  $30 400. 
A)  $800. 
B)  $31 200. 
C)  $30 800. 
D)  $400. 
E)  $30 400.

Question 19

Choose the one alternative that best completes the statement or answers the question.
The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.   TABLE 7-4
-Refer to Table 7-4. The marginal product of labour is at its maximum when the firm changes theamount of labour hired from

Accepted Answer

A)  0 to 1 unit. 
B)  1 to 2 units. 
C)  2 to 3 units. 
D)  3 to 4 units. 
E)  4 to 5 units. 
A)  0 to 1 unit. 
B)  1 to 2 units. 
C)  2 to 3 units. 
D)  3 to 4 units. 
E)  4 to 5 units.

Question 20

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.   TABLE 7-4
-Refer to Table 7-4. The total variable cost of producing 305 units of output is

Accepted Answer

A)  $100. 
B)  $125. 
C)  $225. 
D)  $305. 
E)  $325. 
A)  $100. 
B)  $125. 
C)  $225. 
D)  $305. 
E)  $325.

The equation Q = 0.5KL - (0.4)L + 2L2 is an example of

The diagram below shows some short-run cost curves for a firm. FIGURE 7-2 -Refer to Figure 7-2. Which of the following choices correctly identifies the cost curves in part (ii) of the figure?

Consider a firm in the short run. Average product is at its maximum when

Jodi recently went into business producing widgets. Which of the following would be a fixed cost for her firm?1. labour costs are $1000 per month2. raw material costs are $5000 per month3. a one-year lease on a building is $12 000

In the short run, if average total cost is increasing as output rises, then

Which of the following statements is NOT true of a corporation?

If Michelle used $1000 from her savings account, which was paying 6 percent interest annually, to invest in her brother's new sporting-goods store, the opportunity cost of her investment on an annual basis would be

Which of the following statements about the relationship between marginal product and average product is correct?

A family of short-run cost curves shows how

When a firm's total-product curve is increasing at a decreasing rate

Economists use the notation Q = f(L,K) to describe

Refer to Figure 7-1. If the firm hires the 15th unit of labour,

In the short run, the firm's product curves show

The period of time over which at least one factor of production is fixed is called the

A firm's short-run marginal cost curve is decreasing when

The table below provides the total revenues and costs for a small landscaping company in a recent year. Total Costs ($) TABLE 7-2 -Refer to Table 7-2.

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

Filters

Exam 7: Producers in the Short Run

The equation Q = 0.5KL - (0.4)L + 2L2 is an example of

The diagram below shows some short-run cost curves for a firm. FIGURE 7-2 -Refer to Figure 7-2. Which of the following choices correctly identifies the cost curves in part (ii) of the figure?

Consider a firm in the short run. Average product is at its maximum when

Jodi recently went into business producing widgets. Which of the following would be a fixed cost for her firm?1. labour costs are $1000 per month2. raw material costs are $5000 per month3. a one-year lease on a building is $12 000

In the short run, if average total cost is increasing as output rises, then

Which of the following statements is NOT true of a corporation?

If Michelle used $1000 from her savings account, which was paying 6 percent interest annually, to invest in her brother's new sporting-goods store, the opportunity cost of her investment on an annual basis would be

Which of the following statements about the relationship between marginal product and average product is correct?

A family of short-run cost curves shows how

When a firm's total-product curve is increasing at a decreasing rate

Economists use the notation Q = f(L,K) to describe

Refer to Figure 7-1. If the firm hires the 15th unit of labour,

In the short run, the firm's product curves show

The period of time over which at least one factor of production is fixed is called the

A firm's short-run marginal cost curve is decreasing when

The table below provides the total revenues and costs for a small landscaping company in a recent year. Total Costs ($) TABLE 7-2 -Refer to Table 7-2.

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

Filters