Question 1

Table 7-4    
-Marginal cost

Accepted Answer

A) is the increase in total cost resulting from production of one additional unit of output. 
B) is the cost of the marginal unit of output. 
C) and the average cost curve are U shaped. 
D) All of the responses are correct. 
A) is the increase in total cost resulting from production of one additional unit of output. 
B) is the cost of the marginal unit of output. 
C) and the average cost curve are U shaped. 
D) All of the responses are correct.

Question 2

If significant economies of scale are present, large firms will be much more efficient producers than small firms.

Accepted Answer

A) True 
 B)False

Question 3

Production costs for a given output will be minimized when the

Accepted Answer

A) budget line and the product indifference curve meet in the vertical axis. 
B) budget line crosses the product indifference curve. 
C) budget line begins to bend back on itself. 
D) product indifference curve and the budget line are tangent. 
A) budget line and the product indifference curve meet in the vertical axis. 
B) budget line crosses the product indifference curve. 
C) budget line begins to bend back on itself. 
D) product indifference curve and the budget line are tangent.

Question 4

Figure 7-11  
-Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels.Which of the following statements must be wrong?

Accepted Answer

A) The firm's technology may show increasing marginal returns as production increases from A to B. 
B) The firm may have positive fixed costs. 
C) As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently. 
D) The firm's average fixed cost may rise as production increases from B to C. 
A) The firm's technology may show increasing marginal returns as production increases from A to B. 
B) The firm may have positive fixed costs. 
C) As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently. 
D) The firm's average fixed cost may rise as production increases from B to C.

Question 5

For most firms, the short run is a one-year period.

Accepted Answer

A) True 
 B)False

Question 6

A firm uses workers and seed to grow lettuce.Its lettuce output rises from 100 tons to 200 tons when the number of workers increases from 25 to 75.Its production process shows

Accepted Answer

A) decreasing returns to scale. 
B) diminishing returns to labor. 
C) increasing long-run average cost. 
D) decreasing short-run average variable cost. 
A) decreasing returns to scale. 
B) diminishing returns to labor. 
C) increasing long-run average cost. 
D) decreasing short-run average variable cost.

Question 7

If doubling the quantity of inputs more than doubles the quantity of outputs, 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 8

Figure 7-2  
-Ray's Barbecue produces about 200 slabs of barbecued ribs per day.The price that Ray pays for each slab of ribs rises by 10 and the rent on Ray's restaurant location rises by 5 percent increase.Marginal cost will increase as a result of

Accepted Answer

A) only the increase in the rent paid by Ray. 
B) only the increase in the price that Ray pays for slabs of ribs. 
C) the increase in the rent paid by Ray and the increase in the price of slabs of ribs. 
D) neither of the increases in the prices. 
A) only the increase in the rent paid by Ray. 
B) only the increase in the price that Ray pays for slabs of ribs. 
C) the increase in the rent paid by Ray and the increase in the price of slabs of ribs. 
D) neither of the increases in the prices.

Question 9

The least costly way to produce a given level of output is indicated by the point of tangency between a budget line and the production indifference curve corresponding to that level of output.

Accepted Answer

A) True 
 B)False

Question 10

Explain why the long-run average cost is typically U shaped.

Accepted Answer

As firms grow, they can take advantage o

Question 11

Total physical product is the quantity of a firm's output based upon a given input usage.

Accepted Answer

A) True 
 B)False

Question 12

When the marginal revenue product of an input is less than its price, the

Accepted Answer

A) producer should expand the use of that input. 
B) price of the input will automatically rise in a free market. 
C) producer should reduce the use of that input. 
D) marginal physical product of that input must be below its average physical product. 
A) producer should expand the use of that input. 
B) price of the input will automatically rise in a free market. 
C) producer should reduce the use of that input. 
D) marginal physical product of that input must be below its average physical product.

Question 13

The average fixed cost curve increases as output increases.

Accepted Answer

A) True 
 B)False

Question 14

A firm will tend to select the least costly input combination to produce its output.

Accepted Answer

A) True 
 B)False

Question 15

A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000.The factory's TC

Accepted Answer

A) equals $15. 
B) equals $5,005. 
C) equals $15,000. 
D) cannot be determined from the information given. 
A) equals $15. 
B) equals $5,005. 
C) equals $15,000. 
D) cannot be determined from the information given.

Question 16

The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a single large firm.

Accepted Answer

A) True 
 B)False

Question 17

Marginal fixed costs decrease as output increases.

Accepted Answer

A) True 
 B)False

Question 18

Table 7-5  
-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 19

Figure 7-5  
-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 20

Table 7-4    
-Table 7-4 shows a production relationship.The cost of one day of labor is $65 and the product price is $1 per unit.How much will the labor input increase if the capital stock were increased from 3 to 4?

Accepted Answer

A) From 3 to 4 
B) From 4 to 5 
C) From 4 to 6 
D) Stays the same 
A) From 3 to 4 
B) From 4 to 5 
C) From 4 to 6 
D) Stays the same

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

Table 7-4 -Marginal cost

If significant economies of scale are present, large firms will be much more efficient producers than small firms.

Production costs for a given output will be minimized when the

Figure 7-11 -Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels.Which of the following statements must be wrong?

For most firms, the short run is a one-year period.

A firm uses workers and seed to grow lettuce.Its lettuce output rises from 100 tons to 200 tons when the number of workers increases from 25 to 75.Its production process shows

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Figure 7-2 -Ray's Barbecue produces about 200 slabs of barbecued ribs per day.The price that Ray pays for each slab of ribs rises by 10 and the rent on Ray's restaurant location rises by 5 percent increase.Marginal cost will increase as a result of

The least costly way to produce a given level of output is indicated by the point of tangency between a budget line and the production indifference curve corresponding to that level of output.

Explain why the long-run average cost is typically U shaped.

Total physical product is the quantity of a firm's output based upon a given input usage.

When the marginal revenue product of an input is less than its price, the

The average fixed cost curve increases as output increases.

A firm will tend to select the least costly input combination to produce its output.

A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000.The factory's TC

The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a single large firm.

Marginal fixed costs decrease as output increases.

Table 7-5 -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?

Figure 7-5 -Which of the following is a fixed cost?

Table 7-4 -Table 7-4 shows a production relationship.The cost of one day of labor is $65 and the product price is $1 per unit.How much will the labor input increase if the capital stock were increased from 3 to 4?

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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