Question 1

"All average costs have a U-shaped curve." Do you agree or disagree? Explain why?

Accepted Answer

Disagree. It is true that the average va

Question 2

If total costs are $50,000 when 1000 units are produced, and total costs are $50,100 when 1001 units are produced, we can conclude that

Accepted Answer

A)  average variable costs are $100. 
B)  average total costs are $100. 
C)  average fixed costs are $100. 
D)  marginal costs are $100. 
A)  average variable costs are $100. 
B)  average total costs are $100. 
C)  average fixed costs are $100. 
D)  marginal costs are $100.

Question 3

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 marginal product of the 2nd worker?

Accepted Answer

A)  15 cookies 
B)  20 cookies 
C)  30 cookies 
D)  35 cookies 
A)  15 cookies 
B)  20 cookies 
C)  30 cookies 
D)  35 cookies

Question 4

Which of the following is correct?

Accepted Answer

A)  AFC = TC/Q - TVC/Q 
B)  AVC = TVC - AFC 
C)  TC = AVC∗Q 
D)  MC = TC - TVC 
A)  AFC = TC/Q - TVC/Q 
B)  AVC = TVC - AFC 
C)  TC = AVC∗Q 
D)  MC = TC - TVC

Question 5

A fixed resource is one that

Accepted Answer

A)  is physically tied to a specific location. 
B)  costs more than the average daily revenue of the firm. 
C)  cannot be varied in the short run. 
D)  can be disposed of only if the firm goes out of business. 
A)  is physically tied to a specific location. 
B)  costs more than the average daily revenue of the firm. 
C)  cannot be varied in the short run. 
D)  can be disposed of only if the firm goes out of business.

Question 6

An increase in output would result in a rise in long-run average costs when there are

Accepted Answer

A)  economies of scale. 
B)  diseconomies to scale. 
C)  constant returns to scale. 
D)  the law of diminishing marginal product. 
A)  economies of scale. 
B)  diseconomies to scale. 
C)  constant returns to scale. 
D)  the law of diminishing marginal product.

Question 7

The total cost of the firm

Accepted Answer

A)  includes explicit costs but excludes implicit costs. 
B)  includes implicit costs but excludes explicit costs. 
C)  includes implicit and explicit costs. 
D)  includes implicit and explicit costs but excludes a normal rate of return on investment. 
A)  includes explicit costs but excludes implicit costs. 
B)  includes implicit costs but excludes explicit costs. 
C)  includes implicit and explicit costs. 
D)  includes implicit and explicit costs but excludes a normal rate of return on investment.

Question 8

When total product is increasing at a decreasing rate, marginal product is

Accepted Answer

A)  positive and increasing. 
B)  positive and decreasing. 
C)  constant. 
D)  negative. 
A)  positive and increasing. 
B)  positive and decreasing. 
C)  constant. 
D)  negative.

Question 9

-Refer to the above table. When the quantity of labor equals 2, what does the average product equal?

Accepted Answer

A)  46 
B)  23 
C)  26 
D)  92 
A)  46 
B)  23 
C)  26 
D)  92

Question 10

Economies to scale are illustrated by

Accepted Answer

A)  a downward sloping long-run average cost curve. 
B)  a horizontal long-run average cost curve. 
C)  an upward sloping long-run average cost curve. 
D)  a long-run average cost curve that is shaped like an upside down U. 
A)  a downward sloping long-run average cost curve. 
B)  a horizontal long-run average cost curve. 
C)  an upward sloping long-run average cost curve. 
D)  a long-run average cost curve that is shaped like an upside down U.

Question 11

Diseconomies to scale are illustrated by

Accepted Answer

A)  a downward sloping long-run average cost curve. 
B)  a horizontal long-run average cost curve. 
C)  an upward sloping long-run average cost curve. 
D)  a long-run average cost curve that is shaped like an upside down U. 
A)  a downward sloping long-run average cost curve. 
B)  a horizontal long-run average cost curve. 
C)  an upward sloping long-run average cost curve. 
D)  a long-run average cost curve that is shaped like an upside down U.

