Question 1

The law of diminishing marginal returns CANNOT predict the effect of an additional unit of input when

Accepted Answer

A)  all other inputs are fixed. 
B)  it is possible to vary the proportion in which the various inputs are used. 
C)  technology is changing. 
D)  output rises. 
E)  marginal product is falling. 
A)  all other inputs are fixed. 
B)  it is possible to vary the proportion in which the various inputs are used. 
C)  technology is changing. 
D)  output rises. 
E)  marginal product is falling.

Question 2

A production function

Accepted Answer

A)  shows the functions of production such as income, welfare, and employment. 
B)  reflects the technological constraints with which a firm must reckon. 
C)  shows the output necessary to produce one unit of input. 
D)  is a theoretical concept having no relevance to real-world production. 
E)  quantifies the amounts of variable inputs needed to produce fixed inputs. 
A)  shows the functions of production such as income, welfare, and employment. 
B)  reflects the technological constraints with which a firm must reckon. 
C)  shows the output necessary to produce one unit of input. 
D)  is a theoretical concept having no relevance to real-world production. 
E)  quantifies the amounts of variable inputs needed to produce fixed inputs.

Question 3

The following question are based on the following information for an auto repair shop specializing in muffler installation.
  
-The marginal product of the fourth worker is

Accepted Answer

A)  1. 
B)  2. 
C)  4. 
D)  9. 
E)  10. 
A)  1. 
B)  2. 
C)  4. 
D)  9. 
E)  10.

Question 4

The distinction between the short run and the long run is

Accepted Answer

A)  strictly a calendar matter; the long run is over 10 years. 
B)  dependent solely on the time period necessary to vary all relevant inputs. 
C)  that in the short run neither input nor output can be changed. 
D)  that the law of diminishing marginal returns is operational in the long run but not in the short run. 
E)  operationally meaningless since the firm is continually planning for the future in the short run. 
A)  strictly a calendar matter; the long run is over 10 years. 
B)  dependent solely on the time period necessary to vary all relevant inputs. 
C)  that in the short run neither input nor output can be changed. 
D)  that the law of diminishing marginal returns is operational in the long run but not in the short run. 
E)  operationally meaningless since the firm is continually planning for the future in the short run.

Question 5

The following question are based on the following information:
A firm uses inputs of labor, fertilizer, and land to produce strawberries (which are sold to wholesalers and processors). The quantity of land used is fixed at eight acres per season and the production function implies the relationships in the following table:
  
-It can be said that this firm experiences diminishing returns beyond the employment of the ________ unit of labor.

Accepted Answer

A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth 
A)  first 
B)  second 
C)  third 
D)  fourth 
E)  fifth

Question 6

A legal form of business organization that is easily established and yet has improved opportunities for greater financial resources and specialized know-how without being subject to double taxation of its income is the

Accepted Answer

A)  corporation. 
B)  cartel. 
C)  simple proprietorship. 
D)  consortium. 
E)  partnership. 
A)  corporation. 
B)  cartel. 
C)  simple proprietorship. 
D)  consortium. 
E)  partnership.

Question 7

In the short run

Accepted Answer

A)  all of the firm's inputs are fixed. 
B)  at least one of the firm's inputs is fixed. 
C)  none of the firm's inputs is fixed. 
D)  the output of the firm is fixed. 
E)  only things that are broken can be fixed. 
A)  all of the firm's inputs are fixed. 
B)  at least one of the firm's inputs is fixed. 
C)  none of the firm's inputs is fixed. 
D)  the output of the firm is fixed. 
E)  only things that are broken can be fixed.

Question 8

If the ratio of the marginal product of labor to the marginal product of land is 1:3,a firm making an optimal input combination should

Accepted Answer

A)  employ three times as many workers as land units. 
B)  employ one-third as many workers as land units. 
C)  pay each worker three times as much as the price of a unit of land. 
D)  pay each worker one-third as much as the price of a unit of land. 
E)  use the same number of workers as units of land and pay each worker the same price as a unit of land. 
A)  employ three times as many workers as land units. 
B)  employ one-third as many workers as land units. 
C)  pay each worker three times as much as the price of a unit of land. 
D)  pay each worker one-third as much as the price of a unit of land. 
E)  use the same number of workers as units of land and pay each worker the same price as a unit of land.

Question 9

The use of computerized photo composition methods allowed the Asbury Park Press to

Accepted Answer

A)  lay off reporters. 
B)  reduce the number of pages in its paper. 
C)  tailor its editions to target specific regions. 
D)  more cheaply purchase the paper on which to print its newspaper. 
E)  raise the price at the newsstand without reducing sales. 
A)  lay off reporters. 
B)  reduce the number of pages in its paper. 
C)  tailor its editions to target specific regions. 
D)  more cheaply purchase the paper on which to print its newspaper. 
E)  raise the price at the newsstand without reducing sales.

Question 10

An input whose quantity is unaffected as output rises or falls is a(n)________ input.

Accepted Answer

A)  irrelevant 
B)  dominant 
C)  fixed 
D)  independent 
E)  superior 
A)  irrelevant 
B)  dominant 
C)  fixed 
D)  independent 
E)  superior

Question 11

The standard assumption in economic analysis is that firms attempt to maximize

Accepted Answer

A)  sales. 
B)  profits. 
C)  costs. 
D)  reliability. 
E)  production. 
A)  sales. 
B)  profits. 
C)  costs. 
D)  reliability. 
E)  production.

