Question 1

If the price of one input changes, generally the firm will change its use of both inputs.

Accepted Answer

A) True 
 B)False

Question 2

At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels.A unit of labor costs $6, and a unit of seed costs $12.The farmer should

Accepted Answer

A)  produce less wheat. 
B)  buy only seed. 
C)  buy more seed and less labor. 
D)  buy less seed and more labor. 
A)  produce less wheat. 
B)  buy only seed. 
C)  buy more seed and less labor. 
D)  buy less seed and more labor.

Question 3

If MPP?/P? > MP $\mathrm { P } _ { \mathrm { B } }$ / $\mathrm { P } _ { \mathrm { B } }$ , then the proportions of these two inputs is optimal.

Accepted Answer

A) True 
 B)False

Question 4

If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing costs per unit of output. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing costs per unit of output.

Question 5

Figure 7-8
  
-Of the graphs in Figure 7-8, which resembles marginal cost?

Accepted Answer

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

Question 6

Which of the following is a fixed cost?

Accepted Answer

A)  electricity 
B)  worker bonuses 
C)  mortgage on the building 
D)  steel to produce refrigerators 
A)  electricity 
B)  worker bonuses 
C)  mortgage on the building 
D)  steel to produce refrigerators

Question 7

A total product curve shows the

Accepted Answer

A)  aggregate output of many firms in an industry. 
B)  amount of product consumers will take off the market. 
C)  maximum amount of product that it is technically possible to produce. 
D)  relationship between units of inputs and total output. 
A)  aggregate output of many firms in an industry. 
B)  amount of product consumers will take off the market. 
C)  maximum amount of product that it is technically possible to produce. 
D)  relationship between units of inputs and total output.

Question 8

Table 7-4
 $\begin{array}{c}
\text { CAPITAL }
 \begin{array}{rrrrrrr}
0 & 340 & 490 & 600 & 692 & 773 & 840 \
5 & 316 & 448 & 548 & 632 & 705 & 775 \
4 & 282 & 400 & 480 & 564 & 632 & 692 \
3 & 245 & 346 & 423 & 490 & 548 & 600 \
2 & 200 & 282 & 346 & 400 & 448 & 490 \
1 & 141 & 200 & 245 & 282 & 316 & 346 \
0 & 1 & 2 & 3 & 4 & 5 &6
\end{array}\
\quad\quad\quad\quad\quad\text { LABOR }
\end{array}$

-Table 7-4 shows a production relationship.Assuming the labor input is fixed at 4, what will be the optimum capital input assuming an output price of $1 and a $90-per-day cost for one unit of capital?

Accepted Answer

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

Question 9

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

Accepted Answer

A)  short of an optimal input point. 
B)  at the optimum input point. 
C)  beyond the optimum input point. 
D)  There isn't enough information to determine if the input point is optimal. 
A)  short of an optimal input point. 
B)  at the optimum input point. 
C)  beyond the optimum input point. 
D)  There isn't enough information to determine if the input point is optimal.

Question 10

The total physical product of an input is the same thing as its

Accepted Answer

A)  total revenue product. 
B)  marginal physical product times output. 
C)  output. 
D)  total consumer's surplus. 
A)  total revenue product. 
B)  marginal physical product times output. 
C)  output. 
D)  total consumer's surplus.

Question 11

Higher production indifference curves correspond to larger amounts of one input in relation to a second input.

Accepted Answer

A) True 
 B)False

Question 12

Marginal physical product can tell a producer

Accepted Answer

A)  at what point to stop adding inputs to the production process. 
B)  how much profit will be made at each level of production. 
C)  how much the last input added to the total amount of revenue. 
D)  how much the last input added to the total amount of production. 
A)  at what point to stop adding inputs to the production process. 
B)  how much profit will be made at each level of production. 
C)  how much the last input added to the total amount of revenue. 
D)  how much the last input added to the total amount of production.

Question 13

The major incentive for cost minimization is the

Accepted Answer

A)  power of shareholders in the company. 
B)  fear of top management by workers. 
C)  discipline imposed by the market system. 
D)  impact on U.S.corporations of taxing by the government. 
A)  power of shareholders in the company. 
B)  fear of top management by workers. 
C)  discipline imposed by the market system. 
D)  impact on U.S.corporations of taxing by the government.

Question 14

Whether or not a production process shows economies of scale depends on

Accepted Answer

A)  the number of inputs used. 
B)  technology. 
C)  technology and input prices. 
D)  technology and output prices. 
A)  the number of inputs used. 
B)  technology. 
C)  technology and input prices. 
D)  technology and output prices.

