Question 1

-In the above table, what is the average variable cost to produce 4 units of output?

Accepted Answer

A)  $30 
B)  $60 
C)  $55 
D)  $20 
A)  $30 
B)  $60 
C)  $55 
D)  $20

Question 2

Which of the following is TRUE for a firm in the long run?

Accepted Answer

A)  Variable costs will initially increase and then decrease. 
B)  The law of diminishing marginal product holds. 
C)  All costs are variable costs. 
D)  Variable costs will equal marginal cost at all output levels. 
A)  Variable costs will initially increase and then decrease. 
B)  The law of diminishing marginal product holds. 
C)  All costs are variable costs. 
D)  Variable costs will equal marginal cost at all output levels.

Question 3

A horizontal long-run average cost curve indicates

Accepted Answer

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

Question 4

Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in the

Accepted Answer

A)  production time. 
B)  corporation time. 
C)  long run. 
D)  short run. 
A)  production time. 
B)  corporation time. 
C)  long run. 
D)  short run.

Question 5

The short run is

Accepted Answer

A)  a period of time during which at least one input cannot be changed. 
B)  a period of time during which no inputs can be changed. 
C)  a period of time during which all inputs can be changed. 
D)  a period of time shorter than one year. 
A)  a period of time during which at least one input cannot be changed. 
B)  a period of time during which no inputs can be changed. 
C)  a period of time during which all inputs can be changed. 
D)  a period of time shorter than one year.

Question 6

The law of diminishing marginal product states that

Accepted Answer

A)  output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors. 
B)  successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output. 
C)  a doubling all inputs will double output. 
D)  variable costs tend to decrease with output. 
A)  output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors. 
B)  successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output. 
C)  a doubling all inputs will double output. 
D)  variable costs tend to decrease with output.

Question 7

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first three workers?

Accepted Answer

A)  65 cookies 
B)  30 cookies 
C)  17.5 cookies 
D)  21.67 cookies 
A)  65 cookies 
B)  30 cookies 
C)  17.5 cookies 
D)  21.67 cookies

Question 8

Use the information from the below table to answer following question(s).
  
-In the above table, the average product for 3 units of labor is

Accepted Answer

A)  30.0. 
B)  26.7. 
C)  26.3. 
D)  25.0. 
A)  30.0. 
B)  26.7. 
C)  26.3. 
D)  25.0.

Question 9

Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?

Accepted Answer

A)  There is always a definite relationship between average and marginal cost. 
B)  When marginal costs are less than average costs, the latter must fall. 
C)  When marginal costs are greater than average costs, the latter must rise. 
D)  There is no way for average variable costs to fall when marginal costs are falling. 
A)  There is always a definite relationship between average and marginal cost. 
B)  When marginal costs are less than average costs, the latter must fall. 
C)  When marginal costs are greater than average costs, the latter must rise. 
D)  There is no way for average variable costs to fall when marginal costs are falling.

Question 10

-In the above figure, the firm experiences constant returns to scale between output levels of

Accepted Answer

A)  zero and Q1. 
B)  Q2 and Q3. 
C)  Q3 and Q4. 
D)  any level greater than Q4. 
A)  zero and Q1. 
B)  Q2 and Q3. 
C)  Q3 and Q4. 
D)  any level greater than Q4.

Question 11

As the amount of a variable input increases, while all other inputs are held constant, total product will

Accepted Answer

A)  always increase. 
B)  always decrease. 
C)  initially decrease and then increase. 
D)  initially increase and then decrease. 
A)  always increase. 
B)  always decrease. 
C)  initially decrease and then increase. 
D)  initially increase and then decrease.

Question 12

In economics, how long is the long run?

