Question 1

If marginal product is negative, then

Accepted Answer

A) total product is rising. 
B) total product is falling. 
C) marginal cost is falling. 
D) average profit is rising. 
A) total product is rising. 
B) total product is falling. 
C) marginal cost is falling. 
D) average profit is rising.

Question 2

In economics, a fixed cost is a cost that

Accepted Answer

A) is present only in the short run. 
B) goes up as the level of output goes up. 
C) goes down as the level of output goes up. 
D) does not vary with the level of output. 
A) is present only in the short run. 
B) goes up as the level of output goes up. 
C) goes down as the level of output goes up. 
D) does not vary with the level of output.

Question 3

If the firm can vary all factors of production, it is operating

Accepted Answer

A) at a profit. 
B) at a zero economic profit. 
C) in the short run. 
D) in the long run. 
A) at a profit. 
B) at a zero economic profit. 
C) in the short run. 
D) in the long run.

Question 4

Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in the

Accepted Answer

A) production time. 
B) corporation time. 
C) long run. 
D) short run. 
A) production time. 
B) corporation time. 
C) long run. 
D) short run.

Question 5

-Refer to the above figure. Average variable costs are represented by curve

Accepted Answer

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

Question 6

Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?

Accepted Answer

A) There is always a definite relationship between average and marginal cost. 
B) When marginal costs are less than average costs, the latter must fall. 
C) When marginal costs are greater than average costs, the latter must rise. 
D) There is no way for average variable costs to fall when marginal costs are falling. 
A) There is always a definite relationship between average and marginal cost. 
B) When marginal costs are less than average costs, the latter must fall. 
C) When marginal costs are greater than average costs, the latter must rise. 
D) There is no way for average variable costs to fall when marginal costs are falling.

Question 7

-Refer to the above table. What does total product equal when 3 units of labor are used?

Accepted Answer

A) 336 
B) 1008 
C) 338 
D) 3 
A) 336 
B) 1008 
C) 338 
D) 3

Question 8

The relationship Q = f(K, L)is an example of a

Accepted Answer

A) cost function. 
B) production function. 
C) demand equation. 
D) profit equation. 
A) cost function. 
B) production function. 
C) demand equation. 
D) profit equation.

Question 9

-Marginal physical product of labor equals

Accepted Answer

A) the wage. 
B) the wage divided by marginal cost. 
C) marginal cost divided by the wage. 
D) marginal cost times the wage. 
A) the wage. 
B) the wage divided by marginal cost. 
C) marginal cost divided by the wage. 
D) marginal cost times the wage.

Question 10

-In a graph showing the short-run cost curves, the one curve which declines continuously as we expand output is called

Accepted Answer

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

Question 11

As a firm's production increases in the short run, the average total cost curve eventually slopes upward because

Accepted Answer

A) marginal physical product eventually declines as output increases. 
B) marginal cost eventually declines as output increases. 
C) average fixed cost declines with increases in output. 
D) average physical product rises with increases in output. 
A) marginal physical product eventually declines as output increases. 
B) marginal cost eventually declines as output increases. 
C) average fixed cost declines with increases in output. 
D) average physical product rises with increases in output.

Question 12

-Refer to the above table. What are total costs at an output of 3 units?

Accepted Answer

A) $90 
B) $120 
C) $150 
D) $270 
A) $90 
B) $120 
C) $150 
D) $270

Question 13

When the marginal physical product is rising,

Accepted Answer

A) total cost is falling. 
B) average total cost is increasing. 
C) marginal cost is falling. 
D) marginal cost is rising. 
A) total cost is falling. 
B) average total cost is increasing. 
C) marginal cost is falling. 
D) marginal cost is rising.

Question 14

-In the above table, what are the total fixed costs for an output of 4?

Accepted Answer

A) $0 
B) $120 
C) $100 
D) $220 
A) $0 
B) $120 
C) $100 
D) $220

Question 15

-In the above table, what is the average variable cost to produce 3 units of output?

Accepted Answer

A) $30 
B) $60 
C) $10 
D) $20 
A) $30 
B) $60 
C) $10 
D) $20

Question 16

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

Accepted Answer

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

Question 17

When a firm uses technological improvements to increase output from the same amount of inputs, the result is

Accepted Answer

A) a new production function. 
B) losses. 
C) guaranteed profits. 
D) diseconomies of scale. 
A) a new production function. 
B) losses. 
C) guaranteed profits. 
D) diseconomies of scale.

Question 18

For an economist, the short run means a time period

Accepted Answer

A) during which new firms are prohibited from entering the industry. 
B) during which firms are not allowed to change the amount of imported resources they use. 
C) that is between one and five years. 
D) during which the firm is unable to change its plant size. 
A) during which new firms are prohibited from entering the industry. 
B) during which firms are not allowed to change the amount of imported resources they use. 
C) that is between one and five years. 
D) during which the firm is unable to change its plant size.

Question 19

Minimum efficient scale is defined as

Accepted Answer

A) the lowest output level at which long-run average costs are at their minimum. 
B) the amount of labor that maximizes the marginal product of labor. 
C) the point at which marginal cost, average variable cost, and average fixed cost are all equal. 
D) the point at which economies of scale are at their maximum. 
A) the lowest output level at which long-run average costs are at their minimum. 
B) the amount of labor that maximizes the marginal product of labor. 
C) the point at which marginal cost, average variable cost, and average fixed cost are all equal. 
D) the point at which economies of scale are at their maximum.

Question 20

-In the above table, what is the average total cost to produce 4 units of output?

Accepted Answer

A) $30 
B) $60 
C) $55 
D) $20 
A) $30 
B) $60 
C) $55 
D) $20

Exam 22: The Firm: Cost and Output Determination

If marginal product is negative, then

In economics, a fixed cost is a cost that

If the firm can vary all factors of production, it is operating

Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in the

-Refer to the above figure. Average variable costs are represented by curve

Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?

-Refer to the above table. What does total product equal when 3 units of labor are used?

The relationship Q = f(K, L)is an example of a

-Marginal physical product of labor equals

-In a graph showing the short-run cost curves, the one curve which declines continuously as we expand output is called

As a firm's production increases in the short run, the average total cost curve eventually slopes upward because

-Refer to the above table. What are total costs at an output of 3 units?

When the marginal physical product is rising,

-In the above table, what are the total fixed costs for an output of 4?

-In the above table, what is the average variable cost to produce 3 units of output?

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

When a firm uses technological improvements to increase output from the same amount of inputs, the result is

For an economist, the short run means a time period

Minimum efficient scale is defined as

-In the above table, what is the average total cost to produce 4 units of output?

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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