Question 1

If average total cost is decreasing as more and more units are produced, then marginal cost must be

Accepted Answer

A) rising. 
B) constant. 
C) below average total cost. 
D) negative. 
A) rising. 
B) constant. 
C) below average total cost. 
D) negative.

Question 2

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

Accepted Answer

A) $4.75. 
B) $3.50. 
C) $1.25. 
D) $4.50. 
A) $4.75. 
B) $3.50. 
C) $1.25. 
D) $4.50.

Question 3

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

Accepted Answer

A) $33.33 
B) $53.33 
C) $55 
D) $20 
A) $33.33 
B) $53.33 
C) $55 
D) $20

Question 4

In the long run, a firm can change

Accepted Answer

A) nothing. 
B) only one input, such as plant size. 
C) all inputs. 
D) None of the above are correct. 
A) nothing. 
B) only one input, such as plant size. 
C) all inputs. 
D) None of the above are correct.

Question 5

Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each other's way and fewer dinners are served. This is an example of

Accepted Answer

A) diminishing marginal product. 
B) diminishing marginal utility. 
C) diminishing marginal workforce. 
D) diminishing marginal inputs. 
A) diminishing marginal product. 
B) diminishing marginal utility. 
C) diminishing marginal workforce. 
D) diminishing marginal inputs.

Question 6

The law of diminishing marginal product states that

Accepted Answer

A) output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors. 
B) successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output. 
C) a doubling all inputs will double output. 
D) variable costs tend to decrease with output. 
A) output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors. 
B) successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output. 
C) a doubling all inputs will double output. 
D) variable costs tend to decrease with output.

Question 7

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 three laborers are employed?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 6 
A) 3 
B) 4 
C) 5 
D) 6

Question 8

A decrease in long-run average costs resulting from increases in output is

Accepted Answer

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

Question 9

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

Accepted Answer

A) exploiting the economies of scale available to it. 
B) facing constant returns to scale. 
C) facing diseconomies of scale. 
D) not using the available technology efficiently. 
A) exploiting the economies of scale available to it. 
B) facing constant returns to scale. 
C) facing diseconomies of scale. 
D) not using the available technology efficiently.

Question 10

-In the above table, marginal product becomes negative after employing the

Accepted Answer

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

Question 11

Diseconomies of scale occur

Accepted Answer

A) only in the short run. 
B) only in the long run. 
C) because of fixed costs. 
D) none of the above. 
A) only in the short run. 
B) only in the long run. 
C) because of fixed costs. 
D) none of the above.

Question 12

-In the above table, the average product of the fifth worker is

Accepted Answer

A) 35. 
B) 135. 
C) -5. 
D) 27. 
A) 35. 
B) 135. 
C) -5. 
D) 27.

Question 13

-If the average product of 20 workers is 100 bushels of wheat and the average product of 21 workers of wheat is 99 bushels of wheat, then the marginal product of the 21st worker was

Accepted Answer

A) -1 bushel of wheat. 
B) 5 bushels of wheat. 
C) 79 bushels of wheat. 
D) 99 bushels of wheat. 
A) -1 bushel of wheat. 
B) 5 bushels of wheat. 
C) 79 bushels of wheat. 
D) 99 bushels of wheat.

Question 14

Which of the following statements is true?

Accepted Answer

A) If a firm is experiencing economies of scale, diminishing marginal product has not set in yet. 
B) No firm would ever operate at a level of output for which it experiences diseconomies of scale. 
C) A firm can experience diminishing marginal product and economies of scale at the same time. 
D) Diseconomies of scale is a short-run concept, while economies of scale is a long-run concept. 
A) If a firm is experiencing economies of scale, diminishing marginal product has not set in yet. 
B) No firm would ever operate at a level of output for which it experiences diseconomies of scale. 
C) A firm can experience diminishing marginal product and economies of scale at the same time. 
D) Diseconomies of scale is a short-run concept, while economies of scale is a long-run concept.

Question 15

"If an industry's minimum efficient scale is between 2,000 and 4,000 units of output, then a firm producing 2,000 units of output in that industry has a cost-saving advantage over another firm producing 4,000 units of output in the same industry." Do you agree or disagree? Explain.

Accepted Answer

Disagree. If the minimum efficient scale

Question 16

-Refer to the above figure. Economies of scale exist

Accepted Answer

A) over the entire range of output. 
B) from output   to   . 
C) up to output   . 
D) after output   . 
A) over the entire range of output. 
B) from output   to   . 
C) up to output   . 
D) after output   .

Question 17

A fixed resource is one that

Accepted Answer

A) is physically tied to a specific location. 
B) costs more than the average daily revenue of the firm. 
C) cannot be varied in the short run. 
D) can be disposed of only if the firm goes out of business. 
A) is physically tied to a specific location. 
B) costs more than the average daily revenue of the firm. 
C) cannot be varied in the short run. 
D) can be disposed of only if the firm goes out of business.

Question 18

Which of the following statements is true about the planning horizon?

Accepted Answer

A) All inputs are fixed. 
B) All inputs are variable. 
C) There are fixed and variable inputs. 
D) Costs do not exist. 
A) All inputs are fixed. 
B) All inputs are variable. 
C) There are fixed and variable inputs. 
D) Costs do not exist.

Question 19

-Refer to the above figure. Constant returns to scale exist

Accepted Answer

A) up to output   . 
B) from   to   . 
C) after   . 
D) over the entire long-run average cost curve. 
A) up to output   . 
B) from   to   . 
C) after   . 
D) over the entire long-run average cost curve.

Question 20

The addition to total costs associated with the production of one more unit of output is referred to as

Accepted Answer

A) average cost. 
B) marginal cost. 
C) opportunity cost. 
D) overhead cost. 
A) average cost. 
B) marginal cost. 
C) opportunity cost. 
D) overhead cost.

Exam 22: The Firm: Cost and Output Determination

If average total cost is decreasing as more and more units are produced, then marginal cost must be

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

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

In the long run, a firm can change

Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each other's way and fewer dinners are served. This is an example of

The law of diminishing marginal product states that

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 three laborers are employed?

A decrease in long-run average costs resulting from increases in output is

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

-In the above table, marginal product becomes negative after employing the

Diseconomies of scale occur

-In the above table, the average product of the fifth worker is

-If the average product of 20 workers is 100 bushels of wheat and the average product of 21 workers of wheat is 99 bushels of wheat, then the marginal product of the 21st worker was

Which of the following statements is true?

"If an industry's minimum efficient scale is between 2,000 and 4,000 units of output, then a firm producing 2,000 units of output in that industry has a cost-saving advantage over another firm producing 4,000 units of output in the same industry." Do you agree or disagree? Explain.

-Refer to the above figure. Economies of scale exist

A fixed resource is one that

Which of the following statements is true about the planning horizon?

-Refer to the above figure. Constant returns to scale exist

The addition to total costs associated with the production of one more unit of output is referred to as

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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