Question 1

Diminishing marginal returns occur when

Accepted Answer

A)  the average product of the variable input eventually diminishes. 
B)  the marginal product of an additional worker is less than the marginal product of the previous worker hired. 
C)  the firm hires cheap, less-skilled workers in place of expensive, high-skilled workers. 
D)  total product diminishes. 
A)  the average product of the variable input eventually diminishes. 
B)  the marginal product of an additional worker is less than the marginal product of the previous worker hired. 
C)  the firm hires cheap, less-skilled workers in place of expensive, high-skilled workers. 
D)  total product diminishes.

Question 2

-In the above figure, curve D slopes downward because

Accepted Answer

A)  average fixed costs decrease as output increases. 
B)  all costs decrease as output increases. 
C)  there are diminishing returns. 
D)  there are decreasing marginal costs. 
A)  average fixed costs decrease as output increases. 
B)  all costs decrease as output increases. 
C)  there are diminishing returns. 
D)  there are decreasing marginal costs.

Question 3

A firm experiences ________ when its ________ downward as output increases.

Accepted Answer

A)  diseconomies of scale; average total cost curve slopes 
B)  economies of scale; long-run average cost curve slopes 
C)  diminishing marginal returns; long-run average cost curve slopes 
D)  diminishing marginal returns; average total cost curve shifts 
A)  diseconomies of scale; average total cost curve slopes 
B)  economies of scale; long-run average cost curve slopes 
C)  diminishing marginal returns; long-run average cost curve slopes 
D)  diminishing marginal returns; average total cost curve shifts

Question 4

When long-run average costs increase as output increases, there are

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  constant marginal costs. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  constant marginal costs.

Question 5

-The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is best to use to produce 80 units per day?

Accepted Answer

A)  plant A 
B)  plant B 
C)  plant C 
D)  plant D 
A)  plant A 
B)  plant B 
C)  plant C 
D)  plant D

Question 6

If marginal cost exceeds average variable cost, then ________ cost is ________ as output increases.

Accepted Answer

A)  average total; at a maximum 
B)  average total; falling 
C)  average variable; rising 
D)  average fixed; at a maximum 
A)  average total; at a maximum 
B)  average total; falling 
C)  average variable; rising 
D)  average fixed; at a maximum

Question 7

As output increases, the slope of the curve showing the firm's average fixed cost is

Accepted Answer

A)  first negative, then positive. 
B)  first positive, then negative. 
C)  always negative. 
D)  always positive. 
A)  first negative, then positive. 
B)  first positive, then negative. 
C)  always negative. 
D)  always positive.

Question 8

Cost schedule  
-In the above table, the average total cost of producing 14 units of output is

Accepted Answer

A)  $5.71. 
B)  $6.75. 
C)  $7.00. 
D)  $7.86. 
A)  $5.71. 
B)  $6.75. 
C)  $7.00. 
D)  $7.86.

Question 9

-The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?

Accepted Answer

A)  $200 
B)  $300 
C)  $400 
D)  $500 
A)  $200 
B)  $300 
C)  $400 
D)  $500

Question 10

A change in technology that shifts the firm's total product curve upward without changing the quantity of capital used

Accepted Answer

A)  shifts the average total cost curve upward. 
B)  shifts the average total cost curve downward. 
C)  does not change the cost curves. 
D)  shifts the marginal cost curve upward. 
A)  shifts the average total cost curve upward. 
B)  shifts the average total cost curve downward. 
C)  does not change the cost curves. 
D)  shifts the marginal cost curve upward.

Question 11

As output increases, AVC approaches ATC because of

Accepted Answer

A)  diseconomies of scale. 
B)  diminishing marginal returns. 
C)  decreasing average fixed cost. 
D)  increasing marginal cost. 
A)  diseconomies of scale. 
B)  diminishing marginal returns. 
C)  decreasing average fixed cost. 
D)  increasing marginal cost.

Question 12

Total Product, Marginal Product, Average Product  
-In the above table, the marginal product of the third worker is

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
A)  1. 
B)  2. 
C)  3. 
D)  4.

Question 13

-The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 1?

Accepted Answer

A)  0-20 
B)  0-25 
C)  20-25 
D)  greater than 25 
A)  0-20 
B)  0-25 
C)  20-25 
D)  greater than 25

Question 14

A firm's long-run average cost curve is derived from a series of short-run average total cost curves.

Accepted Answer

A) True 
 B)False

Question 15

Output (pizzas per day)  
-Tony's Pizza's production function is shown in the table above. Tony currently operates Plant 1. He hires workers at a wage rate of $50 a day and his total fixed cost is $100.
a) Calculate Tony's Pizza's total variable cost and total cost for each output level.
b) Calculate Tony's marginal costs.
c) Calculate the average fixed costs, average variable costs, and average total costs.
d) Draw Tony's marginal, average variable, and average total cost curves in one figure. What is the relationship between marginal cost and average cost?