Accepted Answer

A)  More than 12 months 
B)  24 months or longer 
C)  5 years or more 
D)  Whatever time it takes a firm to vary all inputs 
A)  More than 12 months 
B)  24 months or longer 
C)  5 years or more 
D)  Whatever time it takes a firm to vary all inputs

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Average variable costs always exceed average total costs. 
B)  Average fixed costs are constant. 
C)  Average variable cost reaches its minimum when average product equals its maximum. 
D)  Average fixed costs are always less than average variable costs. 
A)  Average variable costs always exceed average total costs. 
B)  Average fixed costs are constant. 
C)  Average variable cost reaches its minimum when average product equals its maximum. 
D)  Average fixed costs are always less than average variable costs.

Question 14

-In the above table, the marginal physical product of the 6th worker is

Accepted Answer

A)  5. 
B)  4. 
C)  3. 
D)  0. 
A)  5. 
B)  4. 
C)  3. 
D)  0.

Question 15

Which of the following is NOT a reason a firm might experience economies of scale?

Accepted Answer

A)  Specialization 
B)  Dimensional factors 
C)  Increasing long-run average costs 
D)  More productive equipment 
A)  Specialization 
B)  Dimensional factors 
C)  Increasing long-run average costs 
D)  More productive equipment

Question 16

The lowest rate of output per unit of time at which long-run average costs for a particular firm are at a minimum is

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns of scale. 
D)  minimum efficient scale. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns of scale. 
D)  minimum efficient scale.

Question 17

-Refer to the above table. At what quantity of labor does the law of diminishing marginal product set in?

Accepted Answer

A)  After 1 unit. 
B)  After 2 units. 
C)  After 3 units. 
D)  After 6 units. 
A)  After 1 unit. 
B)  After 2 units. 
C)  After 3 units. 
D)  After 6 units.

Question 18

Marginal cost is equal to average variable cost

Accepted Answer

A)  when average variable cost is at its minimum value. 
B)  when marginal cost is at its minimum value. 
C)  when average variable cost is getting smaller. 
D)  when average variable cost is getting larger. 
A)  when average variable cost is at its minimum value. 
B)  when marginal cost is at its minimum value. 
C)  when average variable cost is getting smaller. 
D)  when average variable cost is getting larger.

Question 19

Marginal physical product of the first worker is 100, 120 for the second, 80 for the third, 30 for the fourth, 5 for the fifth, 3 for the sixth, 2 for the seventh, 1 for the eighth, and 0 for the ninth. What is total product for the fifth worker and the ninth worker respectively?

Accepted Answer

A)  335; 341 
B)  335; 0 
C)  5; 0 
D)  0; 5 
A)  335; 341 
B)  335; 0 
C)  5; 0 
D)  0; 5

Question 20

-Refer to the above figure. Diseconomies of scale exist

Accepted Answer

A)  over the entire range of output. 
B)  from output   to   . 
C)  up to output   . 
D)  after output   . 
A)  over the entire range of output. 
B)  from output   to   . 
C)  up to output   . 
D)  after output   .

Exam 22: The Firm: Cost and Output Determination

-In the above table, what is the average variable cost to produce 4 units of output?

Which of the following is TRUE for a firm in the long run?

A horizontal long-run average cost curve indicates

Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in the

The short run is

The law of diminishing marginal product states that

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first three workers?

Use the information from the below table to answer following question(s). -In the above table, the average product for 3 units of labor is

Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?

-In the above figure, the firm experiences constant returns to scale between output levels of

As the amount of a variable input increases, while all other inputs are held constant, total product will

In economics, how long is the long run?

Which of the following statements is correct?

-In the above table, the marginal physical product of the 6th worker is

Which of the following is NOT a reason a firm might experience economies of scale?

The lowest rate of output per unit of time at which long-run average costs for a particular firm are at a minimum is

-Refer to the above table. At what quantity of labor does the law of diminishing marginal product set in?

Marginal cost is equal to average variable cost

Marginal physical product of the first worker is 100, 120 for the second, 80 for the third, 30 for the fourth, 5 for the fifth, 3 for the sixth, 2 for the seventh, 1 for the eighth, and 0 for the ninth. What is total product for the fifth worker and the ninth worker respectively?

-Refer to the above figure. Diseconomies of scale exist

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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