Question 1

The long-run average cost curve

Accepted Answer

A) is always a downward sloping straight line. 
B) is a curve which is tangent to each member of a set of short-run average cost curves. 
C) is identical to the marginal cost curve. 
D) should always be horizontal. 
A) is always a downward sloping straight line. 
B) is a curve which is tangent to each member of a set of short-run average cost curves. 
C) is identical to the marginal cost curve. 
D) should always be horizontal.

Question 2

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 marginal product of the 2nd worker?

Accepted Answer

A) 15 cookies 
B) 20 cookies 
C) 30 cookies 
D) 35 cookies 
A) 15 cookies 
B) 20 cookies 
C) 30 cookies 
D) 35 cookies

Question 3

The production function

Accepted Answer

A) shows the maximum level of output for a given set of inputs. 
B) is an economic relationship between revenue and cost. 
C) shows the relationship between input prices and amount of input used. 
D) always shows increasing marginal product of labor. 
A) shows the maximum level of output for a given set of inputs. 
B) is an economic relationship between revenue and cost. 
C) shows the relationship between input prices and amount of input used. 
D) always shows increasing marginal product of labor.

Question 4

-In the above table, what is the marginal cost to produce the 2nd unit of output?

Accepted Answer

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

Question 5

-Using the above table, the average physical product and marginal product when 4 workers are employed are

Accepted Answer

A) 13 and 13, respectively. 
B) 13 and 14, respectively. 
C) 13 and 9, respectively. 
D) 14 and 13, respectively. 
A) 13 and 13, respectively. 
B) 13 and 14, respectively. 
C) 13 and 9, respectively. 
D) 14 and 13, respectively.

Question 6

The typical shape of the long-run average cost curve is like

Accepted Answer

A) the letter "C." 
B) the letter "U." 
C) an inverse of the letter "V." 
D) a circle. 
A) the letter "C." 
B) the letter "U." 
C) an inverse of the letter "V." 
D) a circle.

Question 7

Which of the following is TRUE for a firm in the long run?

Accepted Answer

A) Variable costs will initially increase and then decrease. 
B) The law of diminishing marginal product holds. 
C) All costs are variable costs. 
D) Variable costs will equal marginal cost at all output levels. 
A) Variable costs will initially increase and then decrease. 
B) The law of diminishing marginal product holds. 
C) All costs are variable costs. 
D) Variable costs will equal marginal cost at all output levels.

Question 8

-In the above table, what is the average total cost to produce 5 units of output?

Accepted Answer

A) $80 
B) $55 
C) $40 
D) $60 
A) $80 
B) $55 
C) $40 
D) $60

Question 9

The main source of diseconomies of scale is

Accepted Answer

A) dimensional factors associated with many physical relationships. 
B) specialization of labor. 
C) limits to the efficient functioning of management. 
D) constant returns to scale. 
A) dimensional factors associated with many physical relationships. 
B) specialization of labor. 
C) limits to the efficient functioning of management. 
D) constant returns to scale.

Question 10

When marginal product is rising,

Accepted Answer

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

Question 11

-Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that

Accepted Answer

A) marginal product is increasing from workers 1-50 and then becomes negative after worker 51. 
B) marginal product is increasing from workers 1-50, decreasing after 51 workers, and becomes negative after the 101st worker. 
C) marginal product is decreasing from workers 1-101, becoming negative at the 102nd worker. 
D) marginal product is increasing from workers 1-50, constant from workers 51 to 101, and is decreasing after that. 
A) marginal product is increasing from workers 1-50 and then becomes negative after worker 51. 
B) marginal product is increasing from workers 1-50, decreasing after 51 workers, and becomes negative after the 101st worker. 
C) marginal product is decreasing from workers 1-101, becoming negative at the 102nd worker. 
D) marginal product is increasing from workers 1-50, constant from workers 51 to 101, and is decreasing after that.

