Question 1

Figure 7-15  
-In Figure 7-15, we would expect a move along the production indifference curve from A to B if

Accepted Answer

A) the price of machines falls. 
B) the price of labor falls. 
C) output falls. 
D) the product price rises. 
A) the price of machines falls. 
B) the price of labor falls. 
C) output falls. 
D) the product price rises.

Question 2

The different points on a cost curve represent alternative production possibilities in the same time period.

Accepted Answer

A) True 
 B)False

Question 3

Figure 7-6  
-Which of the lines in Figure 7-6 represents a typical average fixed cost curve?

Accepted Answer

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

Question 4

If in some range of production, average cost is falling, 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 5

In the short run, the firm has no more than one fixed input.

Accepted Answer

A) True 
 B)False

Question 6

Table 7-4    
-To determine total cost, the business owner must know

Accepted Answer

A) input quantity and output price. 
B) output quantity and output price. 
C) output quantity and input price. 
D) input quantity and input price. 
A) input quantity and output price. 
B) output quantity and output price. 
C) output quantity and input price. 
D) input quantity and input price.

Question 7

Figure 7-1  
-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

Which of the following observations is true?

Accepted Answer

A) TFC remains the same irrespective of units of output produced. 
B) TVC remains the same irrespective of units of output produced. 
C) TVC falls as the unit of output increases. 
D) AFC increases as output increases further and further. 
A) TFC remains the same irrespective of units of output produced. 
B) TVC remains the same irrespective of units of output produced. 
C) TVC falls as the unit of output increases. 
D) AFC increases as output increases further and further.

Question 9

Input proportions are usually fixed by technological conditions alone.

Accepted Answer

A) True 
 B)False

Question 10

In the short run,

Accepted Answer

A) all of the firm's input quantities, including plant size, become adjustable. 
B) firms are not constrained by past decisions. 
C) firms have relatively little opportunity to change production processes. 
D) all of the firm's current commitments come to an end. 
A) all of the firm's input quantities, including plant size, become adjustable. 
B) firms are not constrained by past decisions. 
C) firms have relatively little opportunity to change production processes. 
D) all of the firm's current commitments come to an end.

Question 11

If MRP > P, a firm should use less of that input.

Accepted Answer

A) True 
 B)False

Question 12

In the typical AC curve, the downward-sloping part is attributable to

Accepted Answer

A) spreading fixed costs over larger outputs and increasing returns to the variable inputs. 
B) declining administrative costs as output increases. 
C) falling fixed costs. 
D) rising total product. 
A) spreading fixed costs over larger outputs and increasing returns to the variable inputs. 
B) declining administrative costs as output increases. 
C) falling fixed costs. 
D) rising total product.

Question 13

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

Accepted Answer

A) True 
 B)False

Question 14

If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75, and the price of the machinery per period is $25, in order to achieve optimal input proportions, the firm should use

Accepted Answer

A) more labor and less machinery. 
B) more machinery and less labor. 
C) more labor with the same amount of machinery. 
D) the current combination. 
A) more labor and less machinery. 
B) more machinery and less labor. 
C) more labor with the same amount of machinery. 
D) the current combination.

Question 15

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

Accepted Answer

A) slope of its long-run total cost curve is always negative. 
B) slopes of its short-run average cost curves are always negative. 
C) slope of its long-run average cost curve is always negative. 
D) slope of its production function is always negative. 
A) slope of its long-run total cost curve is always negative. 
B) slopes of its short-run average cost curves are always negative. 
C) slope of its long-run average cost curve is always negative. 
D) slope of its production function is always negative.

Question 16

Figure 7-1  
-Of the graphs in Figure 7-1, which best represents marginal physical product?

Accepted Answer

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

Question 17

Figure 7-13  
-Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?

Accepted Answer

A) All of them 
B) Only 2 
C) Only 3 
D) Cannot determine with information given 
A) All of them 
B) Only 2 
C) Only 3 
D) Cannot determine with information given

Question 18

A firm uses two inputs, A and B.At its optimal choice of input proportions,

Accepted Answer

A) MRP of A = MRP of B. 
B) MRPA/PA = MRPB/PB. 
C) MPP of A = MPP of B. 
D) All of the responses are correct. 
A) MRP of A = MRP of B. 
B) MRPA/PA = MRPB/PB. 
C) MPP of A = MPP of B. 
D) All of the responses are correct.

Question 19

Table 7-6  
-Table 7-6 shows a baker's daily production relationship for bread.Diminishing returns to labor begin when the baker goes from

Accepted Answer

A) one hour of labor to two hours of labor. 
B) three hours of labor to four hours of labor. 
C) six hours of labor to seven hours of labor. 
D) seven hours of labor to eight hours of labor. 
A) one hour of labor to two hours of labor. 
B) three hours of labor to four hours of labor. 
C) six hours of labor to seven hours of labor. 
D) seven hours of labor to eight hours of labor.

Question 20

A change in input prices will change the location of the firm's budget line.

Accepted Answer

A) True 
 B)False

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

Figure 7-15 -In Figure 7-15, we would expect a move along the production indifference curve from A to B if

The different points on a cost curve represent alternative production possibilities in the same time period.

Figure 7-6 -Which of the lines in Figure 7-6 represents a typical average fixed cost curve?

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

In the short run, the firm has no more than one fixed input.

Table 7-4 -To determine total cost, the business owner must know

Figure 7-1 -The "law" of diminishing returns is also referred to as

Which of the following observations is true?

Input proportions are usually fixed by technological conditions alone.

In the short run,

If MRP > P, a firm should use less of that input.

In the typical AC curve, the downward-sloping part is attributable to

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75, and the price of the machinery per period is $25, in order to achieve optimal input proportions, the firm should use

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

Figure 7-1 -Of the graphs in Figure 7-1, which best represents marginal physical product?

Figure 7-13 -Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?

A firm uses two inputs, A and B.At its optimal choice of input proportions,

Table 7-6 -Table 7-6 shows a baker's daily production relationship for bread.Diminishing returns to labor begin when the baker goes from

A change in input prices will change the location of the 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

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