Question 1

Which of the following physical relationships might generate economies of scale?

Accepted Answer

A) Proportionally larger pipes can transport more than a proportional increase in oil. 
B) Larger equipment tends to weigh more and use more fuel on a per-unit-of-output basis. 
C) Each lift truck requires one lift truck driver. 
D) A doubling of all inputs leads to a doubling of output. 
A) Proportionally larger pipes can transport more than a proportional increase in oil. 
B) Larger equipment tends to weigh more and use more fuel on a per-unit-of-output basis. 
C) Each lift truck requires one lift truck driver. 
D) A doubling of all inputs leads to a doubling of output.

Question 2

The long run for a business is a period of time

Accepted Answer

A) longer than a year. 
B) when most inputs are variable. 
C) when all inputs can change. 
D) when labor is the only input used by the business. 
A) longer than a year. 
B) when most inputs are variable. 
C) when all inputs can change. 
D) when labor is the only input used by the business.

Question 3

Suppose that a firm is currently producing 1,000 units of output. At this level of output, AVC is $1 per unit, and TFC is $500. What is the firm's TC?

Accepted Answer

A) $1,500 
B) $1,000 
C) $501 
D) $499 
A) $1,500 
B) $1,000 
C) $501 
D) $499

Question 4

Which of the following would be a fixed input for an amusement park?

Accepted Answer

A) Ticket takers 
B) Unpopped popcorn 
C) Concession workers 
D) The roller coaster 
A) Ticket takers 
B) Unpopped popcorn 
C) Concession workers 
D) The roller coaster

Question 5

An increase in output would result in a rise in long-run average costs when there are

Accepted Answer

A) economies of scale. 
B) diseconomies to scale. 
C) constant returns to scale. 
D) the law of diminishing marginal product. 
A) economies of scale. 
B) diseconomies to scale. 
C) constant returns to scale. 
D) the law of diminishing marginal product.

Question 6

-Total product will start to decrease

Accepted Answer

A) at the quantity where the law of diminishing returns starts. 
B) when average physical product decreases. 
C) when marginal physical product increases. 
D) when marginal physical product becomes negative. 
A) at the quantity where the law of diminishing returns starts. 
B) when average physical product decreases. 
C) when marginal physical product increases. 
D) when marginal physical product becomes negative.

Question 7

-Refer to the above table. At what quantity of labor is the average product of labor maximized?

Accepted Answer

A) 1 unit. 
B) 2 units. 
C) 3 units. 
D) 6 units. 
A) 1 unit. 
B) 2 units. 
C) 3 units. 
D) 6 units.

Question 8

-As the amount of a variable input increases, while all other inputs are held constant, total product will

Accepted Answer

A) always increase. 
B) always decrease. 
C) initially decrease and then increase. 
D) initially increase and then decrease. 
A) always increase. 
B) always decrease. 
C) initially decrease and then increase. 
D) initially increase and then decrease.

Question 9

The observation that beyond some point, successive increases in a variable factor of production added to a fixed factor of production lead to smaller and smaller increases in output is

Accepted Answer

A) the law of marginal utility. 
B) the law of averages. 
C) the law of diminishing marginal product. 
D) the law of opportunity costs. 
A) the law of marginal utility. 
B) the law of averages. 
C) the law of diminishing marginal product. 
D) the law of opportunity costs.

Question 10

-Refer to the above figure. Curve (4)is the

Accepted Answer

A) total fixed cost curve. 
B) marginal product curve. 
C) average fixed cost curve. 
D) average variable cost curve. 
A) total fixed cost curve. 
B) marginal product curve. 
C) average fixed cost curve. 
D) average variable cost curve.

Question 11

The change in total product occurring when a variable input is increased and all other inputs are held constant is

Accepted Answer

A) average total cost. 
B) marginal cost. 
C) average physical product. 
D) marginal physical product. 
A) average total cost. 
B) marginal cost. 
C) average physical product. 
D) marginal physical product.

Question 12

If a firm gets so large that management of employees and other resources becomes a costly problem, it will be experiencing

Accepted Answer

A) diseconomies of scale. 
B) diminishing marginal product. 
C) constant returns to scale. 
D) economies of scale. 
A) diseconomies of scale. 
B) diminishing marginal product. 
C) constant returns to scale. 
D) economies of scale.

