Question 1

In the long run, more costs become fixed.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following experiments will yield observations that would allow one to calculate the marginal physical product of labor?

Accepted Answer

A)  increase the number of lumberjacks with chain saws and observe the change in output of cut trees 
B)  increase the number of workers on an assembly line and record the change in output 
C)  Both a and b are correct. 
D)  Neither a nor b are correct. 
A)  increase the number of lumberjacks with chain saws and observe the change in output of cut trees 
B)  increase the number of workers on an assembly line and record the change in output 
C)  Both a and b are correct. 
D)  Neither a nor b are correct.

Question 3

Everything else equal, the AC curve will shift when

Accepted Answer

A)  the price of the product rises. 
B)  technical change raises the MPP of one input. 
C)  output is increased. 
D)  increasing returns to scale are present. 
A)  the price of the product rises. 
B)  technical change raises the MPP of one input. 
C)  output is increased. 
D)  increasing returns to scale are present.

Question 4

The long-run average cost curve

Accepted Answer

A)  is a composite of short-run AC curves. 
B)  shows the lowest possible short-run AC corresponding to each output level. 
C)  depends on the firm's planning horizon. 
D)  All of the above are correct. 
A)  is a composite of short-run AC curves. 
B)  shows the lowest possible short-run AC corresponding to each output level. 
C)  depends on the firm's planning horizon. 
D)  All of the above are correct.

Question 5

Variable costs increase when output rises.

Accepted Answer

A) True 
 B)False

Question 6

The United Auto Workers union is largely responsible for the historically high pay of American auto workers by negotiating pay raises above those obtained by workers in other industries.In addition to increasing the pay of auto workers, what other long-run effect would this high pay have on the use of auto workers?

Accepted Answer

Over the long run, firms will adjust the

Question 7

The short run is that period during which there are no fixed commitments.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following observations is true?

Accepted Answer

A)  TFC remains the same irrespective of units of output produced. 
B)  TVC remains the same irrespective of units of output produced. 
C)  TVC falls as the unit of output increases. 
D)  AFC increases as output increases further and further. 
A)  TFC remains the same irrespective of units of output produced. 
B)  TVC remains the same irrespective of units of output produced. 
C)  TVC falls as the unit of output increases. 
D)  AFC increases as output increases further and further.

Question 9

Which of the following will not lead to increase in the marginal revenue product?

Accepted Answer

A)  MPP increases without any changes in the price. 
B)  Price of the product increases without any changes in MPP. 
C)  MPP and price of the product increases. 
D)  MPP remains the same and price of the product falls. 
A)  MPP increases without any changes in the price. 
B)  Price of the product increases without any changes in MPP. 
C)  MPP and price of the product increases. 
D)  MPP remains the same and price of the product falls.

Question 10

A firm uses two inputs, A and B.At its optimal choice of input proportions,

Accepted Answer

A)  MRP of A = MRP of B. 
B)  MR $ \mathrm{P}_{\mathrm{A}} $ / $ \mathrm{P}_{\mathrm{A}} $  = MR $ \mathrm{P}_{\mathrm{B}} $ / $ \mathrm{P}_{\mathrm{B}} $ . 
C)  MPP of A = MPP of B. 
D)  All of the above are correct. 
A)  MRP of A = MRP of B. 
B)  MR $ \mathrm{P}_{\mathrm{A}} $ / $ \mathrm{P}_{\mathrm{A}} $  = MR $ \mathrm{P}_{\mathrm{B}} $ / $ \mathrm{P}_{\mathrm{B}} $ . 
C)  MPP of A = MPP of B. 
D)  All of the above are correct.

Question 11

"A producer wanting to employ optimal quantity of inputs should choose the point where diminishing returns sets in." True or false?

Accepted Answer

False.The correct rule is marginal reven

Question 12

Average physical product measures the output per unit of input.

