Question 1

The AFC curve shifts upward if

Accepted Answer

A) factor prices rise. 
B) a new technology is introduced. 
C) more workers are hired. 
D) all of the above 
E) none of the above 
A) factor prices rise. 
B) a new technology is introduced. 
C) more workers are hired. 
D) all of the above 
E) none of the above E

Question 2

Use the information below to answer the following questions.
Fact 11.1.1
January 31, 2008: Starbucks will open 75 more stores abroad than originally predicted, for a total of 975.
February 25, 2008: For three hours on Tuesday, Starbucks will shut down every single one of its 7,100 stores so that baristas can receive a refresher course.
June 2, 2008: Starbucks replaces baristas with vending machines.
July 18, 2008: Starbucks is closing 616 stores by the end of March.
-Refer to Fact 11.1.1. The decisions made on ________ are long-run decisions because they ________.

Accepted Answer

A) June 2; are changes to labour which affect people for the long term 
B) January 31 and July 18; change Starbucks' plant 
C) February 25, June 2, and July 18; all deal with stores located in the United States 
D) January 31 and February 25; are the earliest decisions 
E) none of the above 
A) June 2; are changes to labour which affect people for the long term 
B) January 31 and July 18; change Starbucks' plant 
C) February 25, June 2, and July 18; all deal with stores located in the United States 
D) January 31 and February 25; are the earliest decisions 
E) none of the above B

Question 3

Suppose a candy manufacturer can triple its production of fudge by doubling its production facility for making fudge. This indicates the presence of

Accepted Answer

A) constant returns to scale. 
B) economies of scale. 
C) diseconomies of scale. 
D) market constraints. 
E) the law of diminishing returns. 
A) constant returns to scale. 
B) economies of scale. 
C) diseconomies of scale. 
D) market constraints. 
E) the law of diminishing returns. B

Question 4

Use the table below to answer the following questions.
Table 11.3.1
  
-Refer to Table 11.3.1, which gives Tania's total cost schedule. When output increases from 4 to 9 teapots, the marginal cost of one of the 5 teapots is

Accepted Answer

A) $4.25. 
B) $4. 
C) $25. 
D) $6.25. 
E) $5. 
A) $4.25. 
B) $4. 
C) $25. 
D) $6.25. 
E) $5.

Question 5

Which of the following would be classified as a fixed cost for the local supermarket?

Accepted Answer

A) the rent from the six-year lease on the building where the store is located 
B) the cost of the boxes of cereal sold in the supermarket 
C) the salary paid to the store's manager 
D) the overtime paid to the store's manager 
E) the Canada Pension payments that the supermarket makes to the government on the workers' income 
A) the rent from the six-year lease on the building where the store is located 
B) the cost of the boxes of cereal sold in the supermarket 
C) the salary paid to the store's manager 
D) the overtime paid to the store's manager 
E) the Canada Pension payments that the supermarket makes to the government on the workers' income

Question 6

If constant returns to scale are present,

Accepted Answer

A) average total cost is decreasing. 
B) average total cost is increasing. 
C) the LRAC curve is horizontal. 
D) the LRAC curve is downward sloping. 
E) the LRAC curve is upward sloping. 
A) average total cost is decreasing. 
B) average total cost is increasing. 
C) the LRAC curve is horizontal. 
D) the LRAC curve is downward sloping. 
E) the LRAC curve is upward sloping.

Question 7

If MC is rising then ATC must be

Accepted Answer

A) rising. 
B) falling. 
C) above MC. 
D) below MC. 
E) none of the above 
A) rising. 
B) falling. 
C) above MC. 
D) below MC. 
E) none of the above

Question 8

Table 11.2.1
  
-Refer to Table 11.2.1 which gives Tania's total product schedule. The marginal product when the number of workers increases from 1 to 2 is

Accepted Answer

A) 3 teapots. 
B) 12 teapots. 
C) 7 teapots. 
D) 9 teapots. 
E) 6 teapots. 
A) 3 teapots. 
B) 12 teapots. 
C) 7 teapots. 
D) 9 teapots. 
E) 6 teapots.

