Question 1

Which of the following observations is true?

Accepted Answer

A) In the long run, more costs become variable. 
B) Fixed costs cannot be completely varied if the time period is sufficiently long. 
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 cannot be completely varied if the time period is sufficiently long. 
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 2

The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

Accepted Answer

A) True 
 B)False

Question 3

Marginal cost is the

Accepted Answer

A) change in total cost resulting from the purchase of one more unit of the variable input. 
B) change in total cost resulting from the production of one more unit of output. 
C) difference between total fixed cost and total variable cost. 
D) difference between total cost and total expenditure. 
A) change in total cost resulting from the purchase of one more unit of the variable input. 
B) change in total cost resulting from the production of one more unit of output. 
C) difference between total fixed cost and total variable cost. 
D) difference between total cost and total expenditure.

Question 4

Which of the following indicates an input is being overused relative to the optimal level?

Accepted Answer

A) MRP = P of input. 
B) MRP > P of input. 
C) MRP  P of output. 
A) MRP = P of input. 
B) MRP > P of input. 
C) MRP  P of output.

Question 5

Figure 7-15  
-For a firm at equilibrium, at point A in Figure 7-15,

Accepted Answer

A) the price of labor is high relative to the price of machines. 
B) the MPP of labor is greater than the MPP of machines. 
C) the MPP of labor is less than at point B. 
D) output is higher than at point B. 
A) the price of labor is high relative to the price of machines. 
B) the MPP of labor is greater than the MPP of machines. 
C) the MPP of labor is less than at point B. 
D) output is higher than at point B.

Question 6

Figure 7-10  
-The typical average cost curve

Accepted Answer

A) continually declines as output increases. 
B) is horizontal. 
C) continually increases as output increases. 
D) first declines to a minimum and then increases as output increases. 
A) continually declines as output increases. 
B) is horizontal. 
C) continually increases as output increases. 
D) first declines to a minimum and then increases as output increases.

Question 7

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 8

In the long run,

Accepted Answer

A) all of the firm's input quantities are variable. 
B) the firm can vary the quantities of some but not all inputs. 
C) managers become less efficient. 
D) the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output. 
A) all of the firm's input quantities are variable. 
B) the firm can vary the quantities of some but not all inputs. 
C) managers become less efficient. 
D) the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output.

Question 9

If a firm's marginal physical product is 5, and it sells its product for $60, and a unit of labor costs $200, the firm should

Accepted Answer

A) increase the use of labor. 
B) decrease the use of labor. 
C) decrease the price of the product. 
D) reduce output of the product. 
A) increase the use of labor. 
B) decrease the use of labor. 
C) decrease the price of the product. 
D) reduce output of the product.

Question 10

Economies of scale is another term for

Accepted Answer

A) increasing returns to scale. 
B) constant returns to scale. 
C) increasing marginal physical productivity. 
D) decreasing returns to scale. 
A) increasing returns to scale. 
B) constant returns to scale. 
C) increasing marginal physical productivity. 
D) decreasing returns to scale.

Question 11

A firm's optimal input proportions may change if

Accepted Answer

A) input prices change. 
B) the relative marginal productivities of the inputs change. 
C) the firm's optimal output level changes. 
D) All of the responses are correct. 
A) input prices change. 
B) the relative marginal productivities of the inputs change. 
C) the firm's optimal output level changes. 
D) All of the responses are correct.

Question 12

In which case is the transition from short run to long run likely to involve the shortest chronological time period?

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 13

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 14

Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is most likely to be a fixed cost for farmer McDonald? Fertilizer

Accepted Answer

A) Gasoline 
B) Fertilizer 
C) Insurance 
D) Seed 
A) Gasoline 
B) Fertilizer 
C) Insurance 
D) Seed

Question 16

Decreasing returns to scale is strictly a short run phenomenon for firms.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Economies of scale

Accepted Answer

A) require inputs' MPP to fall as output increases (everything else equal). 
B) pertain to the long run only. 
C) refer to increased output generalized by an increase in the quantity of a single input. 
D) imply that the AC curve will fall continuously as output increases in the short run. 
A) require inputs' MPP to fall as output increases (everything else equal). 
B) pertain to the long run only. 
C) refer to increased output generalized by an increase in the quantity of a single input. 
D) imply that the AC curve will fall continuously as output increases in the short run.

Question 19

The graph of the average cost curve

Accepted Answer

A) is identical to the AVC curve. 
B) is above the AVC curve 
C) lies everywhere below the AFC curve. 
D) lies below the AFC curve. 
A) is identical to the AVC curve. 
B) is above the AVC curve 
C) lies everywhere below the AFC curve. 
D) lies below the AFC curve.

Question 20

The marginal cost curve shows the per-unit cost associated with various levels of output.

Accepted Answer

A) True 
 B)False

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

Which of the following observations is true?

The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

Marginal cost is the

Which of the following indicates an input is being overused relative to the optimal level?

Figure 7-15 -For a firm at equilibrium, at point A in Figure 7-15,

Figure 7-10 -The typical average cost curve

Where marginal cost is less than average cost,

In the long run,

If a firm's marginal physical product is 5, and it sells its product for $60, and a unit of labor costs $200, the firm should

Economies of scale is another term for

A firm's optimal input proportions may change if

In which case is the transition from short run to long run likely to involve the shortest chronological time period?

Which of the following equations defines marginal revenue product?

Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

Which of the following is most likely to be a fixed cost for farmer McDonald? Fertilizer

Decreasing returns to scale is strictly a short run phenomenon for firms.

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

Economies of scale

The graph of the average cost curve

The marginal cost curve shows the per-unit cost associated with various levels of output.

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

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