Accepted Answer

A) True 
 B)False

Question 13

Figure 7-16
  
-In Figure 7-16, as we move from A to B,

Accepted Answer

A)  the relative price of machines falls. 
B)  total cost falls. 
C)  output increases. 
D)  labor becomes less productive relative to capital. 
A)  the relative price of machines falls. 
B)  total cost falls. 
C)  output increases. 
D)  labor becomes less productive relative to capital.

Question 14

USX, a steel company, reduced the number of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs.Technically, this rise in productivity means the

Accepted Answer

A)  marginal product of labor increased. 
B)  average product of labor increased. 
C)  average product of capital fell. 
D)  marginal product of capital fell. 
A)  marginal product of labor increased. 
B)  average product of labor increased. 
C)  average product of capital fell. 
D)  marginal product of capital fell.

Question 15

Figure 7-3
  
-Government provides many goods and services to the public because they are not provided by free markets.Some economists believe bureaucrats who manage the programs have no interest in maximizing net benefits (profits) but instead maximize the size of a program constrained only by the need to have total benefits exceed total costs.Figure 7-3 shows total benefits and cost curves for a program.What point is the efficient point, and what point will the bureaucrat choose?

Accepted Answer

A)  A and B, respectively 
B)  B and D, respectively 
C)  D and C, respectively 
D)  D and A, respectively 
A)  A and B, respectively 
B)  B and D, respectively 
C)  D and C, respectively 
D)  D and A, respectively

Question 16

Figure 7-7
  
-In Figure 7-7 at 100 units, AVC equals

Accepted Answer

A)  8. 
B)  800. 
C)  100. 
D)  1,000. 
A)  8. 
B)  800. 
C)  100. 
D)  1,000.

Question 17

To determine total cost, the businessperson must know

Accepted Answer

A)  input quantity and output price. 
B)  output quantity and output price. 
C)  output quantity and input price. 
D)  input quantity and input price. 
A)  input quantity and output price. 
B)  output quantity and output price. 
C)  output quantity and input price. 
D)  input quantity and input price.

Question 18

In the typical AC curve, the downward-sloping part is attributable to

Accepted Answer

A)  spreading fixed costs over larger outputs and increasing returns to the variable inputs. 
B)  declining administrative costs as output increases. 
C)  falling fixed costs. 
D)  rising total product. 
A)  spreading fixed costs over larger outputs and increasing returns to the variable inputs. 
B)  declining administrative costs as output increases. 
C)  falling fixed costs. 
D)  rising total product.

Question 19

Which of the following observations is true?

Accepted Answer

A)  In the long run, more costs become variable. 
B)  Fixed costs can be completely varied if the time period is sufficient. 
C)  Fixed costs arise when some types of inputs can be bought only in big batches. 
D)  Variable costs arise when inputs have a large productive capacity. 
A)  In the long run, more costs become variable. 
B)  Fixed costs can be completely varied if the time period is sufficient. 
C)  Fixed costs arise when some types of inputs can be bought only in big batches. 
D)  Variable costs arise when inputs have a large productive capacity.

Question 20

Fixed cost increases when output rises.

Accepted Answer

A) True 
 B)False

Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

In the long run, more costs become fixed.

Which of the following experiments will yield observations that would allow one to calculate the marginal physical product of labor?

Everything else equal, the AC curve will shift when

The long-run average cost curve

Variable costs increase when output rises.

The short run is that period during which there are no fixed commitments.

Which of the following observations is true?

Which of the following will not lead to increase in the marginal revenue product?

A firm uses two inputs, A and B.At its optimal choice of input proportions,

"A producer wanting to employ optimal quantity of inputs should choose the point where diminishing returns sets in." True or false?

Average physical product measures the output per unit of input.

Figure 7-16 -In Figure 7-16, as we move from A to B,

USX, a steel company, reduced the number of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs.Technically, this rise in productivity means the

Figure 7-7 -In Figure 7-7 at 100 units, AVC equals

To determine total cost, the businessperson must know

In the typical AC curve, the downward-sloping part is attributable to

Which of the following observations is true?

Fixed cost increases when output rises.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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