Question 15

Figure 7-5
  
-Which of the curves in Figure 7-5 could be a firm's average fixed cost curve?

Accepted Answer

A)  (a) 
B)  (b) 
C)  (c) 
D)  (d) 
A)  (a) 
B)  (b) 
C)  (c) 
D)  (d)

Question 16

Table 7-5
$ \begin{array}{lccccccc}\text { Stereos produced } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \ \text { Total cost (in \$) } & 200 & 325 & 410 & 475 & 550 & 660 & 825\end{array} $
-Table 7-5 shows short-run total cost figures for a stereo manufacturer.At what output level does short-run average total cost reach a minimum?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 17

Total physical product shows what happens to the quantity of an output when the firm changes the quantity of an input.

Accepted Answer

A) True 
 B)False

Question 18

If a firm has a U-shaped long-run average cost curve,

Accepted Answer

A)  its fixed cost rises as output rises. 
B)  it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production. 
C)  it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production. 
D)  the firm can maximize its output by operating at the point of minimum long-run average cost. 
A)  its fixed cost rises as output rises. 
B)  it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production. 
C)  it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production. 
D)  the firm can maximize its output by operating at the point of minimum long-run average cost.

Question 19

When economies of scale are present,

Accepted Answer

A)  costs per unit decline as output expands. 
B)  the government feels responsible for breaking up the firm. 
C)  firms always make handsome profits. 
D)  costs fall as the size of the product is increased. 
A)  costs per unit decline as output expands. 
B)  the government feels responsible for breaking up the firm. 
C)  firms always make handsome profits. 
D)  costs fall as the size of the product is increased.

Question 20

Complete the table below by computing the missing numbers from those that are given.
 \[\begin{array} { c c c c c } 
\underline {\text { Q }} & \underline {\text { Fixed Costs } }& \underline {\text { Vanable Costs }} & \underline {\text { Average Cost } }&\underline { \text { Marginal Cost } }\
0 & \$ 20 &\underline {\quad\quad\quad} &\underline {\quad\quad\quad} &\underline {\quad\quad\quad} \
1 & \underline {\quad\quad\quad} & \underline {\quad\quad\quad} &\underline {\quad\quad\quad}& \$ 8 \
2 & \underline {\quad\quad\quad}& 15 & \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
3 & \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& 13.67 & \underline {\quad\quad\quad} \
4 & \underline {\quad\quad\quad}& \underline {\quad\quad\quad} & \underline {\quad\quad\quad}& 6 \
5 & \underline {\quad\quad\quad} & \underline {\quad\quad\quad}& \underline {\quad\quad\quad} & 7 \
6 & \underline {\quad\quad\quad} & 42 & \underline {\quad\quad\quad}& \underline {\quad\quad\quad}\
7 & \underline {\quad\quad\quad}& 51 & \underline {\quad\quad\quad}& \underline {\quad\quad\quad}\
8 & \underline {\quad\quad\quad} & \underline {\quad\quad\quad}& 10.125 &\underline {\quad\quad\quad}
\end{array}\]

Accepted Answer

\[\begin{array} { c c c c c } 
\underlin

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

If the price of one input changes, generally the firm will change its use of both inputs.

At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels.A unit of labor costs $6, and a unit of seed costs $12.The farmer should

If MPP?/P? > MP PB\mathrm { P } _ { \mathrm { B } }PB​ / PB\mathrm { P } _ { \mathrm { B } }PB​ , then the proportions of these two inputs is optimal.

If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing

Figure 7-8 -Of the graphs in Figure 7-8, which resembles marginal cost?

Which of the following is a fixed cost?

A total product curve shows the

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

The total physical product of an input is the same thing as its

Higher production indifference curves correspond to larger amounts of one input in relation to a second input.

Marginal physical product can tell a producer

The major incentive for cost minimization is the

Whether or not a production process shows economies of scale depends on

Figure 7-5 -Which of the curves in Figure 7-5 could be a firm's average fixed cost curve?

Total physical product shows what happens to the quantity of an output when the firm changes the quantity of an input.

If a firm has a U-shaped long-run average cost curve,

When economies of scale are present,

Complete the table below by computing the missing numbers from those that are given. 0 \ 20 1 \ 8 2 15 3 13.67 4 6 5 7 6 42 7 51 8 10.125

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

Filters

If MPP?/P? > MP $\mathrm { P } _ { \mathrm { B } }$ / $\mathrm { P } _ { \mathrm { B } }$ , then the proportions of these two inputs is optimal.