Accepted Answer

@#IMG-DLM& a) The total variable cost and total co

Question 16

Health care costs rose more than 10 percent in 2011, according to a survey of insurers by Aon Consulting Worldwide. Which of the following would be a fixed cost in a hospital?

Accepted Answer

A)  an MRI machine 
B)  bandages 
C)  nurses 
D)  syringes 
A)  an MRI machine 
B)  bandages 
C)  nurses 
D)  syringes

Question 17

-Farmer Seth has a perfectly flat long-run average total cost curve over the range of output from 10,000 bushels of wheat to 100,000 bushels of wheat. Hence, over this range of output, Farmer Seth definitely experiences

Accepted Answer

A)  constant marginal returns. 
B)  constant returns to scale. 
C)  constant economies of scale. 
D)  none of the above. 
A)  constant marginal returns. 
B)  constant returns to scale. 
C)  constant economies of scale. 
D)  none of the above.

Question 18

The long-run average cost curve is the

Accepted Answer

A)  change in total product divided by the change in capital when the quantity of labor is constant. 
B)  change in output resulting from a one-unit increase in the quantity of capital. 
C)  relationship between the lowest attainable average total cost and output when both the plant size and labor are varied. 
D)  relationship between the lowest attainable average total cost and output when both the plant size and labor are fixed. 
A)  change in total product divided by the change in capital when the quantity of labor is constant. 
B)  change in output resulting from a one-unit increase in the quantity of capital. 
C)  relationship between the lowest attainable average total cost and output when both the plant size and labor are varied. 
D)  relationship between the lowest attainable average total cost and output when both the plant size and labor are fixed.

Question 19

When a firm's long-run average cost is constant as output increases, the firm is experiencing constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 20

-In the above figure, the long-run average cost curve exhibits economies of scale

Accepted Answer

A)  between 5 and 10 units per hour. 
B)  between 10 and 20 units per hour. 
C)  between 20 and 25 units per hour. 
D)  along the entire curve. 
A)  between 5 and 10 units per hour. 
B)  between 10 and 20 units per hour. 
C)  between 20 and 25 units per hour. 
D)  along the entire curve.

Diminishing marginal returns occur when

-In the above figure, curve D slopes downward because

A firm experiences when its downward as output increases.

When long-run average costs increase as output increases, there are

-The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is best to use to produce 80 units per day?

If marginal cost exceeds average variable cost, then cost is as output increases.

As output increases, the slope of the curve showing the firm's average fixed cost is

Cost schedule -In the above table, the average total cost of producing 14 units of output is

-The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?

A change in technology that shifts the firm's total product curve upward without changing the quantity of capital used

As output increases, AVC approaches ATC because of

Total Product, Marginal Product, Average Product -In the above table, the marginal product of the third worker is

-The average total cost curves for Plant 1, ATC₀, and Plant 2, ATC₁, are shown in the figure above. Over what range of output is it efficient to operate Plant 1?

A firm's long-run average cost curve is derived from a series of short-run average total cost curves.

Health care costs rose more than 10 percent in 2011, according to a survey of insurers by Aon Consulting Worldwide. Which of the following would be a fixed cost in a hospital?

-Farmer Seth has a perfectly flat long-run average total cost curve over the range of output from 10,000 bushels of wheat to 100,000 bushels of wheat. Hence, over this range of output, Farmer Seth definitely experiences

The long-run average cost curve is the

When a firm's long-run average cost is constant as output increases, the firm is experiencing constant returns to scale.

-In the above figure, the long-run average cost curve exhibits economies of scale

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 11: Output and Costs

Diminishing marginal returns occur when

-In the above figure, curve D slopes downward because

A firm experiences ________ when its ________ downward as output increases.

When long-run average costs increase as output increases, there are

-The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is best to use to produce 80 units per day?

If marginal cost exceeds average variable cost, then ________ cost is ________ as output increases.

As output increases, the slope of the curve showing the firm's average fixed cost is

Cost schedule -In the above table, the average total cost of producing 14 units of output is

-The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?

A change in technology that shifts the firm's total product curve upward without changing the quantity of capital used

As output increases, AVC approaches ATC because of

Total Product, Marginal Product, Average Product -In the above table, the marginal product of the third worker is

-The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 1?

A firm's long-run average cost curve is derived from a series of short-run average total cost curves.

Health care costs rose more than 10 percent in 2011, according to a survey of insurers by Aon Consulting Worldwide. Which of the following would be a fixed cost in a hospital?

-Farmer Seth has a perfectly flat long-run average total cost curve over the range of output from 10,000 bushels of wheat to 100,000 bushels of wheat. Hence, over this range of output, Farmer Seth definitely experiences

The long-run average cost curve is the

When a firm's long-run average cost is constant as output increases, the firm is experiencing constant returns to scale.

-In the above figure, the long-run average cost curve exhibits economies of scale

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

A firm experiences when its downward as output increases.

If marginal cost exceeds average variable cost, then cost is as output increases.

-The average total cost curves for Plant 1, ATC₀, and Plant 2, ATC₁, are shown in the figure above. Over what range of output is it efficient to operate Plant 1?