Question 1

A firm practices input substitution when it

Accepted Answer

A) retrains Joe the welder as a painter and Pat the painter as a welder. 
B) buys extra machines for its workers to use. 
C) allows fixed cost to become variable. 
D) replaces unskilled labor with automated machinery. 
A) retrains Joe the welder as a painter and Pat the painter as a welder. 
B) buys extra machines for its workers to use. 
C) allows fixed cost to become variable. 
D) replaces unskilled labor with automated machinery.

Question 2

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 3

Total physical product shows what happens to the quantity of a firm's output when that firm changes the quantity of an input in the production process.

Accepted Answer

A) True 
 B)False

Question 4

Some costs cannot be varied within a given time period.These costs are called

Accepted Answer

A) overheads. 
B) total costs. 
C) fixed costs. 
D) variable costs. 
A) overheads. 
B) total costs. 
C) fixed costs. 
D) variable costs.

Question 5

Diminishing marginal returns explains why a firm's long-run average total cost curve is U shaped.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

An airline industry study recently reported, "Evidence is abundant that larger firms are not more efficient or less costly simply because they are larger.In fact, other things equal, the largest carriers tend to have a higher level of unit costs, possibly caused by the difficulties of managing an airline of large size." This means that

Accepted Answer

A) there are increasing returns to scale in the airline industry. 
B) the airline industry has constant returns to scale. 
C) the larger airlines are not profitable. 
D) airlines are experiencing decreasing returns to scale. 
A) there are increasing returns to scale in the airline industry. 
B) the airline industry has constant returns to scale. 
C) the larger airlines are not profitable. 
D) airlines are experiencing decreasing returns to scale.

Question 8

The firm can calculate all points on its total cost curve if it knows

Accepted Answer

A) its production function. 
B) the prices of inputs and of output. 
C) its average cost at its optimal output level. 
D) the prices of inputs and its production function. 
A) its production function. 
B) the prices of inputs and of output. 
C) its average cost at its optimal output level. 
D) the prices of inputs and its production function.

Question 9

Figure 7-4  
-Average cost curves have the same basic 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.

Question 10

If the MRP per dollar is greater for labor than that for tools, a producer should spend more money on labor than originally planned and less on tools.How long can he continue this switch in spending? Why?

Accepted Answer

By the "law" of diminishing returns, whe

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The average cost curve shows the total cost divided by quantity produced for various levels of output.

Accepted Answer

A) True 
 B)False

Question 13

Figure 7-10  
-In Figure 7-10, the curve B is

Accepted Answer

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

Question 14

Table 7-5  
-Table 7-5 shows short-run total cost figures for a stereo manufacturer.The short-run average variable cost of producing five stereos is

Accepted Answer

A) $92. 
B) $110. 
C) $132. 
D) $460. 
A) $92. 
B) $110. 
C) $132. 
D) $460.

Question 15

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.

Accepted Answer

The answer of The table below gives data on output...

Question 16

"If it were not for the law of diminishing marginal returns, the world's wheat could be grown in a flower pot." Explain.

Accepted Answer

The law of diminishing returns states th

Question 17

When economies of scale exist,

Accepted Answer

A) production costs per unit increase as output expands. 
B) production costs per unit decline as output expands. 
C) total production costs decrease. 
D) total production costs increase. 
A) production costs per unit increase as output expands. 
B) production costs per unit decline as output expands. 
C) total production costs decrease. 
D) total production costs increase.

Question 18

A firm produces 2,000 high-quality bicycles per year.At this output, AVC $300 and the firm's fixed costs are $200,000.The firm's total costs are

Accepted Answer

A) $400. 
B) $600,000. 
C) $800,000. 
D) $500,000. 
A) $400. 
B) $600,000. 
C) $800,000. 
D) $500,000.

Question 19

A production indifference curve describes the input combinations that will produce a given output.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

A firm practices input substitution when it

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

Total physical product shows what happens to the quantity of a firm's output when that firm changes the quantity of an input in the production process.

Some costs cannot be varied within a given time period.These costs are called

Diminishing marginal returns explains why a firm's long-run average total cost curve is U shaped.

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

The firm can calculate all points on its total cost curve if it knows

Figure 7-4 -Average cost curves have the same basic shape as

If the MRP per dollar is greater for labor than that for tools, a producer should spend more money on labor than originally planned and less on tools.How long can he continue this switch in spending? Why?

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

The average cost curve shows the total cost divided by quantity produced for various levels of output.

Figure 7-10 -In Figure 7-10, the curve B is

Table 7-5 -Table 7-5 shows short-run total cost figures for a stereo manufacturer.The short-run average variable cost of producing five stereos is

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.

"If it were not for the law of diminishing marginal returns, the world's wheat could be grown in a flower pot." Explain.

When economies of scale exist,

A firm produces 2,000 high-quality bicycles per year.At this output, AVC $300 and the firm's fixed costs are $200,000.The firm's total costs are

A production indifference curve describes the input combinations that will produce a given output.

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

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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