Question 1

Table 7-1   ​
​
​
-In Table 7-1, the marginal physical product of labor from the addition of the second worker is ​

Accepted Answer

A) 12. 
B) 7. 
C) 17. 
D) 5. 
A) 12. 
B) 7. 
C) 17. 
D) 5.

Question 2

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 responses 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 responses are correct.

Question 3

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should

Accepted Answer

A) reduce the labor used and increase the machinery used if labor costs half as much as machinery. 
B) reduce the labor used and increase the machinery used if labor and machinery cost the same amount. 
C) reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery. 
D) reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery. 
A) reduce the labor used and increase the machinery used if labor costs half as much as machinery. 
B) reduce the labor used and increase the machinery used if labor and machinery cost the same amount. 
C) reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery. 
D) reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery.

Question 4

Figure 7-4  
-Following a rash of airplane bombs, the airlines have been forced to increase security at a cost of $30 million per year.The number of inspectors and machines does not vary with the number of passengers; the airlines must have sufficient staff available to handle the full-capacity load.Which graph in Figure 7-4 best illustrates the impact of the security expenditures?

Accepted Answer

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

Question 5

The amount of time during which at least one input cannot be adjust is the

Accepted Answer

A) length of the long-run period. 
B) length of the short-run period. 
C) time period when all costs are fixed. 
D) end of the firm's operations. 
A) length of the long-run period. 
B) length of the short-run period. 
C) time period when all costs are fixed. 
D) end of the firm's operations.

Question 6

If a firm has increasing returns to scale at all levels of output, then the

Accepted Answer

A) marginal cost for the firm declines over the entire range of output. 
B) average cost for the firm declines over the entire range of output. 
C) fixed costs of operation diminish to zero. 
D) production technology is optimized. 
A) marginal cost for the firm declines over the entire range of output. 
B) average cost for the firm declines over the entire range of output. 
C) fixed costs of operation diminish to zero. 
D) production technology is optimized.

Question 7

The short-run average cost curve shows the lowest possible average cost corresponding to each output level, assuming that all inputs are variable.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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 10

Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.The last worker hired picked 100 peppers, and the last machine added 1,000 peppers.If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?

Accepted Answer

Optimal use of two variable inputs calls

Question 11

The average total cost curve of a firm is U shaped.

Accepted Answer

A) True 
 B)False

Question 12

A production indifference curve shows all combinations of input quantities capable of producing a given quantity of output.

Accepted Answer

A) True 
 B)False

Question 13

Figure 7-10  
-The average cost curve

Accepted Answer

A) is the vertical summation of the AFC and the AVC curves. 
B) lies below the AVC curve. 
C) lies below the AFC curve. 
D) is the vertical summation of the MC and AVC curves. 
A) is the vertical summation of the AFC and the AVC curves. 
B) lies below the AVC curve. 
C) lies below the AFC curve. 
D) is the vertical summation of the MC and AVC curves.

Question 14

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 15

Cost minimization is the process of making optimal use of all of the inputs whose quantities are

Accepted Answer

A) set in the short run. 
B) set in the intermediate run. 
C) set in the long run. 
D) variable in the short and long run. 
A) set in the short run. 
B) set in the intermediate run. 
C) set in the long run. 
D) variable in the short and long run.

Question 16

If MPPa/Pa = MPPb/Pb, then the firm should increase the usage of both input a and input

Accepted Answer

A) True 
 B)False

Question 17

If a firm wants to determine total cost, it needs

Accepted Answer

A) to add its variable costs to its fixed costs. 
B) the prices of inputs and of output. 
C) the variable cost per unit. 
D) the production function and the price of its output. 
A) to add its variable costs to its fixed costs. 
B) the prices of inputs and of output. 
C) the variable cost per unit. 
D) the production function and the price of its output.

Question 18

If economies of scale exist for a particular production relationship, long-run average costs will

Accepted Answer

A) rise. 
B) fall. 
C) first rise and then fall. 
D) be unaffected since there is no direct relationship between the two. 
A) rise. 
B) fall. 
C) first rise and then fall. 
D) be unaffected since there is no direct relationship between the two.

Question 19

Renee runs an accounting firm that does tax returns, which she operates out of a building that she owns downtown.She hires all of the accountants and buys the equipment and supplies for the business.The costs used to calculate the total cost curve include

Accepted Answer

A) the salaries of the accountants, the equipment and supply costs, and the opportunity cost of the building that houses the firm. 
B) only the salaries of the accountants and the equipment and supply costs, since she owns the building. 
C) just the costs of the accountant's salaries. 
D) the costs of the accountant's salaries plus the opportunity costs of the building. 
A) the salaries of the accountants, the equipment and supply costs, and the opportunity cost of the building that houses the firm. 
B) only the salaries of the accountants and the equipment and supply costs, since she owns the building. 
C) just the costs of the accountant's salaries. 
D) the costs of the accountant's salaries plus the opportunity costs of the building.

Question 20

A change in input prices has no impact on a firm's budget line.

Accepted Answer

A) True 
 B)False

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

Table 7-1 ​ ​ ​ -In Table 7-1, the marginal physical product of labor from the addition of the second worker is ​

The long-run average cost curve

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should

The amount of time during which at least one input cannot be adjust is the

If a firm has increasing returns to scale at all levels of output, then the

The short-run average cost curve shows the lowest possible average cost corresponding to each output level, assuming that all inputs are variable.

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

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

Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.The last worker hired picked 100 peppers, and the last machine added 1,000 peppers.If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?

The average total cost curve of a firm is U shaped.

A production indifference curve shows all combinations of input quantities capable of producing a given quantity of output.

Figure 7-10 -The average cost curve

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

Cost minimization is the process of making optimal use of all of the inputs whose quantities are

If MPPa/Pa = MPPb/Pb, then the firm should increase the usage of both input a and input

If a firm wants to determine total cost, it needs

If economies of scale exist for a particular production relationship, long-run average costs will

Renee runs an accounting firm that does tax returns, which she operates out of a building that she owns downtown.She hires all of the accountants and buys the equipment and supplies for the business.The costs used to calculate the total cost curve include

A change in input prices has no impact on a firm's budget line.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Table 7-1 -In Table 7-1, the marginal physical product of labor from the addition of the second worker is