Question 9

Use the table below to answer the following questions.
Table 11.3.2
  
-Refer to Table 11.3.2, which gives Tania's total cost schedule. When output increases from 8 to 12 teapots, the marginal cost of one of the 4 teapots is

Accepted Answer

A) $20. 
B) $5. 
C) $1. 
D) $6.67. 
E) $2. 
A) $20. 
B) $5. 
C) $1. 
D) $6.67. 
E) $2.

Question 10

When the marginal product of labour is greater than the average product of labour,

Accepted Answer

A) the average product of labour is increasing. 
B) the marginal product of labour is increasing. 
C) the total product curve is negatively sloped. 
D) the firm is experiencing diminishing marginal returns. 
E) the firm is experiencing constant returns. 
A) the average product of labour is increasing. 
B) the marginal product of labour is increasing. 
C) the total product curve is negatively sloped. 
D) the firm is experiencing diminishing marginal returns. 
E) the firm is experiencing constant returns.

Question 11

Which of the following are correct? According to the law of diminishing returns,
(1)marginal product eventually rises.
(2)marginal product eventually falls.
(3)marginal cost eventually rises.
(4)marginal cost eventually falls.

Accepted Answer

A) (1)and (3) 
B) (1)and (4) 
C) (2)and (3) 
D) (2)and (4) 
E) (4) 
A) (1)and (3) 
B) (1)and (4) 
C) (2)and (3) 
D) (2)and (4) 
E) (4)

Question 12

Which one of the following statements is false?

Accepted Answer

A) Total variable cost plus total fixed cost equals total cost. 
B) Marginal cost equals the change in total cost divided by the change in output. 
C) Average total cost is calculated by dividing total cost by the level of output. 
D) The average cost curve is U-shaped. 
E) The total cost curve is U-shaped. 
A) Total variable cost plus total fixed cost equals total cost. 
B) Marginal cost equals the change in total cost divided by the change in output. 
C) Average total cost is calculated by dividing total cost by the level of output. 
D) The average cost curve is U-shaped. 
E) The total cost curve is U-shaped.

Question 13

Use the figure below to answer the following questions.
   
Figure 11.3.2
-Refer to Figure 11.3.2, which illustrates the short-run average and marginal cost curves. The average variable cost curve is curve

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
E) C minus curve B 
A) A. 
B) B. 
C) C. 
D) D. 
E) C minus curve B

Question 14

Diseconomies of scale are present when

Accepted Answer

A) the LRAC curve slopes downward. 
B) average total cost falls as input increases. 
C) average total cost rises as output increases. 
D) the LRAC curve is horizontal. 
E) total fixed cost increases. 
A) the LRAC curve slopes downward. 
B) average total cost falls as input increases. 
C) average total cost rises as output increases. 
D) the LRAC curve is horizontal. 
E) total fixed cost increases.

Question 15

The marginal product of capital is the

Accepted Answer

A) change in total product resulting from a 1-unit increase in the quantity of labour employed, holding the quantity of the capital constant. 
B) change in total product resulting from a 1-unit increase in the quantity of capital employed, holding the quantity of the labour constant. 
C) total product divided by the total quantity of capital employed, holding the quantity of the labour constant. 
D) total product divided by the total quantity of labour employed, holding the quantity of the capital constant. 
E) change in the quantity of capital used resulting from a 1-unit increase in total product, holding constant the quantity of labour. 
A) change in total product resulting from a 1-unit increase in the quantity of labour employed, holding the quantity of the capital constant. 
B) change in total product resulting from a 1-unit increase in the quantity of capital employed, holding the quantity of the labour constant. 
C) total product divided by the total quantity of capital employed, holding the quantity of the labour constant. 
D) total product divided by the total quantity of labour employed, holding the quantity of the capital constant. 
E) change in the quantity of capital used resulting from a 1-unit increase in total product, holding constant the quantity of labour.