Question 13

What happens to the marginal cost curve when the marginal physical product of labor is rising?

Accepted Answer

A) It becomes upward sloping. 
B) It becomes vertical. 
C) It becomes downward sloping. 
D) It becomes horizontal. 
A) It becomes upward sloping. 
B) It becomes vertical. 
C) It becomes downward sloping. 
D) It becomes horizontal.

Question 14

-In the above figure, point B is called

Accepted Answer

A) the maximum efficient scale. 
B) the minimum efficient scale. 
C) the planning horizon. 
D) the point of diminishing marginal product. 
A) the maximum efficient scale. 
B) the minimum efficient scale. 
C) the planning horizon. 
D) the point of diminishing marginal product.

Question 15

-Refer to the above table. When the quantity of labor equals 4, what does the average product equal?

Accepted Answer

A) 9 
B) 18 
C) 72 
D) 216 
A) 9 
B) 18 
C) 72 
D) 216

Question 16

-In the above table, diminishing marginal product occurs after employing the

Accepted Answer

A) first worker. 
B) second worker. 
C) third worker. 
D) fourth worker. 
A) first worker. 
B) second worker. 
C) third worker. 
D) fourth worker.

Question 17

-Use the above figure. The TFC at output level 10 is

Accepted Answer

A) $10. 
B) $3. 
C) $2. 
D) $1. 
A) $10. 
B) $3. 
C) $2. 
D) $1.

Question 18

A firm's long-run average cost curve is

Accepted Answer

A) the locus of points representing the minimum unit cost of producing any given rate of output when all inputs may be adjusted. 
B) the locus of points made up of the minimum point on each short-run average total cost curve when only one input may be adjusted. 
C) the envelope of the firm's variable cost curves. 
D) identical to the lowest short-run average cost curve the firm has. 
A) the locus of points representing the minimum unit cost of producing any given rate of output when all inputs may be adjusted. 
B) the locus of points made up of the minimum point on each short-run average total cost curve when only one input may be adjusted. 
C) the envelope of the firm's variable cost curves. 
D) identical to the lowest short-run average cost curve the firm has.

Question 19

Average variable costs equal

Accepted Answer

A) total variable costs divided by marginal costs. 
B) total variable costs divided by output. 
C) the change in marginal costs from producing another unit of output. 
D) output divided by the change in total costs. 
A) total variable costs divided by marginal costs. 
B) total variable costs divided by output. 
C) the change in marginal costs from producing another unit of output. 
D) output divided by the change in total costs.

Question 20

-In the above table, the average physical product for 5 workers and the marginal physical product of the 5th worker is

Accepted Answer

A) 3.6; 2. 
B) 0.72; 1. 
C) 2; 0.6. 
D) 16; 2. 
A) 3.6; 2. 
B) 0.72; 1. 
C) 2; 0.6. 
D) 16; 2.

Exam 22: The Firm: Cost and Output Determination

Which of the following physical relationships might generate economies of scale?

The long run for a business is a period of time

Suppose that a firm is currently producing 1,000 units of output. At this level of output, AVC is $1 per unit, and TFC is $500. What is the firm's TC?

Which of the following would be a fixed input for an amusement park?

An increase in output would result in a rise in long-run average costs when there are

-Total product will start to decrease

-Refer to the above table. At what quantity of labor is the average product of labor maximized?

-As the amount of a variable input increases, while all other inputs are held constant, total product will

The observation that beyond some point, successive increases in a variable factor of production added to a fixed factor of production lead to smaller and smaller increases in output is

-Refer to the above figure. Curve (4)is the

The change in total product occurring when a variable input is increased and all other inputs are held constant is

If a firm gets so large that management of employees and other resources becomes a costly problem, it will be experiencing

What happens to the marginal cost curve when the marginal physical product of labor is rising?

-In the above figure, point B is called

-Refer to the above table. When the quantity of labor equals 4, what does the average product equal?

-In the above table, diminishing marginal product occurs after employing the

-Use the above figure. The TFC at output level 10 is

A firm's long-run average cost curve is

Average variable costs equal

-In the above table, the average physical product for 5 workers and the marginal physical product of the 5th worker is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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