Question 1

Which of the following is correct?

Accepted Answer

A)  AC = AFC/Q 
B)  AC = AFC + AVC 
C)  AC = MFC + MVC 
D)  TFC + TMC = MFC + MVC 
A)  AC = AFC/Q 
B)  AC = AFC + AVC 
C)  AC = MFC + MVC 
D)  TFC + TMC = MFC + MVC

Question 2

Are returns to a single input and returns to scale one and the same? Explain.

Accepted Answer

No.
Returns to a single input refers to

Question 3

Which of the following equations defines marginal revenue product?

Accepted Answer

A)  MRP = P times Q. 
B)  MRP = total cost. 
C)  MRP = total revenue minus total cost. 
D)  MRP = MPP times price of the product. 
A)  MRP = P times Q. 
B)  MRP = total cost. 
C)  MRP = total revenue minus total cost. 
D)  MRP = MPP times price of the product.

Question 4

Economies of scale lead to declining long-run average cost curves.

Accepted Answer

A) True 
 B)False

Question 5

Figure 7-9
  
-Of the graphs in Figure 7-9, which represents total fixed cost?

Accepted Answer

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

Question 6

Figure 7-9
  
-Of the graphs in Figure 7-9, which represents average fixed cost?

Accepted Answer

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

Question 7

The "law" of diminishing returns is also referred to as

Accepted Answer

A)  the "law" of diminishing returns to scale. 
B)  the "law" of variable input proportions. 
C)  diminishing average physical product. 
D)  the "law" of decreasing cost. 
A)  the "law" of diminishing returns to scale. 
B)  the "law" of variable input proportions. 
C)  diminishing average physical product. 
D)  the "law" of decreasing cost.

Question 8

The firm's average cost curve is the result of cost minimization in the use of fixed inputs.

Accepted Answer

A) True 
 B)False

Question 9

Production technology determines the relationship of total cost to outputs.

Accepted Answer

A) True 
 B)False

Question 10

The table below gives data on output for a firm in the short run.The firm is able to hire labor and its TPP is given.Compute the APP, MPP, and MRP for labor if the price of the good is fixed at $12 per unit.
 \(\begin{array} { c c } 
 \underline {\text { LABOR }} &  \underline {\text { TPP }}& \underline {\text { APP }}& \underline {  \text { MPP }   }& \underline {  \text { MRP }   } \
1 & 4& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
2 & 9& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
3 & 15& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
4 & 21& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
5 & 26& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
6 & 30& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
7 & 33& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
8 & 35& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
9 & 36& \underline {\quad\quad\quad}& \underline {\quad\quad\quad}& \underline {\quad\quad\quad} \
\end{array}\)

Accepted Answer

None

Question 11

Total physical product is maximized if marginal physical product is zero.

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-2
  
-In Figure 7-2 at an output of 500, marginal cost equals

Accepted Answer

A)  10. 
B)  20. 
C)  30. 
D)  40. 
A)  10. 
B)  20. 
C)  30. 
D)  40.

Question 13

If in some production range average cost is rising, 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 14

Which of the following is the correct statement of the marginal rule for optimal input proportions? The input proportion is optimal when

Accepted Answer

A)  $ \mathrm{P}_{\mathrm{A}} $ = $ \mathrm{P}_{\mathrm{B}} $ . 
B)  MP $ \mathrm{P}_{\mathrm{A}} $= MP  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . . 
C)  $ \mathrm{P}_{\mathrm{A}} $× MP $ \mathrm{P}_{\mathrm{A}} $=  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . × MP  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . . 
D)  $ \mathrm{P}_{\mathrm{A}} $ /  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ .= MP $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . 
A)  $ \mathrm{P}_{\mathrm{A}} $ = $ \mathrm{P}_{\mathrm{B}} $ . 
B)  MP $ \mathrm{P}_{\mathrm{A}} $= MP  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . . 
C)  $ \mathrm{P}_{\mathrm{A}} $× MP $ \mathrm{P}_{\mathrm{A}} $=  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . × MP  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ . . 
D)  $ \mathrm{P}_{\mathrm{A}} $ /  $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ .= MP $ \mathrm{P}_{\mathrm{A}} $ /MP $ \mathrm{P}_{\mathrm{B}} $ .

