Question 1

Which of the following is not a determinant of a firm's cost functions?

Accepted Answer

A) The production function. 
B) The price of labor. 
C) The productivity of the firm's capital stock. 
D) The price of the firm's output. 
A) The production function. 
B) The price of labor. 
C) The productivity of the firm's capital stock. 
D) The price of the firm's output.

Question 2

Which of the following is the best example of "depreciation"?

Accepted Answer

A) An individual worker becoming tired at the end of an eight-hour work day. 
B) The notion that individuals obtain less utility from paying taxes than giving to charities. 
C) A truck used by a pizzeria to make deliveries is worth less at the end of one year. 
D) A rise in prices depreciating the value of consumers' real incomes. 
A) An individual worker becoming tired at the end of an eight-hour work day. 
B) The notion that individuals obtain less utility from paying taxes than giving to charities. 
C) A truck used by a pizzeria to make deliveries is worth less at the end of one year. 
D) A rise in prices depreciating the value of consumers' real incomes.

Question 3

Refer to Scenario 2.Diminishing marginal returns starts to occur between units:

Accepted Answer

A) 2 and 3. 
B) 3 and 4. 
C) 4 and 5. 
D) 5 and 6. 
A) 2 and 3. 
B) 3 and 4. 
C) 4 and 5. 
D) 5 and 6.

Question 4

Which of the following is true of the relationship between the marginal cost function and the average total cost and average variable cost functions?

Accepted Answer

A) If MC is greater than ATC and AVC, then ATC and AVC will increase. 
B) The ATC and AVC curves intersect the MC curve at minimum MC. 
C) The MC curve, ATC curve, and AVC curve all intersect at the same point. 
D) At each level of output, MC is equal to difference between AVC and ATC. 
A) If MC is greater than ATC and AVC, then ATC and AVC will increase. 
B) The ATC and AVC curves intersect the MC curve at minimum MC. 
C) The MC curve, ATC curve, and AVC curve all intersect at the same point. 
D) At each level of output, MC is equal to difference between AVC and ATC.

Question 5

Explain the difference between the short run and the long run as it relates to the firm's production function.Why is this distinction important to a firm's manager?

Accepted Answer

In the short run, the amount of at least

Question 6

So long as marginal cost is greater than average variable cost, both average variable cost and average total cost must increase as output is increased.

Accepted Answer

A) True 
 B)False

Question 7

Marginal product equals 0 when:

Accepted Answer

A) average product equals zero. 
B) total product equals average product. 
C) average product reached its minimum value. 
D) total product reaches its maximum value. 
A) average product equals zero. 
B) total product equals average product. 
C) average product reached its minimum value. 
D) total product reaches its maximum value.

Question 8

Which of the following is an example of an "implicit cost"?

Accepted Answer

A) Interest that could have been earned on retained earnings used by the firm to finance expansion. 
B) The payment of rent by the firm for the building in which it is housed. 
C) The interest payment made by the firm for funds borrowed from a bank. 
D) The payment of wages by the firm. 
A) Interest that could have been earned on retained earnings used by the firm to finance expansion. 
B) The payment of rent by the firm for the building in which it is housed. 
C) The interest payment made by the firm for funds borrowed from a bank. 
D) The payment of wages by the firm.

Question 9

The "long run" is defined as a period of time long enough for the quantities of all of the inputs to production to vary.

Accepted Answer

A) True 
 B)False

Question 10

The amount of output produced with an additional unit of variable input is referred to as:

Accepted Answer

A) total product. 
B) average variable product. 
C) marginal product. 
D) average fixed product. 
A) total product. 
B) average variable product. 
C) marginal product. 
D) average fixed product.

Question 11

So long as a firm is enjoying increasing marginal returns, a one unit increase in output will cause marginal costs to ________ and total costs to ________.

Accepted Answer

A) increase; increase 
B) decrease; increase 
C) increase; decrease 
D) decrease; decrease 
A) increase; increase 
B) decrease; increase 
C) increase; decrease 
D) decrease; decrease

Question 12

Which of the following would be classified as a short-run decision?

Accepted Answer

A) A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room. 
B) A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room. 
C) A trucking firm's decision to move to a smaller facility. 
D) A university's decision to add a new residence hall. 
A) A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room. 
B) A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room. 
C) A trucking firm's decision to move to a smaller facility. 
D) A university's decision to add a new residence hall.

Question 13

Complete the table below, which represents the production costs for a typical firm.(Round numbers to the nearest tenth.)
   
At what level of output do diminishing returns set in? How do you know?

Accepted Answer

@#IMG-DLM& Diminishing returns set in be

Question 14

The amount of money a firm pays to lease a building it uses for office space is called:

Accepted Answer

A) the full opportunity cost of production. 
B) an explicit cost. 
C) a real cost of production. 
D) an implicit cost. 
A) the full opportunity cost of production. 
B) an explicit cost. 
C) a real cost of production. 
D) an implicit cost.

