Question 1

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

The marginal physical product of an input is the

Accepted Answer

A) addition to output from using one more unit of an input. 
B) extra amount of an input needed to produce one additional unit of output. 
C) change in average physical product, given a change in the quantity of an input. 
D) slope of the production indifference curve for an output made using the input. 
A) addition to output from using one more unit of an input. 
B) extra amount of an input needed to produce one additional unit of output. 
C) change in average physical product, given a change in the quantity of an input. 
D) slope of the production indifference curve for an output made using the input.

Question 3

In the short run, if the average cost curve is shown as decreasing, it is because

Accepted Answer

A) fixed cost is spread out over larger amounts of production. 
B) it becomes cheaper to produce an infinite amount of goods. 
C) additional units of production are inferior. 
D) variable costs increase with each additional amount of production. 
A) fixed cost is spread out over larger amounts of production. 
B) it becomes cheaper to produce an infinite amount of goods. 
C) additional units of production are inferior. 
D) variable costs increase with each additional amount of production.

Question 4

Figure 7-16  
 
In Figure 7-16, as we move from A to B,

Accepted Answer

A) the relative price of machines falls. 
B) total cost falls. 
C) output increases. 
D) labor becomes less productive relative to capital. 
A) the relative price of machines falls. 
B) total cost falls. 
C) output increases. 
D) labor becomes less productive relative to capital.

Question 5

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 6

When a firm's AC eventually starts to rise, it is often because

Accepted Answer

A) executive salaries rise sharply as output rises. 
B) the ability to manage larger and larger levels of output results in much higher administrative costs. 
C) marginal cost increases rapidly at higher output levels. 
D) firm output has started to decline. 
A) executive salaries rise sharply as output rises. 
B) the ability to manage larger and larger levels of output results in much higher administrative costs. 
C) marginal cost increases rapidly at higher output levels. 
D) firm output has started to decline.

Question 7

Which of the following is correct?

Accepted Answer

A) AC = AFC\Q 
B) AC = AFC + AVC 
C) AC = MFC + MVC 
D) TFC + TMC = MFC + MVC 
A) AC = AFC\Q 
B) AC = AFC + AVC 
C) AC = MFC + MVC 
D) TFC + TMC = MFC + MVC

Question 8

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 9

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

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The "law" of diminishing returns is what happens to marginal returns as all inputs are varied.

Accepted Answer

A) True 
 B)False

Question 14

Figure 7-2
 
In Figure 7-2, average cost at 500 units of output equals

Accepted Answer

A) 4,000. 
B) 200. 
C) 8. 
D) 6. 
A) 4,000. 
B) 200. 
C) 8. 
D) 6.

Question 15

Table 7-5   Table 7-5 shows short-run total cost figures for a stereo manufacturer. At what output level does short-run average variable cost reach a minimum?

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
A) 2 
B) 3 
C) 4 
D) 5

Question 16

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 17

Variable cost changes as the time period under consideration changes.

Accepted Answer

A) True 
 B)False

Question 18

In Table 7-1, the marginal physical product begins to diminish with the addition of the

Accepted Answer

A) second worker. 
B) third worker. 
C) fourth worker. 
D) Marginal returns never diminish in Table 7-1. 
A) second worker. 
B) third worker. 
C) fourth worker. 
D) Marginal returns never diminish in Table 7-1.

Question 19

Explain why the average cost curve for the long run differs from that for the short run.

Accepted Answer

The average cost curve for the long run

Question 20

Which of the following is the correct statement of the marginal rule for optimal input proportions? The input proportion is optimal when

Accepted Answer

A) P  A  = P  B  . 
B) MPP  A  = MPP  B  . 
C) P  A  × MPP  A  = P  B  × MPP  B  . 
D) P  A  \P  B  = MPP  A  \MPP  B  . 
A) P  A  = P  B  . 
B) MPP  A  = MPP  B  . 
C) P  A  × MPP  A  = P  B  × MPP  B  . 
D) P  A  \P  B  = MPP  A  \MPP  B  .

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

Marginal cost

The marginal physical product of an input is the

In the short run, if the average cost curve is shown as decreasing, it is because

Figure 7-16 In Figure 7-16, as we move from A to B,

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

When a firm's AC eventually starts to rise, it is often because

Which of the following is correct?

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.

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

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

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

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

The "law" of diminishing returns is what happens to marginal returns as all inputs are varied.

Figure 7-2 In Figure 7-2, average cost at 500 units of output equals

Table 7-5 Table 7-5 shows short-run total cost figures for a stereo manufacturer. At what output level does short-run average variable cost reach a minimum?

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

Variable cost changes as the time period under consideration changes.

In Table 7-1, the marginal physical product begins to diminish with the addition of the

Explain why the average cost curve for the long run differs from that for the short run.

Which of the following is the correct statement of the marginal rule for optimal input proportions? The input proportion is optimal when

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

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