Question 15

Figure 7-8
  
-Of the graphs in Figure 7-8, which represents total cost?

Accepted Answer

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

Question 16

Table 7-1
 $\begin{array}{cc}
\underline {\text { Warkers } }&\underline {\text { Tays }}\
1 & 5 \
2 & 12 \
3 & 22 \
4 & 30 \
5 & 35
\end{array}$
-In Table 7-1, the average physical product after five workers are hired is

Accepted Answer

A)  5. 
B)  6. 
C)  7. 
D)  8. 
A)  5. 
B)  6. 
C)  7. 
D)  8.

Question 17

The optimum quantity of an input occurs when

Accepted Answer

A)  diminishing returns set in. 
B)  marginal revenue product equals input price. 
C)  marginal physical product equals input price. 
D)  marginal revenue product equals output price. 
A)  diminishing returns set in. 
B)  marginal revenue product equals input price. 
C)  marginal physical product equals input price. 
D)  marginal revenue product equals output price.

Question 18

In which case will the transition from short run to long run involve the shortest chronological time?

Accepted Answer

A)  a service that provides temporary secretaries to companies 
B)  an automobile factory 
C)  a farm 
D)  an electric utility 
A)  a service that provides temporary secretaries to companies 
B)  an automobile factory 
C)  a farm 
D)  an electric utility

Question 19

Where marginal cost is less than average cost,

Accepted Answer

A)  opportunity cost must have been excluded from the calculation of marginal cost. 
B)  marginal cost must be falling. 
C)  marginal cost must be rising. 
D)  marginal cost may be rising, falling, or constant. 
A)  opportunity cost must have been excluded from the calculation of marginal cost. 
B)  marginal cost must be falling. 
C)  marginal cost must be rising. 
D)  marginal cost may be rising, falling, or constant.

Question 20

Average cost curves have the same shape as

Accepted Answer

A)  total cost curves. 
B)  marginal cost curves. 
C)  total fixed cost curves. 
D)  average fixed cost curves. 
A)  total cost curves. 
B)  marginal cost curves. 
C)  total fixed cost curves. 
D)  average fixed cost curves.

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

Which of the following is correct?

Are returns to a single input and returns to scale one and the same? Explain.

Which of the following equations defines marginal revenue product?

Economies of scale lead to declining long-run average cost curves.

Figure 7-9 -Of the graphs in Figure 7-9, which represents total fixed cost?

Figure 7-9 -Of the graphs in Figure 7-9, which represents average fixed cost?

The "law" of diminishing returns is also referred to as

The firm's average cost curve is the result of cost minimization in the use of fixed inputs.

Production technology determines the relationship of total cost to outputs.

The table below gives data on output for a firm in the short run.The firm is able to hire labor and its TPP is given.Compute the APP, MPP, and MRP for labor if the price of the good is fixed at $12 per unit. 1 4 2 9 3 15 4 21 5 26 6 30 7 33 8 35 9 36

Total physical product is maximized if marginal physical product is zero.

Figure 7-2 -In Figure 7-2 at an output of 500, marginal cost equals

If in some production range average cost is rising, the firm is experiencing

Which of the following is the correct statement of the marginal rule for optimal input proportions? The input proportion is optimal when

Figure 7-8 -Of the graphs in Figure 7-8, which represents total cost?

Table 7-1 1 5 2 12 3 22 4 30 5 35 -In Table 7-1, the average physical product after five workers are hired is

The optimum quantity of an input occurs when

In which case will the transition from short run to long run involve the shortest chronological time?

Where marginal cost is less than average cost,

Average cost curves have the same shape as

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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