Question 15

Refer to Scenario 1.What is the marginal product of the third hour of labor?

Accepted Answer

A) 60 
B) 80 
C) 100 
D) 240 
A) 60 
B) 80 
C) 100 
D) 240

Question 16

Refer to Scenario 3.The marginal cost of producing the sixth unit of output is:

Accepted Answer

A) $33.33 (approximate). 
B) $55. 
C) $200. 
D) $250. 
A) $33.33 (approximate). 
B) $55. 
C) $200. 
D) $250.

Question 17

Use the following information on a hypothetical short-run production function to answer questions a-c.
   
The price of labor is $20 per day.Ten units of capital are used each day, regardless of output level.The price of capital is $50 per unit.
a.Calculate the marginal and average variable product of each unit of labor input.
b.Calculate total, average total, average variable, and marginal costs.
c.Can you tell where diminishing marginal returns sets in?

Accepted Answer

a.b.
 @#IMG-DLM& c.Diminishing marginal

Question 18

The term "variable input" is used to refer to inputs that vary in terms of quality and, therefore, productivity.

Accepted Answer

A) True 
 B)False

Question 19

After the former CEO of the Coca-Cola Company began requiring employees to treat the rate of return on shareholder equity as an explicit cost, Coke's profits increased considerably.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true of the relationship among the average cost functions?

Accepted Answer

A) ATC = AFC - AVC 
B) AVC = AFC + ATC 
C) AFC = ATC + AVC 
D) AFC = ATC - AVC 
A) ATC = AFC - AVC 
B) AVC = AFC + ATC 
C) AFC = ATC + AVC 
D) AFC = ATC - AVC

Which of the following is not a determinant of a firm's cost functions?

Which of the following is the best example of "depreciation"?

Refer to Scenario 2.Diminishing marginal returns starts to occur between units:

Which of the following is true of the relationship between the marginal cost function and the average total cost and average variable cost functions?

Explain the difference between the short run and the long run as it relates to the firm's production function.Why is this distinction important to a firm's manager?

So long as marginal cost is greater than average variable cost, both average variable cost and average total cost must increase as output is increased.

Marginal product equals 0 when:

Which of the following is an example of an "implicit cost"?

The "long run" is defined as a period of time long enough for the quantities of all of the inputs to production to vary.

The amount of output produced with an additional unit of variable input is referred to as:

So long as a firm is enjoying increasing marginal returns, a one unit increase in output will cause marginal costs to and total costs to .

Which of the following would be classified as a short-run decision?

Complete the table below, which represents the production costs for a typical firm.(Round numbers to the nearest tenth.) At what level of output do diminishing returns set in? How do you know?

The amount of money a firm pays to lease a building it uses for office space is called:

Refer to Scenario 1.What is the marginal product of the third hour of labor?

Refer to Scenario 3.The marginal cost of producing the sixth unit of output is:

The term "variable input" is used to refer to inputs that vary in terms of quality and, therefore, productivity.

After the former CEO of the Coca-Cola Company began requiring employees to treat the rate of return on shareholder equity as an explicit cost, Coke's profits increased considerably.

Which of the following statements is true of the relationship among the average cost functions?

Managers and Economics

Demand, Supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters

Exam 5: Production and Cost Analysis in the Short Run

Which of the following is not a determinant of a firm's cost functions?

Which of the following is the best example of "depreciation"?

Refer to Scenario 2.Diminishing marginal returns starts to occur between units:

Which of the following is true of the relationship between the marginal cost function and the average total cost and average variable cost functions?

Explain the difference between the short run and the long run as it relates to the firm's production function.Why is this distinction important to a firm's manager?

So long as marginal cost is greater than average variable cost, both average variable cost and average total cost must increase as output is increased.

Marginal product equals 0 when:

Which of the following is an example of an "implicit cost"?

The "long run" is defined as a period of time long enough for the quantities of all of the inputs to production to vary.

The amount of output produced with an additional unit of variable input is referred to as:

So long as a firm is enjoying increasing marginal returns, a one unit increase in output will cause marginal costs to ________ and total costs to ________.

Which of the following would be classified as a short-run decision?

Complete the table below, which represents the production costs for a typical firm.(Round numbers to the nearest tenth.) At what level of output do diminishing returns set in? How do you know?

The amount of money a firm pays to lease a building it uses for office space is called:

Refer to Scenario 1.What is the marginal product of the third hour of labor?

Refer to Scenario 3.The marginal cost of producing the sixth unit of output is:

The term "variable input" is used to refer to inputs that vary in terms of quality and, therefore, productivity.

After the former CEO of the Coca-Cola Company began requiring employees to treat the rate of return on shareholder equity as an explicit cost, Coke's profits increased considerably.

Which of the following statements is true of the relationship among the average cost functions?

Managers and Economics

Demand, Supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters

So long as a firm is enjoying increasing marginal returns, a one unit increase in output will cause marginal costs to and total costs to .