Question 1

When economies of scale are present,

Accepted Answer

A) costs per unit decline as output expands. 
B) the government feels responsible for breaking up the firm. 
C) firms always make handsome profits. 
D) costs fall as the size of the product is increased. 
A) costs per unit decline as output expands. 
B) the government feels responsible for breaking up the firm. 
C) firms always make handsome profits. 
D) costs fall as the size of the product is increased.

Question 2

The rule for the optimal use of any input says that

Accepted Answer

A) when MRP is less than price, it pays to expand resource use. 
B) when MRP is greater than price, it pays to expand resource use. 
C) when MRP equals price, resource use should be cut back. 
D) resources should be used only if MRP exceeds price. 
A) when MRP is less than price, it pays to expand resource use. 
B) when MRP is greater than price, it pays to expand resource use. 
C) when MRP equals price, resource use should be cut back. 
D) resources should be used only if MRP exceeds price.

Question 3

The optimal level of resource use comes when

Accepted Answer

A) MRP exceeds input price. 
B) MRP is less than input price. 
C) MRP equals input price. 
D) use of the resource exhausts the producer's funds. 
A) MRP exceeds input price. 
B) MRP is less than input price. 
C) MRP equals input price. 
D) use of the resource exhausts the producer's funds.

Question 4

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 5

Total fixed cost falls as output expands.

Accepted Answer

A) True 
 B)False

Question 6

Total fixed cost

Accepted Answer

A) varies with the level of output. 
B) has a downward-sloping curve. 
C) has an upward-sloping curve. 
D) is constant at all levels of output. 
A) varies with the level of output. 
B) has a downward-sloping curve. 
C) has an upward-sloping curve. 
D) is constant at all levels of output.

Question 7

Input choices in the present are often affected by past decisions.

Accepted Answer

A) True 
 B)False

Question 8

A budget line is the locus of all points representing every input combination of inputs that the producer can afford to buy with a given amount of money and given input prices.

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-1
  
-In Figure 7-1, which graph best represents total physical product with diminishing returns?

Accepted Answer

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

Question 10

A firm's optimal input proportions may change if

Accepted Answer

A) input prices change. 
B) the relative marginal productivities of the inputs change. 
C) the firm's optimal output level changes. 
D) All of the above are correct. 
A) input prices change. 
B) the relative marginal productivities of the inputs change. 
C) the firm's optimal output level changes. 
D) All of the above are correct.

Question 11

The United Auto Workers union is largely responsible for the historically high pay of American auto workers by negotiating pay raises above those obtained by workers in other industries.In addition to increasing the pay of auto workers, what other long-run effect would this high pay have on the use of auto workers?

Accepted Answer

Over the long run, firms will adjust the

Question 12

Marginal revenue product is the

Accepted Answer

A) additional revenue from one additional dollar increase in price. 
B) change in the revenue product resulting from one additional unit of input. 
C) additional revenue from one additional unit of input. 
D) change in revenue resulting in one additional dollar in price. 
A) additional revenue from one additional dollar increase in price. 
B) change in the revenue product resulting from one additional unit of input. 
C) additional revenue from one additional unit of input. 
D) change in revenue resulting in one additional dollar in price.

Question 13

Which of the following experiments will yield observations that would allow one to calculate the marginal physical product of labor?

Accepted Answer

A) increase the number of lumberjacks with chain saws and observe the change in output of cut trees 
B) increase the number of workers on an assembly line and record the change in output 
C) Both a and b are correct. 
D) Neither a nor b are correct. 
A) increase the number of lumberjacks with chain saws and observe the change in output of cut trees 
B) increase the number of workers on an assembly line and record the change in output 
C) Both a and b are correct. 
D) Neither a nor b are correct.

Question 14

Marginal revenue product equals the marginal physical product multiplied by the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 15

The short-run average cost curve shows the lowest possible average cost corresponding to each output level, assuming that all inputs are variable.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) 10. 
B) 100. 
C) 180. 
D) 1,000. 
A) 10. 
B) 100. 
C) 180. 
D) 1,000.

Question 17

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 18

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 19

Draw a graph using production indifference curves and budget lines showing a firm initially minimizing cost with its inputs of A and B.Then illustrate a new optimal combination of inputs when the prices of the inputs change.

Accepted Answer

The graph should be

Question 20

Cost curves in the long run differ from cost curves in the short run.

Accepted Answer

A) True 
 B)False

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

When economies of scale are present,

The rule for the optimal use of any input says that

The optimal level of resource use comes when

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

Total fixed cost falls as output expands.

Total fixed cost

Input choices in the present are often affected by past decisions.

A budget line is the locus of all points representing every input combination of inputs that the producer can afford to buy with a given amount of money and given input prices.

Figure 7-1 -In Figure 7-1, which graph best represents total physical product with diminishing returns?

A firm's optimal input proportions may change if

Marginal revenue product is the

Which of the following experiments will yield observations that would allow one to calculate the marginal physical product of labor?

Marginal revenue product equals the marginal physical product multiplied by the quantity demanded.

The short-run average cost curve shows the lowest possible average cost corresponding to each output level, assuming that all inputs are variable.

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

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

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

Draw a graph using production indifference curves and budget lines showing a firm initially minimizing cost with its inputs of A and B.Then illustrate a new optimal combination of inputs when the prices of the inputs change.

Cost curves in the long run differ from cost curves in the short run.

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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

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