Question 1

Average physical product measures the increase in total output that results from a one-unit increase in an input.

Accepted Answer

A) True 
 B)False

Question 2

The marginal revenue product of an hour of labor used in steel production is equal to

Accepted Answer

A) its marginal physical product times the hourly wage rate. 
B) its marginal physical product times the price of steel. 
C) the hourly wage rate. 
D) its marginal physical product divided by the price of steel. 
A) its marginal physical product times the hourly wage rate. 
B) its marginal physical product times the price of steel. 
C) the hourly wage rate. 
D) its marginal physical product divided by the price of steel.

Question 3

Most firms have very little flexibility in their choice of input proportions.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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 6

Table 7-4   Table 7-4 shows a production relationship. Assuming the labor input is fixed at 4, what will be the optimum capital input assuming an output price of $1 and a $90-per-day cost for one unit of capital?

Accepted Answer

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

Question 7

If the price of one input changes, generally the firm will change its use of both inputs.

Accepted Answer

A) True 
 B)False

Question 8

Production technology determines the relationship of total cost to outputs.

Accepted Answer

A) True 
 B)False

Question 9

Complete the table below by computing the missing numbers from those that are given.

Accepted Answer

The answer of Complete the table below by computing the...

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

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 15

An example of the law of variable input proportions can be found in

Accepted Answer

A) the law of increasing returns to scale. 
B) the law of diminishing marginal returns. 
C) the law of large numbers. 
D) the law of demand. 
A) the law of increasing returns to scale. 
B) the law of diminishing marginal returns. 
C) the law of large numbers. 
D) the law of demand.

Question 16

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 17

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 18

On Naomi's pig farm, Naomi hires all the labor used, grows all the grain fed to the pigs, and owns the barn. The costs used to calculate the total cost curve include

Accepted Answer

A) only the cost of labor. 
B) only the cost of labor and the cost of grain, which is completely consumed in the period in which it is grown. 
C) only the variable cost of growing grain. 
D) the cost of labor, the cost of growing grain, and the opportunity cost of the barn. 
A) only the cost of labor. 
B) only the cost of labor and the cost of grain, which is completely consumed in the period in which it is grown. 
C) only the variable cost of growing grain. 
D) the cost of labor, the cost of growing grain, and the opportunity cost of the barn.

Question 19

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 20

For a typical firm, the portion of the AC curve that is downward-sloping is because production

Accepted Answer

A) exhibits decreasing returns to scale. 
B) creates innovative technological progress. 
C) economies of scale. 
D) exhibits rising total product. 
A) exhibits decreasing returns to scale. 
B) creates innovative technological progress. 
C) economies of scale. 
D) exhibits rising total product.

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

Average physical product measures the increase in total output that results from a one-unit increase in an input.

The marginal revenue product of an hour of labor used in steel production is equal to

Most firms have very little flexibility in their choice of input proportions.

Which of the following equations defines marginal revenue product?

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

Table 7-4 Table 7-4 shows a production relationship. Assuming the labor input is fixed at 4, what will be the optimum capital input assuming an output price of $1 and a $90-per-day cost for one unit of capital?

If the price of one input changes, generally the firm will change its use of both inputs.

Production technology determines the relationship of total cost to outputs.

Complete the table below by computing the missing numbers from those that are given.

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

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

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

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

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

An example of the law of variable input proportions can be found in

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

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

On Naomi's pig farm, Naomi hires all the labor used, grows all the grain fed to the pigs, and owns the barn. The costs used to calculate the total cost curve include

The typical average cost curve

For a typical firm, the portion of the AC curve that is downward-sloping is because production

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters