Question 1

When a firm uses technological improvements to increase output from the same amount of inputs, the result is

Accepted Answer

A)  a new production function. 
B)  losses. 
C)  guaranteed profits. 
D)  diseconomies of scale. 
A)  a new production function. 
B)  losses. 
C)  guaranteed profits. 
D)  diseconomies of scale.

Question 2

Which one of the following statements is FALSE?

Accepted Answer

A)  TC = TFC + TVC 
B)  ATC = AFC + AVC 
C)  AFC = TFC divided by Q 
D)  MC = TC divided by Q 
A)  TC = TFC + TVC 
B)  ATC = AFC + AVC 
C)  AFC = TFC divided by Q 
D)  MC = TC divided by Q

Question 3

If a firm is experiencing diseconomies of scale, then

Accepted Answer

A)  proportional increases in all inputs result in proportional increases in output. 
B)  the long-run average cost curve is rising as output expands. 
C)  the long-run average cost curve is decreasing as output expands. 
D)  the firm should expand the size of its operation. 
A)  proportional increases in all inputs result in proportional increases in output. 
B)  the long-run average cost curve is rising as output expands. 
C)  the long-run average cost curve is decreasing as output expands. 
D)  the firm should expand the size of its operation.

Question 4

Graphically, what does the marginal product curve for a labor input look like? Explain in words.

Accepted Answer

Typically, the marginal product of labor

Question 5

Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that

Accepted Answer

A)  marginal product is increasing from workers 1-50 and then becomes negative after worker 51. 
B)  marginal product is increasing from workers 1-50, decreasing after 51 workers, and becomes negative after the 101st worker. 
C)  marginal product is decreasing from workers 1-101, becoming negative at the 102nd worker. 
D)  marginal product is increasing from workers 1-50, constant from workers 51 to 101, and is decreasing after that. 
A)  marginal product is increasing from workers 1-50 and then becomes negative after worker 51. 
B)  marginal product is increasing from workers 1-50, decreasing after 51 workers, and becomes negative after the 101st worker. 
C)  marginal product is decreasing from workers 1-101, becoming negative at the 102nd worker. 
D)  marginal product is increasing from workers 1-50, constant from workers 51 to 101, and is decreasing after that.

Question 6

Minimum efficient scale

Accepted Answer

A)  is the point at which economies of scale begin for a particular firm. 
B)  is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm. 
C)  applies only to firms with U-shaped long-run average cost curves. 
D)  is the point at which diseconomies of scale begin for a particular firm. 
A)  is the point at which economies of scale begin for a particular firm. 
B)  is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm. 
C)  applies only to firms with U-shaped long-run average cost curves. 
D)  is the point at which diseconomies of scale begin for a particular firm.

Question 7

-Using the above table, we see that when output is 4 units, average total cost equals

Accepted Answer

A)  $24.00. 
B)  $14.00. 
C)  $3.50. 
D)  $6.00. 
A)  $24.00. 
B)  $14.00. 
C)  $3.50. 
D)  $6.00.

Question 8

The production function

Accepted Answer

A)  shows the maximum level of output for a given set of inputs. 
B)  is an economic relationship between revenue and cost. 
C)  shows the relationship between input prices and amount of input used. 
D)  always shows increasing marginal product of labor. 
A)  shows the maximum level of output for a given set of inputs. 
B)  is an economic relationship between revenue and cost. 
C)  shows the relationship between input prices and amount of input used. 
D)  always shows increasing marginal product of labor.

Question 9

The time frame in which all factors of production can vary is

Accepted Answer

A)  the short run. 
B)  the intermediate run. 
C)  the long run. 
D)  indeterminate. 
A)  the short run. 
B)  the intermediate run. 
C)  the long run. 
D)  indeterminate.

Question 10

Marginal cost is equal to

Accepted Answer

A)  change in total cost divided by change in output. 
B)  change in total variable cost divided by change in output. 
C)  total variable cost divided by quantity of output. 
D)  Both A and B are correct. 
A)  change in total cost divided by change in output. 
B)  change in total variable cost divided by change in output. 
C)  total variable cost divided by quantity of output. 
D)  Both A and B are correct.

Question 11

-Refer to the above table. What are total fixed costs at an output of 2 units?

Accepted Answer

A)  $50 
B)  $100 
C)  $150 
D)  $200 
A)  $50 
B)  $100 
C)  $150 
D)  $200

Question 12

-In the above table, the average physical product of the 3rd worker is

Accepted Answer

A)  5. 
B)  4. 
C)  3. 
D)  12. 
A)  5. 
B)  4. 
C)  3. 
D)  12.

Question 13

-Refer to the above table. When output rises from 2 units to 3 units, marginal costs are

Accepted Answer

A)  $7. 
B)  $10. 
C)  $22. 
D)  $41. 
A)  $7. 
B)  $10. 
C)  $22. 
D)  $41.

Question 14

When the marginal physical product is falling,

Accepted Answer

A)  marginal cost is rising. 
B)  average fixed costs are rising. 
C)  total costs are falling. 
D)  average variable costs are falling. 
A)  marginal cost is rising. 
B)  average fixed costs are rising. 
C)  total costs are falling. 
D)  average variable costs are falling.

Question 15

-Use the above figure. The AFC at output level 20 is

Accepted Answer

A)  $10.00. 
B)  $0.50. 
C)  $3.00. 
D)  $1.00. 
A)  $10.00. 
B)  $0.50. 
C)  $3.00. 
D)  $1.00.

Question 16

Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average variable costs of $50. The firm's total fixed costs are

Accepted Answer

A)  $50. 
B)  $5,000. 
C)  $150. 
D)  $15,000. 
A)  $50. 
B)  $5,000. 
C)  $150. 
D)  $15,000.

Question 17

The time period during which a firm's capital is fixed but its labor is variable is called

Accepted Answer

A)  the planning horizon. 
B)  the short run. 
C)  the long run. 
D)  the very long run. 
A)  the planning horizon. 
B)  the short run. 
C)  the long run. 
D)  the very long run.

Question 18

As a firm's production increases in the short run, the average total cost curve eventually slopes upward because

Accepted Answer

A)  marginal physical product eventually declines as output increases. 
B)  marginal cost eventually declines as output increases. 
C)  average fixed cost declines with increases in output. 
D)  average physical product rises with increases in output. 
A)  marginal physical product eventually declines as output increases. 
B)  marginal cost eventually declines as output increases. 
C)  average fixed cost declines with increases in output. 
D)  average physical product rises with increases in output.

Question 19

The typical cost curves are U-shaped due to the

Accepted Answer

A)  law of diminishing marginal utility. 
B)  law of supply. 
C)  law of demand. 
D)  law of diminishing marginal product. 
A)  law of diminishing marginal utility. 
B)  law of supply. 
C)  law of demand. 
D)  law of diminishing marginal product.

Question 20

Another term for the total quantity of output is

Accepted Answer

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

Exam 22: The Firm: Cost and Output Determination

When a firm uses technological improvements to increase output from the same amount of inputs, the result is

Which one of the following statements is FALSE?

If a firm is experiencing diseconomies of scale, then

Graphically, what does the marginal product curve for a labor input look like? Explain in words.

Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that

Minimum efficient scale

-Using the above table, we see that when output is 4 units, average total cost equals

The production function

The time frame in which all factors of production can vary is

Marginal cost is equal to

-Refer to the above table. What are total fixed costs at an output of 2 units?

-In the above table, the average physical product of the 3rd worker is

-Refer to the above table. When output rises from 2 units to 3 units, marginal costs are

When the marginal physical product is falling,

-Use the above figure. The AFC at output level 20 is

Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average variable costs of $50. The firm's total fixed costs are

The time period during which a firm's capital is fixed but its labor is variable is called

As a firm's production increases in the short run, the average total cost curve eventually slopes upward because

The typical cost curves are U-shaped due to the

Another term for the total quantity of output is

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

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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

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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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