Question 1

A firm will want to increase its scale of plant if

Accepted Answer

A) it is persistently producing on the upward-sloping part of its short-run average total cost curve. 
B) it is persistently producing on the downward-sloping part of its short-run average total cost curve. 
C) it is producing below minimum efficient scale. 
D) marginal cost is below average total cost. 
E) marginal cost is below average variable cost. 
A) it is persistently producing on the upward-sloping part of its short-run average total cost curve. 
B) it is persistently producing on the downward-sloping part of its short-run average total cost curve. 
C) it is producing below minimum efficient scale. 
D) marginal cost is below average total cost. 
E) marginal cost is below average variable cost.

Question 2

Use the figure below to answer the following questions.
   
Figure 11.4.2
-Refer to Figure 11.4.2, which illustrates the short-run average total cost curves for four different plant sizes. Which curve represents the average total cost for the largest of the four plant sizes?

Accepted Answer

A) ATCS1U1B1AS1U1B0 
B) ATCS1U1B1BS1U1B0 
C) ATCS1U1B1CS1U1B0 
D) ATCS1U1B1DS1U1B0 
E) either ATCS1U1B1CS1U1B0 or ATCS1U1B1DS1U1B0 
A) ATCS1U1B1AS1U1B0 
B) ATCS1U1B1BS1U1B0 
C) ATCS1U1B1CS1U1B0 
D) ATCS1U1B1DS1U1B0 
E) either ATCS1U1B1CS1U1B0 or ATCS1U1B1DS1U1B0

Question 3

The marginal cost curve slopes upward due to

Accepted Answer

A) diminishing marginal utility. 
B) diminishing marginal returns. 
C) technological inefficiency. 
D) economic inefficiency. 
E) none of the above 
A) diminishing marginal utility. 
B) diminishing marginal returns. 
C) technological inefficiency. 
D) economic inefficiency. 
E) none of the above

Question 4

The average fixed cost curve slopes downward due to

Accepted Answer

A) diminishing marginal utility. 
B) diminishing marginal returns. 
C) technological inefficiency. 
D) economic inefficiency. 
E) spreading total fixed cost over increasing output. 
A) diminishing marginal utility. 
B) diminishing marginal returns. 
C) technological inefficiency. 
D) economic inefficiency. 
E) spreading total fixed cost over increasing output.

Question 5

Use the figure below to answer the following questions.
   
Figure 11.3.2
-Refer to Figure 11.3.2, which illustrates short-run average and marginal cost curves. Which one of the following statements is false?

Accepted Answer

A) Average fixed cost decreases with output. 
B) The vertical gap between curves B and C is equal to average variable cost. 
C) Line B comes closer to line C as output increases because of a decrease in average fixed cost. 
D) Curve D is the marginal cost curve. 
E) The vertical gap between curves B and C is equal to average fixed cost. 
A) Average fixed cost decreases with output. 
B) The vertical gap between curves B and C is equal to average variable cost. 
C) Line B comes closer to line C as output increases because of a decrease in average fixed cost. 
D) Curve D is the marginal cost curve. 
E) The vertical gap between curves B and C is equal to average fixed cost.

Question 6

A firm's total fixed cost is $100. If total cost is $200 for one unit of output and $310 for two units, what is the marginal cost of the second unit?

Accepted Answer

A) $100 
B) $110 
C) $200 
D) $210 
E) $310 
A) $100 
B) $110 
C) $200 
D) $210 
E) $310

Question 7

Which one of the following statements is correct?

Accepted Answer

A) When marginal product is increasing, average product is decreasing. 
B) When average product is less than zero, marginal product is positive. 
C) When marginal product is increasing and greater than average product, average product is increasing. 
D) When marginal product is zero, total product is at its minimum. 
E) When average product exceeds marginal product, marginal product is increasing. 
A) When marginal product is increasing, average product is decreasing. 
B) When average product is less than zero, marginal product is positive. 
C) When marginal product is increasing and greater than average product, average product is increasing. 
D) When marginal product is zero, total product is at its minimum. 
E) When average product exceeds marginal product, marginal product is increasing.

Question 8

Diminishing marginal returns refers to a situation where the ________ of an additional worker is less than the ________ of the previous worker.