Question 12

A business that requires a new agreement whenever an owner leaves or a new owner arrives is a

Accepted Answer

A)  firm. 
B)  corporation. 
C)  partnership. 
D)  foundation. 
E)  proprietorship. 
A)  firm. 
B)  corporation. 
C)  partnership. 
D)  foundation. 
E)  proprietorship.

Question 13

The following question are based on the following diagram illustrating the weekly average and marginal products for salespersons in the appliance department of a large department store:
  
-The number of appliances sold per week when four salespersons are employed is

Accepted Answer

A)  4. 
B)  5. 
C)  8. 
D)  20. 
E)  32. 
A)  4. 
B)  5. 
C)  8. 
D)  20. 
E)  32.

Question 14

Any production function embodies a

Accepted Answer

A)  predetermined rate of return. 
B)  statement of the firm's goals and objectives. 
C)  rate of depreciation. 
D)  given state of technology. 
E)  financial commitment to common stockholders. 
A)  predetermined rate of return. 
B)  statement of the firm's goals and objectives. 
C)  rate of depreciation. 
D)  given state of technology. 
E)  financial commitment to common stockholders.

Question 15

A production technique is essentially a

Accepted Answer

A)  level of output. 
B)  given combination of inputs. 
C)  type of market structure. 
D)  form of public regulation. 
E)  length of time. 
A)  level of output. 
B)  given combination of inputs. 
C)  type of market structure. 
D)  form of public regulation. 
E)  length of time.

Question 16

The following question are based on the following production function:
  
-In this production function

Accepted Answer

A)  total, average, and marginal products are all declining. 
B)  total and average products are rising. 
C)  total, average, and marginal products are all rising. 
D)  total product is rising, while average and marginal products are declining. 
E)  total product is rising, but the behavior of the average and marginal products cannot be determined. 
A)  total, average, and marginal products are all declining. 
B)  total and average products are rising. 
C)  total, average, and marginal products are all rising. 
D)  total product is rising, while average and marginal products are declining. 
E)  total product is rising, but the behavior of the average and marginal products cannot be determined.

Question 17

If the marginal products of the first five units of labor are 120,105,85,60,and 30,respectively,the average product of five units of labor is ________ units of output.

Accepted Answer

A)  6 
B)  30 
C)  80 
D)  90 
E)  150 
A)  6 
B)  30 
C)  80 
D)  90 
E)  150

Question 18

The following question are based on the following information:
A firm uses inputs of labor, fertilizer, and land to produce strawberries (which are sold to wholesalers and processors). The quantity of land used is fixed at eight acres per season and the production function implies the relationships in the following table:
  
-The marginal product of the fourth unit of labor is ________ bushels.

Accepted Answer

A)  1,000 
B)  2,000 
C)  3,100 
D)  3,500 
E)  4,000 
A)  1,000 
B)  2,000 
C)  3,100 
D)  3,500 
E)  4,000

Question 19

An advantage of proprietorship is that the owner is faced with

Accepted Answer

A)  complete control. 
B)  easy-to-obtain financing. 
C)  unlimited liability. 
D)  limited liability. 
E)  lower tax rates than those applicable to a partnership. 
A)  complete control. 
B)  easy-to-obtain financing. 
C)  unlimited liability. 
D)  limited liability. 
E)  lower tax rates than those applicable to a partnership.

Question 20

The bulk of goods and services consumed in the United States is produced by

Accepted Answer

A)  foreign countries. 
B)  the U.S. government. 
C)  households. 
D)  business firms. 
E)  the stock market. 
A)  foreign countries. 
B)  the U.S. government. 
C)  households. 
D)  business firms. 
E)  the stock market.

Exam 3: The Business Firm: Organization,motivation,and Optimal Input Decisions

The law of diminishing marginal returns CANNOT predict the effect of an additional unit of input when

A production function

The following question are based on the following information for an auto repair shop specializing in muffler installation. -The marginal product of the fourth worker is

The distinction between the short run and the long run is

A legal form of business organization that is easily established and yet has improved opportunities for greater financial resources and specialized know-how without being subject to double taxation of its income is the

In the short run

If the ratio of the marginal product of labor to the marginal product of land is 1:3,a firm making an optimal input combination should

The use of computerized photo composition methods allowed the Asbury Park Press to

An input whose quantity is unaffected as output rises or falls is a(n)________ input.

The standard assumption in economic analysis is that firms attempt to maximize

A business that requires a new agreement whenever an owner leaves or a new owner arrives is a

The following question are based on the following diagram illustrating the weekly average and marginal products for salespersons in the appliance department of a large department store: -The number of appliances sold per week when four salespersons are employed is

Any production function embodies a

A production technique is essentially a

The following question are based on the following production function: -In this production function

If the marginal products of the first five units of labor are 120,105,85,60,and 30,respectively,the average product of five units of labor is ________ units of output.

An advantage of proprietorship is that the owner is faced with

The bulk of goods and services consumed in the United States is produced by

What is Economics

Markets and Prices

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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