Question 1

For most industries, average costs decrease indefinitely as output expands.

Accepted Answer

A) True 
 B)False

Question 2

-Table 7-4 shows a production relationship.Assuming the capital stock is fixed at three units and the cost per day of labor is $65, what is the most labor that it is efficient to hire if the product price is $1 per unit?

Accepted Answer

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

Question 3

The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

Accepted Answer

A) True 
 B)False

Question 4

Average cost curves decline 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 5

In the long run,

Accepted Answer

A) all of the firm's input quantities are variable. 
B) the firm can vary the quantities of some but not all inputs. 
C) managers become less efficient. 
D) the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output. 
A) all of the firm's input quantities are variable. 
B) the firm can vary the quantities of some but not all inputs. 
C) managers become less efficient. 
D) the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output.

Question 6

Production indifference curves bow inward toward the graph's origin because of

Accepted Answer

A) the law of diminishing returns to a single input. 
B) the law of diminishing marginal returns to scale. 
C) constant returns to scale. 
D) minimizing costs in the short run. 
A) the law of diminishing returns to a single input. 
B) the law of diminishing marginal returns to scale. 
C) constant returns to scale. 
D) minimizing costs in the short run.

Question 7

Figure 7-3
  
-Government provides many goods and services to the public because they are not provided by free markets.Some economists believe bureaucrats who manage the programs have no interest in maximizing net benefits (profits) but instead maximize the size of a program constrained only by the need to have total benefits exceed total costs.Figure 7-3 shows total benefits and cost curves for a program.What point is the efficient point, and what point will the bureaucrat choose?

Accepted Answer

A) A and B, respectively 
B) B and D, respectively 
C) D and C, respectively 
D) D and A, respectively 
A) A and B, respectively 
B) B and D, respectively 
C) D and C, respectively 
D) D and A, respectively

Question 8

The optimum quantity of an input occurs when

Accepted Answer

A) diminishing returns set in. 
B) marginal revenue product equals input price. 
C) marginal physical product equals input price. 
D) marginal revenue product equals output price. 
A) diminishing returns set in. 
B) marginal revenue product equals input price. 
C) marginal physical product equals input price. 
D) marginal revenue product equals output price.

Question 9

The "law" of diminishing returns rests on the "law" of variable input proportions.

Accepted Answer

A) True 
 B)False

Question 10

The table below gives data on output for a firm in the short run.The firm is able to hire labor and its TPP is given.Compute the APP, MPP, and MRP for labor if the price of the good is fixed at $12 per unit.

Accepted Answer

The answer of The table below gives data on output...

Question 11

Economies of scale are also called increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 12

If a firm has a U-shaped long-run average cost curve,

Accepted Answer

A) its fixed cost rises as output rises. 
B) it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production. 
C) it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production. 
D) the firm can maximize its output by operating at the point of minimum long-run average cost. 
A) its fixed cost rises as output rises. 
B) it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production. 
C) it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production. 
D) the firm can maximize its output by operating at the point of minimum long-run average cost.

Question 13

Figure 7-5
  
-Which of the graphs in Figure 7-5 could be a firm's total fixed cost curve?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
A) (a) 
B) (b) 
C) (c) 
D) (d)

Question 14

Explain briefly the following concepts:(a)Increasing returns to scale.(b)Decreasing returns to scale.(c)Constant returns to scale.

Accepted Answer

Increasing returns to scale: An increase

Question 15

If a firm increases inputs by 15 percent and output increases by 12.5 percent, 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 16

Production technology determines the relationship of total cost to outputs.

Accepted Answer

A) True 
 B)False

Question 17

-Table 7-2 contains information on widget production.The average physical product of the seventh pound of plastic is calculated as ____.

Accepted Answer

A) 9/25 
B) 2 
C) 25/9 
D) 19/7 
A) 9/25 
B) 2 
C) 25/9 
D) 19/7

Question 18

The average cost curve

Accepted Answer

A) is the vertical summation of the AFC and the AVC curves. 
B) lies below the AVC curve. 
C) lies below the AFC curve. 
D) is the vertical summation of the MC and AVC curves. 
A) is the vertical summation of the AFC and the AVC curves. 
B) lies below the AVC curve. 
C) lies below the AFC curve. 
D) is the vertical summation of the MC and AVC curves.

Question 19

USX, a steel company, reduced the number of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs.Technically, this rise in productivity means the

Accepted Answer

A) marginal product of labor increased. 
B) average product of labor increased. 
C) average product of capital fell. 
D) marginal product of capital fell. 
A) marginal product of labor increased. 
B) average product of labor increased. 
C) average product of capital fell. 
D) marginal product of capital fell.

Question 20

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.

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

For most industries, average costs decrease indefinitely as output expands.

-Table 7-4 shows a production relationship.Assuming the capital stock is fixed at three units and the cost per day of labor is $65, what is the most labor that it is efficient to hire if the product price is $1 per unit?

The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

Average cost curves decline because

In the long run,

Production indifference curves bow inward toward the graph's origin because of

The optimum quantity of an input occurs when

The "law" of diminishing returns rests on the "law" of variable input proportions.

The table below gives data on output for a firm in the short run.The firm is able to hire labor and its TPP is given.Compute the APP, MPP, and MRP for labor if the price of the good is fixed at $12 per unit.

Economies of scale are also called increasing returns to scale.

If a firm has a U-shaped long-run average cost curve,

Figure 7-5 -Which of the graphs in Figure 7-5 could be a firm's total fixed cost curve?

Explain briefly the following concepts:(a)Increasing returns to scale.(b)Decreasing returns to scale.(c)Constant returns to scale.

If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing

Production technology determines the relationship of total cost to outputs.

-Table 7-2 contains information on widget production.The average physical product of the seventh pound of plastic is calculated as ____.

The average cost curve

USX, a steel company, reduced the number of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs.Technically, this rise in productivity means the

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

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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