Question 12

Production

Accepted Answer

A)  is a process by which resources are produced. 
B)  is a process by which resources are transferred into goods and services. 
C)  only applies to manufacturing of goods. 
D)  is carried on by corporations, but not by sole proprietorships. 
A)  is a process by which resources are produced. 
B)  is a process by which resources are transferred into goods and services. 
C)  only applies to manufacturing of goods. 
D)  is carried on by corporations, but not by sole proprietorships.

Question 13

The short run is

Accepted Answer

A)  a year or less. 
B)  up to three years. 
C)  the period of time in which the firm can vary its rate of output. 
D)  the period of time in which the firm cannot change its use of at least one input. 
A)  a year or less. 
B)  up to three years. 
C)  the period of time in which the firm can vary its rate of output. 
D)  the period of time in which the firm cannot change its use of at least one input.

Question 14

The marginal productivity of labor will eventually decrease as more workers are employed because

Accepted Answer

A)  average product is increasing. 
B)  total product is decreasing. 
C)  the amount of capital will also be increasing. 
D)  on the average each worker will have fewer inputs to work with. 
A)  average product is increasing. 
B)  total product is decreasing. 
C)  the amount of capital will also be increasing. 
D)  on the average each worker will have fewer inputs to work with.

Question 15

-Use the above figure. At an output equal to "Q" the total cost for the firm will be the area

Accepted Answer

A)  OQDC. 
B)  OQFA. 
C)  OQBC. 
D)  OQEB. 
A)  OQDC. 
B)  OQFA. 
C)  OQBC. 
D)  OQEB.

Question 16

A firm has the following production relationship between labor and output, for a fixed capital stock.
  
-According to the above table, at what usage of labor does diminishing marginal product begin?

Accepted Answer

A)  1 
B)  2 
C)  4 
D)  5 
A)  1 
B)  2 
C)  4 
D)  5

Question 17

The long run is

Accepted Answer

A)  over one year. 
B)  over five years. 
C)  when all factors of production are fixed. 
D)  the time period in which all factors of production can be varied. 
A)  over one year. 
B)  over five years. 
C)  when all factors of production are fixed. 
D)  the time period in which all factors of production can be varied.

Question 18

Economies of scale exist where the long-run average cost curve is

Accepted Answer

A)  horizontal. 
B)  downward sloping. 
C)  upward sloping. 
D)  tangent to the marginal cost curve. 
A)  horizontal. 
B)  downward sloping. 
C)  upward sloping. 
D)  tangent to the marginal cost curve.

Question 19

An increase in output would result in no change in long-run average costs when there are

Accepted Answer

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

Question 20

If four laborers were hired and we discovered that we could produce 88 units of production, what is the average physical product of labor?

Accepted Answer

A)  44 
B)  352 
C)  11 
D)  22 
A)  44 
B)  352 
C)  11 
D)  22

Exam 22: The Firm: Cost and Output Determination

"All average costs have a U-shaped curve." Do you agree or disagree? Explain why?

If total costs are $50,000 when 1000 units are produced, and total costs are $50,100 when 1001 units are produced, we can conclude 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 marginal product of the 2nd worker?

Which of the following is correct?

A fixed resource is one that

An increase in output would result in a rise in long-run average costs when there are

The total cost of the firm

When total product is increasing at a decreasing rate, marginal product is

-Refer to the above table. When the quantity of labor equals 2, what does the average product equal?

Economies to scale are illustrated by

Diseconomies to scale are illustrated by

Production

The short run is

The marginal productivity of labor will eventually decrease as more workers are employed because

-Use the above figure. At an output equal to "Q" the total cost for the firm will be the area

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, at what usage of labor does diminishing marginal product begin?

The long run is

Economies of scale exist where the long-run average cost curve is

An increase in output would result in no change in long-run average costs when there are

If four laborers were hired and we discovered that we could produce 88 units of production, what is the average physical product of labor?

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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