Question 1

-In the above figure, the firm experiences constant returns to scale between output levels of

Accepted Answer

A) zero and Q1. 
B) Q2 and Q3. 
C) Q3 and Q4. 
D) any level greater than Q4. 
A) zero and Q1. 
B) Q2 and Q3. 
C) Q3 and Q4. 
D) any level greater than Q4.

Question 2

The change in total variable cost which accompanies one extra unit of output is

Accepted Answer

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

Question 3

A basic distinction between the long run and the short run is that

Accepted Answer

A) if a firm produces no output in the long run, it still incurs a cost. 
B) the opportunity costs of production are lower in the short run than in the long run. 
C) in the long run, some inputs are fixed, while in the short run, all inputs are variable. 
D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted. 
A) if a firm produces no output in the long run, it still incurs a cost. 
B) the opportunity costs of production are lower in the short run than in the long run. 
C) in the long run, some inputs are fixed, while in the short run, all inputs are variable. 
D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

Question 4

-Refer to the above table. MC is the lowest

Accepted Answer

A) between 0 and 1 units of output. 
B) between 1 and 2 units of output. 
C) between 3 and 4 units of output. 
D) at 0 units of output. 
A) between 0 and 1 units of output. 
B) between 1 and 2 units of output. 
C) between 3 and 4 units of output. 
D) at 0 units of output.

Question 5

-Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?

Accepted Answer

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

Question 6

The minimum possible short-run average costs are equal to long-run average costs when

Accepted Answer

A) the plant is producing at its short-run minimum point. 
B) short-run and long-run costs are declining. 
C) the long-run curve is at a minimum point. 
D) production is at any point on the LAC curve. 
A) the plant is producing at its short-run minimum point. 
B) short-run and long-run costs are declining. 
C) the long-run curve is at a minimum point. 
D) production is at any point on the LAC curve.

Question 7

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

Accepted Answer

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

Question 8

What are the relationships between the marginal cost curve and the average cost curves? Explain in words.

Accepted Answer

When the marginal cost curve is below ea

Question 9

Average physical product is calculated by dividing total product by the

Accepted Answer

A) amount of variable and fixed inputs employed. 
B) quantity of the variable input. 
C) quantity of the fixed input. 
D) production function. 
A) amount of variable and fixed inputs employed. 
B) quantity of the variable input. 
C) quantity of the fixed input. 
D) production function.

Question 10

-In the above table, the average physical product of 2 workers and the marginal physical product of the 2nd worker is

Accepted Answer

A) 2; 2. 
B) 4; 1. 
C) 3.5; 3.5. 
D) 3.5; 4. 
A) 2; 2. 
B) 4; 1. 
C) 3.5; 3.5. 
D) 3.5; 4.

Question 11

A firm has the following production relationship between labor and output, for a fixed capital stock.  
-According to the above table, what is the average product of labor when five laborers are employed?

Accepted Answer

A) 3 
B) 5.2 
C) 5.75 
D) 6 
A) 3 
B) 5.2 
C) 5.75 
D) 6

Question 12

What happens at a firm's point of saturation?

Accepted Answer

A) For the first time, hiring an additional worker decreases total product. 
B) Workers cannot take on any additional tasks without working overtime hours. 
C) The market for a firm's output has been saturated and sales fall to zero. 
D) The firm's total costs exceed its revenues. 
A) For the first time, hiring an additional worker decreases total product. 
B) Workers cannot take on any additional tasks without working overtime hours. 
C) The market for a firm's output has been saturated and sales fall to zero. 
D) The firm's total costs exceed its revenues.

Question 13

At the output rate at which diminishing marginal product begins, a firm will experience

Accepted Answer

A) constant average total costs. 
B) increasing average fixed costs. 
C) increasing marginal costs. 
D) decreasing average variable costs. 
A) constant average total costs. 
B) increasing average fixed costs. 
C) increasing marginal costs. 
D) decreasing average variable costs.

Question 14

For a hotdog vendor, the hotdog stand represents his

Accepted Answer

A) fixed input. 
B) variable input. 
C) diseconomies of scale. 
D) none of the above. 
A) fixed input. 
B) variable input. 
C) diseconomies of scale. 
D) none of the above.

Question 15

What is the relationship between the marginal cost curve and marginal product? Explain.

Accepted Answer

The short-run cost curve is a reflection

Question 16

Economies of scale occur when there are

Accepted Answer

A) decreases in long-run average costs resulting from increases in output. 
B) no changes in long-run average costs when output increases. 
C) increases in long-run average costs when output increases. 
D) decreases in output resulting from decreases in input. 
A) decreases in long-run average costs resulting from increases in output. 
B) no changes in long-run average costs when output increases. 
C) increases in long-run average costs when output increases. 
D) decreases in output resulting from decreases in input.

Question 17

-Refer to the above table. When output rises from 3 units to 4 units, marginal costs are

Accepted Answer

A) $16. 
B) $10. 
C) $22. 
D) $31. 
A) $16. 
B) $10. 
C) $22. 
D) $31.

Question 18

"In the short run, a firm cannot change any of its inputs." Do you agree or disagree? Explain.

Accepted Answer

Disagree. The short run is a p

Question 19

-Refer to the above table. At what quantity of labor does it become obvious that the law of diminishing marginal product has set in?

Accepted Answer

A) worker number 3 
B) worker number 4 
C) worker number 21 
D) worker number 5 
A) worker number 3 
B) worker number 4 
C) worker number 21 
D) worker number 5

Question 20

"Diminishing marginal product is a basic law because new workers are always less qualified than the existing workers." Do you agree or disagree? Explain.

Accepted Answer

Disagree. Diminishing marginal product o

Exam 22: The Firm: Cost and Output Determination

-In the above figure, the firm experiences constant returns to scale between output levels of

The change in total variable cost which accompanies one extra unit of output is

A basic distinction between the long run and the short run is that

-Refer to the above table. MC is the lowest

-Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?

The minimum possible short-run average costs are equal to long-run average costs when

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

What are the relationships between the marginal cost curve and the average cost curves? Explain in words.

Average physical product is calculated by dividing total product by the

-In the above table, the average physical product of 2 workers and the marginal physical product of the 2nd worker is

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the average product of labor when five laborers are employed?

What happens at a firm's point of saturation?

At the output rate at which diminishing marginal product begins, a firm will experience

For a hotdog vendor, the hotdog stand represents his

What is the relationship between the marginal cost curve and marginal product? Explain.

Economies of scale occur when there are

-Refer to the above table. When output rises from 3 units to 4 units, marginal costs are

"In the short run, a firm cannot change any of its inputs." Do you agree or disagree? Explain.

-Refer to the above table. At what quantity of labor does it become obvious that the law of diminishing marginal product has set in?

"Diminishing marginal product is a basic law because new workers are always less qualified than the existing workers." Do you agree or disagree? Explain.

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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