Accepted Answer

A) marginal cost; marginal cost 
B) average cost; average cost 
C) marginal product; marginal product 
D) average product; average product 
E) marginal product; average product 
A) marginal cost; marginal cost 
B) average cost; average cost 
C) marginal product; marginal product 
D) average product; average product 
E) marginal product; average product

Question 9

Table 11.2.1
  
-Refer to Table 11.2.1 which gives Tania's total product schedule. The average product when the firm hires two workers is

Accepted Answer

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

Question 10

Which type of cost does not change as the quantity of output produced changes?

Accepted Answer

A) average total cost 
B) marginal cost 
C) average fixed cost 
D) total fixed cost 
E) Both C and D are correct. 
A) average total cost 
B) marginal cost 
C) average fixed cost 
D) total fixed cost 
E) Both C and D are correct.

Question 11

Marginal product of labour is the increase in total product that results from a

Accepted Answer

A) one-unit increase in the quantity of labour employed, other inputs remaining the same. 
B) one-unit increase in the quantity of fixed inputs employed, holding the quantity of labour constant. 
C) one-unit increase in both the quantity of variable and fixed inputs. 
D) change in the cost of labour. 
E) 1 percent change in the quantity of labour and the quantity of capital employed. 
A) one-unit increase in the quantity of labour employed, other inputs remaining the same. 
B) one-unit increase in the quantity of fixed inputs employed, holding the quantity of labour constant. 
C) one-unit increase in both the quantity of variable and fixed inputs. 
D) change in the cost of labour. 
E) 1 percent change in the quantity of labour and the quantity of capital employed.

Question 12

The law of diminishing marginal returns states:

Accepted Answer

A) As the size of a plant increases, marginal product eventually decreases. 
B) As the size of a firm's plant increases, average cost eventually decreases. 
C) As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes. 
D) As a firm uses more of a variable factor of production, its average cost eventually decreases. 
E) As a firm uses more of a variable factor or production, total product eventually decreases. 
A) As the size of a plant increases, marginal product eventually decreases. 
B) As the size of a firm's plant increases, average cost eventually decreases. 
C) As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes. 
D) As a firm uses more of a variable factor of production, its average cost eventually decreases. 
E) As a firm uses more of a variable factor or production, total product eventually decreases.

Question 13

The total product curve is a graph that shows the

Accepted Answer

A) minimum cost of producing a given amount of output using a given technology. 
B) maximum profit from each unit of output sold. 
C) maximum output that a given quantity of labour can produce. 
D) maximum output that can be produced as technology advances. 
E) change in total product for a given change in marginal product. 
A) minimum cost of producing a given amount of output using a given technology. 
B) maximum profit from each unit of output sold. 
C) maximum output that a given quantity of labour can produce. 
D) maximum output that can be produced as technology advances. 
E) change in total product for a given change in marginal product.

Question 14

A cost that has been incurred and cannot be recovered is a

Accepted Answer

A) marginal cost. 
B) sunk cost. 
C) variable cost. 
D) business cost. 
E) significant cost. 
A) marginal cost. 
B) sunk cost. 
C) variable cost. 
D) business cost. 
E) significant cost.

Question 15

Which of the following statements by a restaurant owner refers to the law of diminishing marginal returns?

Accepted Answer

A) "The higher the quality of the ingredients we use, the higher the cost of producing each meal." 
B) "If we double the size of our premises and double everything else - kitchen staff, serving staff, equipment - we can increase the number of meals we serve, but not to double the current levels." 
C) "We can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds less meals than the previous worker because traffic in the kitchen will get worse." 
D) "We can serve the same number of meals with fewer kitchen staff, but we would have to buy more labour-saving kitchen equipment." 
E) "We can serve the same number of meals with less kitchen equipment, but we would have to hire more kitchen staff." 
A) "The higher the quality of the ingredients we use, the higher the cost of producing each meal." 
B) "If we double the size of our premises and double everything else - kitchen staff, serving staff, equipment - we can increase the number of meals we serve, but not to double the current levels." 
C) "We can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds less meals than the previous worker because traffic in the kitchen will get worse." 
D) "We can serve the same number of meals with fewer kitchen staff, but we would have to buy more labour-saving kitchen equipment." 
E) "We can serve the same number of meals with less kitchen equipment, but we would have to hire more kitchen staff."