Question 16

Table 11.2.1
  
-Refer to Table 11.2.1 which gives Tania's total product schedule. Average product of labour reaches its maximum for the ________ worker.

Accepted Answer

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

Question 17

Which of the following quotes best illustrates the idea of fixed cost?

Accepted Answer

A) "As we increase output, per-unit costs fall." 
B) "My primary source of overhead cost is the cost of running the head office." 
C) "If I need to, I can negotiate more overtime with my work force to meet unexpected orders." 
D) "If I double the number of workers and trucks, I get only 80 percent more packages delivered." 
E) None of the above 
A) "As we increase output, per-unit costs fall." 
B) "My primary source of overhead cost is the cost of running the head office." 
C) "If I need to, I can negotiate more overtime with my work force to meet unexpected orders." 
D) "If I double the number of workers and trucks, I get only 80 percent more packages delivered." 
E) None of the above

Question 18

The MC curve shifts upward if

Accepted Answer

A) factor prices rise. 
B) a new technology is introduced. 
C) more workers are hired. 
D) all of the above 
E) none of the above 
A) factor prices rise. 
B) a new technology is introduced. 
C) more workers are hired. 
D) all of the above 
E) none of the above

Question 19

Marginal cost equals

Accepted Answer

A) Q/TVC. 
B) ΔTFC/ΔTC. 
C) ΔTC/ΔQ. 
D) ΔQ/ΔTVC. 
E) (TC - TV
C) /Q. 
A) Q/TVC. 
B) ΔTFC/ΔTC. 
C) ΔTC/ΔQ. 
D) ΔQ/ΔTVC. 
E) (TC - TV
C) /Q.

Question 20

When the 7th worker is hired, output increases from 100 units per week to 110 units per week. When the 8th worker is hired, output increases from 110 units to 118 units. This is an example of

Accepted Answer

A) diminishing marginal returns. 
B) diminishing marginal cost. 
C) decreasing returns to scale. 
D) labour-intensive production. 
E) increasing returns to scale. 
A) diminishing marginal returns. 
B) diminishing marginal cost. 
C) decreasing returns to scale. 
D) labour-intensive production. 
E) increasing returns to scale.

Exam 11: Output and Costs

The AFC curve shifts upward if

Suppose a candy manufacturer can triple its production of fudge by doubling its production facility for making fudge. This indicates the presence of

Use the table below to answer the following questions. Table 11.3.1 -Refer to Table 11.3.1, which gives Tania's total cost schedule. When output increases from 4 to 9 teapots, the marginal cost of one of the 5 teapots is

Which of the following would be classified as a fixed cost for the local supermarket?

If constant returns to scale are present,

If MC is rising then ATC must be

Table 11.2.1 -Refer to Table 11.2.1 which gives Tania's total product schedule. The marginal product when the number of workers increases from 1 to 2 is

Use the table below to answer the following questions. Table 11.3.2 -Refer to Table 11.3.2, which gives Tania's total cost schedule. When output increases from 8 to 12 teapots, the marginal cost of one of the 4 teapots is

When the marginal product of labour is greater than the average product of labour,

Which of the following are correct? According to the law of diminishing returns, (1)marginal product eventually rises. (2)marginal product eventually falls. (3)marginal cost eventually rises. (4)marginal cost eventually falls.

Which one of the following statements is false?

Use the figure below to answer the following questions. Figure 11.3.2 -Refer to Figure 11.3.2, which illustrates the short-run average and marginal cost curves. The average variable cost curve is curve

Diseconomies of scale are present when

The marginal product of capital is the

Table 11.2.1 -Refer to Table 11.2.1 which gives Tania's total product schedule. Average product of labour reaches its maximum for the ________ worker.

Which of the following quotes best illustrates the idea of fixed cost?

The MC curve shifts upward if

Marginal cost equals

When the 7th worker is hired, output increases from 100 units per week to 110 units per week. When the 8th worker is hired, output increases from 110 units to 118 units. This is an example of

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