Question 1

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 2

A firm's AC will eventually begin to rise because

Accepted Answer

A) managers' salaries rise with output. 
B) bottlenecks may be reached for some inputs. 
C) MFC begins to rise near capacity. 
D) the range of negative returns is reached. 
A) managers' salaries rise with output. 
B) bottlenecks may be reached for some inputs. 
C) MFC begins to rise near capacity. 
D) the range of negative returns is reached.

Question 3

The rule that states that the marginal revenue product equal to price does not hold when there are more than two inputs.

Accepted Answer

A) True 
 B)False

Question 4

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster.For the roller coaster operator, electricity is

Accepted Answer

A) an opportunity cost. 
B) a variable cost. 
C) a fixed cost. 
D) a sunk cost. 
A) an opportunity cost. 
B) a variable cost. 
C) a fixed cost. 
D) a sunk cost.

Question 5

The average total cost curve of a firm is U-shaped.

Accepted Answer

A) True 
 B)False

Question 6

In the short run the firm has at least one fixed input.

Accepted Answer

A) True 
 B)False

Question 7

One reason why critics argue that large firms should not be broken up is that in some cases

Accepted Answer

A) large firms have a concentration of economic power. 
B) large firms are less-efficient producers. 
C) many smaller firms would be less-efficient producers. 
D) there is no economic reason to break up large firms that may have some control over the market. 
A) large firms have a concentration of economic power. 
B) large firms are less-efficient producers. 
C) many smaller firms would be less-efficient producers. 
D) there is no economic reason to break up large firms that may have some control over the market.

Question 8

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 9

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)

Accepted Answer

A) analytical cost curve. 
B) long-run cost curve. 
C) historical cost curve. 
D) theoretical cost curve. 
A) analytical cost curve. 
B) long-run cost curve. 
C) historical cost curve. 
D) theoretical cost curve.

Question 10

"If it were not for the law of diminishing marginal returns, the world's wheat could be grown in a flower pot." Explain.

Accepted Answer

The law of diminishing returns states th

Question 11

Everything else equal, the AC curve will shift downward if

Accepted Answer

A) input prices rise. 
B) input MPPs rise. 
C) output rises. 
D) output falls. 
A) input prices rise. 
B) input MPPs rise. 
C) output rises. 
D) output falls.

Question 12

Which of the following observations is true?

Accepted Answer

A) In the long run, more costs become variable. 
B) Fixed costs can be completely varied if the time period is sufficient. 
C) Fixed costs arise when some types of inputs can be bought only in big batches. 
D) Variable costs arise when inputs have a large productive capacity. 
A) In the long run, more costs become variable. 
B) Fixed costs can be completely varied if the time period is sufficient. 
C) Fixed costs arise when some types of inputs can be bought only in big batches. 
D) Variable costs arise when inputs have a large productive capacity.

Question 13

Explain why the long-run average cost is typically U-shaped.

Accepted Answer

As firms grow, they can take advantage o

Question 14

The long-run average cost curve

Accepted Answer

A) is a composite of short-run AC curves. 
B) shows the lowest possible short-run AC corresponding to each output level. 
C) depends on the firm's planning horizon. 
D) All of the above are correct. 
A) is a composite of short-run AC curves. 
B) shows the lowest possible short-run AC corresponding to each output level. 
C) depends on the firm's planning horizon. 
D) All of the above are correct.

Question 15

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

Accepted Answer

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

Question 16

To determine total cost, the businessperson must know

Accepted Answer

A) input quantity and output price. 
B) output quantity and output price. 
C) output quantity and input price. 
D) input quantity and input price. 
A) input quantity and output price. 
B) output quantity and output price. 
C) output quantity and input price. 
D) input quantity and input price.

Question 17

The average cost curve shows the total cost divided by quantity produced for various levels of output.

Accepted Answer

A) True 
 B)False

Question 18

Figure 7-17
  
-Which of the following statements must be true when a firm makes choices that put it at point A in Figure 7-17?

Accepted Answer

A) The firm is minimizing its cost of producing 100 units of output. 
B) The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land. 
C) The firm first decided how much output to produce and then decided how to produce it. 
D) All of the above are true. 
A) The firm is minimizing its cost of producing 100 units of output. 
B) The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land. 
C) The firm first decided how much output to produce and then decided how to produce it. 
D) All of the above are true.

Question 19

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

Accepted Answer

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

Question 20

In which case will the transition from short run to long run involve the shortest chronological time?

Accepted Answer

A) a service that provides temporary secretaries to companies 
B) an automobile factory 
C) a farm 
D) an electric utility 
A) a service that provides temporary secretaries to companies 
B) an automobile factory 
C) a farm 
D) an electric utility

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

Which of the following equations defines marginal revenue product?

A firm's AC will eventually begin to rise because

The rule that states that the marginal revenue product equal to price does not hold when there are more than two inputs.

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster.For the roller coaster operator, electricity is

The average total cost curve of a firm is U-shaped.

In the short run the firm has at least one fixed input.

One reason why critics argue that large firms should not be broken up is that in some cases

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

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)

"If it were not for the law of diminishing marginal returns, the world's wheat could be grown in a flower pot." Explain.

Everything else equal, the AC curve will shift downward if

Which of the following observations is true?

Explain why the long-run average cost is typically U-shaped.

The long-run average cost curve

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

To determine total cost, the businessperson must know

The average cost curve shows the total cost divided by quantity produced for various levels of output.

Figure 7-17 -Which of the following statements must be true when a firm makes choices that put it at point A in Figure 7-17?

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

In which case will the transition from short run to long run involve the shortest chronological time?

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

Filters