Question 12

-In the above figure, the long-run cost curve between points E and F illustrates

Accepted Answer

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

Question 13

Short-run total cost is defined as

Accepted Answer

A) the sum of marginal cost and total variable cost. 
B) price of labor per unit multiplied by the number of labor units. 
C) total fixed cost plus total variable cost. 
D) total capital cost only. 
A) the sum of marginal cost and total variable cost. 
B) price of labor per unit multiplied by the number of labor units. 
C) total fixed cost plus total variable cost. 
D) total capital cost only.

Question 14

-Use the above figure. At an output equal to "Q" the total cost for the firm will be the area

Accepted Answer

A) OQDC. 
B) OQFA. 
C) OQBC. 
D) OQEB. 
A) OQDC. 
B) OQFA. 
C) OQBC. 
D) OQEB.

Question 15

The lowest rate of output per unit of time at which long-run average costs for a firm are at a minimum defines

Accepted Answer

A) maximum efficient scale. 
B) minimum efficient scale. 
C) allowable efficient scale. 
D) short-run efficient scale. 
A) maximum efficient scale. 
B) minimum efficient scale. 
C) allowable efficient scale. 
D) short-run efficient scale.

Question 16

Mr. James' company produces candy bars. Which is NOT a variable input for this firm?

Accepted Answer

A) Sugar 
B) Assembly line workers 
C) The big chocolate-stirring machines 
D) Packaging materials 
A) Sugar 
B) Assembly line workers 
C) The big chocolate-stirring machines 
D) Packaging materials

Question 17

Which one of the following statements is FALSE?

Accepted Answer

A) TC = TFC + TVC 
B) ATC = AFC + AVC 
C) AFC = TFC divided by Q 
D) MC = TC divided by Q 
A) TC = TFC + TVC 
B) ATC = AFC + AVC 
C) AFC = TFC divided by Q 
D) MC = TC divided by Q

Question 18

Total fixed cost is

Accepted Answer

A) the cost of buying and installing new machinery. 
B) the cost that does not change as output changes. 
C) the expenditure on imported raw materials. 
D) the wages paid to consultants. 
A) the cost of buying and installing new machinery. 
B) the cost that does not change as output changes. 
C) the expenditure on imported raw materials. 
D) the wages paid to consultants.

Question 19

-Which of the following would be an example of a fixed cost to a firm?

Accepted Answer

A) rent for the building it occupies 
B) wages for the laborers 
C) the cost of raw materials 
D) electricity and other fuel costs 
A) rent for the building it occupies 
B) wages for the laborers 
C) the cost of raw materials 
D) electricity and other fuel costs

Question 20

Which of the following would NOT be considered a fixed cost of production?

Accepted Answer

A) Wages paid to labor 
B) The opportunity cost of capital 
C) Interest payments on a loan 
D) Insurance payments on plant and equipment 
A) Wages paid to labor 
B) The opportunity cost of capital 
C) Interest payments on a loan 
D) Insurance payments on plant and equipment

Exam 22: The Firm: Cost and Output Determination

The long-run average cost curve

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 marginal product of the 2nd worker?

The production function

-In the above table, what is the marginal cost to produce the 2nd unit of output?

-Using the above table, the average physical product and marginal product when 4 workers are employed are

The typical shape of the long-run average cost curve is like

Which of the following is TRUE for a firm in the long run?

-In the above table, what is the average total cost to produce 5 units of output?

The main source of diseconomies of scale is

When marginal product is rising,

-Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that

-In the above figure, the long-run cost curve between points E and F illustrates

Short-run total cost is defined as

-Use the above figure. At an output equal to "Q" the total cost for the firm will be the area

The lowest rate of output per unit of time at which long-run average costs for a firm are at a minimum defines

Mr. James' company produces candy bars. Which is NOT a variable input for this firm?

Which one of the following statements is FALSE?

Total fixed cost is

-Which of the following would be an example of a fixed cost to a firm?

Which of the following would NOT be considered a fixed cost of production?

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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