Question 1

Which of the following is NOT a reason why a firm may experience economies of scale?

Accepted Answer

A) Productive specialization 
B) Dimensional factors 
C) Improved productive equipment 
D) Increased levels of management 
A) Productive specialization 
B) Dimensional factors 
C) Improved productive equipment 
D) Increased levels of management

Question 2

The shape of the short-run average total cost curve is a result of

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) the law of diminishing marginal product. 
D) falling profits. 
A) economies of scale. 
B) diseconomies of scale. 
C) the law of diminishing marginal product. 
D) falling profits.

Question 3

The short run is

Accepted Answer

A) a year or less. 
B) up to three years. 
C) the period of time in which the firm can vary its rate of output. 
D) the period of time in which the firm cannot change its use of at least one input. 
A) a year or less. 
B) up to three years. 
C) the period of time in which the firm can vary its rate of output. 
D) the period of time in which the firm cannot change its use of at least one input.

Question 4

As a firm increases the level of output that it produces, short-run average fixed cost

Accepted Answer

A) rises and then falls. 
B) remains constant since fixed costs are constant. 
C) decreases. 
D) decreases up to a particular level of output and then increases. 
A) rises and then falls. 
B) remains constant since fixed costs are constant. 
C) decreases. 
D) decreases up to a particular level of output and then increases.

Question 5

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 1 to 2?

Accepted Answer

A) 46 
B) 23 
C) 26 
D) 92 
A) 46 
B) 23 
C) 26 
D) 92

Question 6

The planning horizon is the

Accepted Answer

A) long run. 
B) short run. 
C) point where production begins. 
D) point where diminishing marginal product starts. 
A) long run. 
B) short run. 
C) point where production begins. 
D) point where diminishing marginal product starts.

Question 7

For a hotdog vendor, the hotdog buns represents his

Accepted Answer

A) fixed input. 
B) variable input. 
C) sunk cost. 
D) none of the above. 
A) fixed input. 
B) variable input. 
C) sunk cost. 
D) none of the above.

Question 8

Marginal cost is equal to average variable cost

Accepted Answer

A) when average variable cost is at its minimum value. 
B) when marginal cost is at its minimum value. 
C) when average variable cost is getting smaller. 
D) when average variable cost is getting larger. 
A) when average variable cost is at its minimum value. 
B) when marginal cost is at its minimum value. 
C) when average variable cost is getting smaller. 
D) when average variable cost is getting larger.

Question 9

The production function

Accepted Answer

A) gives the maximum amount of output for a given level of inputs. 
B) gives the implicit costs for all inputs. 
C) gives the amount of time necessary to reach the long run. 
D) allows us to compute the difference between accounting and economic profits. 
A) gives the maximum amount of output for a given level of inputs. 
B) gives the implicit costs for all inputs. 
C) gives the amount of time necessary to reach the long run. 
D) allows us to compute the difference between accounting and economic profits.

Question 10

Any activity that results in the conversion of resources into products that can be used in consumption is

Accepted Answer

A) planning. 
B) investment. 
C) production. 
D) discounting. 
A) planning. 
B) investment. 
C) production. 
D) discounting.

Question 11

In the table below, what are the marginal costs of the fourth unit of output?

Accepted Answer

A) $10,000 
B) $20,000 
C) $30,000 
D) $40,000 
A) $10,000 
B) $20,000 
C) $30,000 
D) $40,000

Question 12

A firm has the following production relationship between labor and output, for a fixed capital stock.  
-According to the above table, at what usage of labor does diminishing marginal product begin?

Accepted Answer

A) 1 
B) 2 
C) 4 
D) 5 
A) 1 
B) 2 
C) 4 
D) 5

Question 13

-Use the above figure. The AVC at output 10 is

Accepted Answer

A) $20.00. 
B) $1.00. 
C) $2.00. 
D) $3.00. 
A) $20.00. 
B) $1.00. 
C) $2.00. 
D) $3.00.

Question 14

Which of the following is TRUE about the long run?

Accepted Answer

A) All resources are variable. 
B) All resources are fixed. 
C) At least one resource is fixed. 
D) None of the above. 
A) All resources are variable. 
B) All resources are fixed. 
C) At least one resource is fixed. 
D) None of the above.

Question 15

During the short run, a firm cannot

Accepted Answer

A) increase its use of labor. 
B) change its plant size. 
C) purchase more raw materials. 
D) change its variable costs. 
A) increase its use of labor. 
B) change its plant size. 
C) purchase more raw materials. 
D) change its variable costs.

Question 16

-Using the above table, the total product and average physical product when 3 workers are employed are

Accepted Answer

A) 36 and 12, respectively. 
B) 39 and 13, respectively. 
C) 37 and 27, respectively. 
D) 40 and 10, respectively. 
A) 36 and 12, respectively. 
B) 39 and 13, respectively. 
C) 37 and 27, respectively. 
D) 40 and 10, respectively.

Question 17

Describe the concept of the production function. What happens to the production function when a firm becomes less efficient, so that it now requires more labor to produce the same amount of output as before?

Accepted Answer

The production function is the maximum p

Question 18

-As successive equal increases in a variable factor of production are added to fixed factors of production, there will be a point beyond which the extra product that can be attributed to each additional unit of the variable factor of production will decline. This is known as the law of

Accepted Answer

A) diminishing total product. 
B) diminishing average product. 
C) diminishing marginal product. 
D) decreasing product. 
A) diminishing total product. 
B) diminishing average product. 
C) diminishing marginal product. 
D) decreasing product.

Question 19

-Refer to the above table. At an output of 2 units, average total costs are

Accepted Answer

A) $61. 
B) $122. 
C) $16. 
D) $45. 
A) $61. 
B) $122. 
C) $16. 
D) $45.

Question 20

Which of the following statements is not true about the production function?

Accepted Answer

A) It gives the maximum output that can be obtained for a given level of inputs. 
B) A new production function does not have to be developed when there is technical progress since technology is included in the function. 
C) The production function depends upon the level of technology available to the firm. 
D) It specifies the cost of inputs necessary to produce a certain level of outputs. 
A) It gives the maximum output that can be obtained for a given level of inputs. 
B) A new production function does not have to be developed when there is technical progress since technology is included in the function. 
C) The production function depends upon the level of technology available to the firm. 
D) It specifies the cost of inputs necessary to produce a certain level of outputs.

Exam 22: The Firm: Cost and Output Determination

Which of the following is NOT a reason why a firm may experience economies of scale?

The shape of the short-run average total cost curve is a result of

The short run is

As a firm increases the level of output that it produces, short-run average fixed cost

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 1 to 2?

The planning horizon is the

For a hotdog vendor, the hotdog buns represents his

Marginal cost is equal to average variable cost

The production function

Any activity that results in the conversion of resources into products that can be used in consumption is

In the table below, what are the marginal costs of the fourth unit of output?

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, at what usage of labor does diminishing marginal product begin?

-Use the above figure. The AVC at output 10 is

Which of the following is TRUE about the long run?

During the short run, a firm cannot

-Using the above table, the total product and average physical product when 3 workers are employed are

Describe the concept of the production function. What happens to the production function when a firm becomes less efficient, so that it now requires more labor to produce the same amount of output as before?

-As successive equal increases in a variable factor of production are added to fixed factors of production, there will be a point beyond which the extra product that can be attributed to each additional unit of the variable factor of production will decline. This is known as the law of

-Refer to the above table. At an output of 2 units, average total costs are

Which of the following statements is not true about the production function?

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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