Question 1

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n)________ decision.

Accepted Answer

A) immediate-run 
B) long-run 
C) short-run 
D) variable-input 
A) immediate-run 
B) long-run 
C) short-run 
D) variable-input

Question 2

-Use the above figure. The ATC at output 5 is

Accepted Answer

A) $25.00. 
B) $2.00. 
C) $3.00. 
D) $5.00. 
A) $25.00. 
B) $2.00. 
C) $3.00. 
D) $5.00.

Question 3

Which of the following changes a firm's production function?

Accepted Answer

A) Hiring additional workers 
B) Acquiring additional physical capital 
C) Adding a second production facility exactly like its first production site 
D) Adopting new technology 
A) Hiring additional workers 
B) Acquiring additional physical capital 
C) Adding a second production facility exactly like its first production site 
D) Adopting new technology

Question 4

-The law of diminishing marginal product indicates that

Accepted Answer

A) average product will eventually decrease. 
B) marginal product will eventually decrease. 
C) total product will eventually decrease. 
D) resources are inefficient. 
A) average product will eventually decrease. 
B) marginal product will eventually decrease. 
C) total product will eventually decrease. 
D) resources are inefficient.

Question 5

"In economics, the short run commonly refers to a period within one year and the long run is a period longer than one year." Do you agree or disagree? Explain your answer.

Accepted Answer

Disagree. The time period of the short r

Question 6

-In the above figure, if this firm produces output level Q2, it has average total costs of

Accepted Answer

A) OF. 
B) OE. 
C) OC. 
D) OD. 
A) OF. 
B) OE. 
C) OC. 
D) OD.

Question 7

-The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the

Accepted Answer

A) law of diminishing marginal product. 
B) streamlining production function. 
C) consumer equilibrium. 
D) theory of increasing marginal utility. 
A) law of diminishing marginal product. 
B) streamlining production function. 
C) consumer equilibrium. 
D) theory of increasing marginal utility.

Question 8

A firm has the following production relationship between labor and output, for a fixed capital stock.  
-According to the above table, what is the marginal product of the 4th unit of labor?

Accepted Answer

A) 3 
B) 5 
C) 6 
D) 7 
A) 3 
B) 5 
C) 6 
D) 7

Question 9

When total product is increasing at a decreasing rate, marginal product is

Accepted Answer

A) positive and increasing. 
B) positive and decreasing. 
C) constant. 
D) negative. 
A) positive and increasing. 
B) positive and decreasing. 
C) constant. 
D) negative.

Question 10

Which of the following would NOT be a short-run decision for the firm?

Accepted Answer

A) Recall workers who were previously laid-off 
B) Have labor work two hours overtime each day in order to expand output 
C) Build another wing on the plant in order to add a new assembly line 
D) Place an order with a supplier for additional raw materials 
A) Recall workers who were previously laid-off 
B) Have labor work two hours overtime each day in order to expand output 
C) Build another wing on the plant in order to add a new assembly line 
D) Place an order with a supplier for additional raw materials

Question 11

In the above table, when output is 8 units, average total costs are

Accepted Answer

A) $4.75. 
B) $3.50. 
C) $38. 
D) $28. 
A) $4.75. 
B) $3.50. 
C) $38. 
D) $28.

Question 12

Constant returns to scale are illustrated by

Accepted Answer

A) a downward sloping long-run average cost curve. 
B) a horizontal long-run average cost curve. 
C) an upward sloping long-run average cost curve. 
D) a long-run average cost curve that is shaped like an upside down U. 
A) a downward sloping long-run average cost curve. 
B) a horizontal long-run average cost curve. 
C) an upward sloping long-run average cost curve. 
D) a long-run average cost curve that is shaped like an upside down U.

Question 13

An increase in output would result in no change in long-run average costs when there are

Accepted Answer

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

Question 14

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 2 to 3?

Accepted Answer

A) 21 
B) 17 
C) 63 
D) 189 
A) 21 
B) 17 
C) 63 
D) 189

Question 15

When a firm is at its minimum efficient scale of operation, it produces the

Accepted Answer

A) maximum rate of output at which long-run average cost is minimized. 
B) minimum rate of output at which long-run average cost is minimized. 
C) maximum rate of output consistent with lowest long-run marginal cost. 
D) minimum rate of output consistent with lowest long-run marginal cost. 
A) maximum rate of output at which long-run average cost is minimized. 
B) minimum rate of output at which long-run average cost is minimized. 
C) maximum rate of output consistent with lowest long-run marginal cost. 
D) minimum rate of output consistent with lowest long-run marginal cost.

Question 16

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first three workers?

Accepted Answer

A) 65 cookies 
B) 30 cookies 
C) 17.5 cookies 
D) 21.67 cookies 
A) 65 cookies 
B) 30 cookies 
C) 17.5 cookies 
D) 21.67 cookies

Question 17

-When long-run average costs decline as output increases, the firm is experiencing

Accepted Answer

A) negative returns to scale. 
B) diseconomies of scale. 
C) constant returns to scale. 
D) economies of scale. 
A) negative returns to scale. 
B) diseconomies of scale. 
C) constant returns to scale. 
D) economies of scale.

Question 18

Which equation is used by a manager when considering total cost?

Accepted Answer

A) total costs (T
C) = consumption (
C) + investment (I)+ government (G) 
B) total costs (T
C) = average fixed costs (AF
C) + number of workers 
C) total costs (T
C) = average total costs (AT
C)  
D) total costs (T
C) = total fixed costs (TF
C) + total variable costs (TV
C)  
A) total costs (T
C) = consumption (
C) + investment (I)+ government (G) 
B) total costs (T
C) = average fixed costs (AF
C) + number of workers 
C) total costs (T
C) = average total costs (AT
C)  
D) total costs (T
C) = total fixed costs (TF
C) + total variable costs (TV
C)

Question 19

-The distance between the TC and the TVC curve

Accepted Answer

A) is constant. 
B) decreases as output increases. 
C) increases as output increases. 
D) is the MC curve. 
A) is constant. 
B) decreases as output increases. 
C) increases as output increases. 
D) is the MC curve.

Question 20

At an output at which MC is greater than ATC

Accepted Answer

A) the ATC curve is downward sloping. 
B) the ATC curve is upward sloping. 
C) the AFC curve is upward sloping. 
D) the AVC curve is downward sloping. 
A) the ATC curve is downward sloping. 
B) the ATC curve is upward sloping. 
C) the AFC curve is upward sloping. 
D) the AVC curve is downward sloping.

Exam 22: The Firm: Cost and Output Determination

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n)________ decision.

-Use the above figure. The ATC at output 5 is

Which of the following changes a firm's production function?

-The law of diminishing marginal product indicates that

"In economics, the short run commonly refers to a period within one year and the long run is a period longer than one year." Do you agree or disagree? Explain your answer.

-In the above figure, if this firm produces output level Q2, it has average total costs of

-The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the marginal product of the 4th unit of labor?

When total product is increasing at a decreasing rate, marginal product is

Which of the following would NOT be a short-run decision for the firm?

In the above table, when output is 8 units, average total costs are

Constant returns to scale are illustrated by

An increase in output would result in no change in long-run average costs when there are

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 2 to 3?

When a firm is at its minimum efficient scale of operation, it produces the

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first three workers?

-When long-run average costs decline as output increases, the firm is experiencing

Which equation is used by a manager when considering total cost?

-The distance between the TC and the TVC curve

At an output at which MC is greater than ATC

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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