Question 16

Use the figure below to answer the following questions.
   
Figure 11.2.1
-Refer to Figure 11.2.1 which illustrates Tania's total product curve. 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

As soon as diminishing returns set in, a firm's

Accepted Answer

A) marginal product increases. 
B) average fixed cost decreases. 
C) marginal cost decreases. 
D) marginal cost increases. 
E) total cost decreases. 
A) marginal product increases. 
B) average fixed cost decreases. 
C) marginal cost decreases. 
D) marginal cost increases. 
E) total cost decreases.

Question 18

The long-run average cost curve is the relationship between the lowest attainable average total cost and output, when plant size is ________ and labour is ________. The long-run average cost curve is made up of the segments of individual average ________ cost curves with the lowest average ________ cost for a given output.

Accepted Answer

A) varied; varied; variable; variable 
B) varied; varied; total; total 
C) varied; held constant; variable; variable 
D) held constant; varied; total; total 
E) held constant; varied; variable; variable 
A) varied; varied; variable; variable 
B) varied; varied; total; total 
C) varied; held constant; variable; variable 
D) held constant; varied; total; total 
E) held constant; varied; variable; variable

Question 19

When Coffee 'n' Cream in Victoria, British Columbia hires two students, 64 customers can be served in one hour. Suppose the manager of the restaurant observes that after hiring the third student, 80 customers are being served in one hour. The marginal product of the third student is ________ customers per hour.

Accepted Answer

A) 4 
B) 16 
C) 8 
D) 26.67 
E) 32 
A) 4 
B) 16 
C) 8 
D) 26.67 
E) 32

Question 20

Choose the correct statement.

Accepted Answer

A) The long run is a period of time in which the quantity of at least one input is fixed. 
B) The short run is a period of time in which the firm has sufficient time to change all its inputs. 
C) The long run is a time frame that lasts for 10 years. 
D) In the short run, the firm's plant is fixed. 
E) A firm always has plenty of time to make decisions about changing its inputs no matter if it is in a short run or long run position. 
A) The long run is a period of time in which the quantity of at least one input is fixed. 
B) The short run is a period of time in which the firm has sufficient time to change all its inputs. 
C) The long run is a time frame that lasts for 10 years. 
D) In the short run, the firm's plant is fixed. 
E) A firm always has plenty of time to make decisions about changing its inputs no matter if it is in a short run or long run position.

Exam 11: Output and Costs

A firm will want to increase its scale of plant if

Use the figure below to answer the following questions. Figure 11.4.2 -Refer to Figure 11.4.2, which illustrates the short-run average total cost curves for four different plant sizes. Which curve represents the average total cost for the largest of the four plant sizes?

The marginal cost curve slopes upward due to

The average fixed cost curve slopes downward due to

Use the figure below to answer the following questions. Figure 11.3.2 -Refer to Figure 11.3.2, which illustrates short-run average and marginal cost curves. Which one of the following statements is false?

A firm's total fixed cost is $100. If total cost is $200 for one unit of output and $310 for two units, what is the marginal cost of the second unit?

Which one of the following statements is correct?

Diminishing marginal returns refers to a situation where the ________ of an additional worker is less than the ________ of the previous worker.

Table 11.2.1 -Refer to Table 11.2.1 which gives Tania's total product schedule. The average product when the firm hires two workers is

Which type of cost does not change as the quantity of output produced changes?

Marginal product of labour is the increase in total product that results from a

The law of diminishing marginal returns states:

The total product curve is a graph that shows the

A cost that has been incurred and cannot be recovered is a

Which of the following statements by a restaurant owner refers to the law of diminishing marginal returns?

Use the figure below to answer the following questions. Figure 11.2.1 -Refer to Figure 11.2.1 which illustrates Tania's total product curve. Average product of labour reaches its maximum for the ________ worker.

As soon as diminishing returns set in, a firm's

Choose the correct statement.

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Diminishing marginal returns refers to a situation where the of an additional worker is less than the of the previous worker.