Question 1

Total product divided by the variable input is

Accepted Answer

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

Question 2

If the marginal product of an input is falling, then

Accepted Answer

A)  average fixed cost is constant. 
B)  marginal cost is falling. 
C)  average total cost is constant. 
D)  marginal cost is rising. 
A)  average fixed cost is constant. 
B)  marginal cost is falling. 
C)  average total cost is constant. 
D)  marginal cost is rising.

Question 3

If in the short run total product is decreasing as more workers are hired, then the marginal physical product is

Accepted Answer

A)  increasing. 
B)  zero. 
C)  negative. 
D)  positive. 
A)  increasing. 
B)  zero. 
C)  negative. 
D)  positive.

Question 4

-In the above table, total fixed costs are

Accepted Answer

A)  $10.00. 
B)  $5.00. 
C)  $8.00. 
D)  $18.00. 
A)  $10.00. 
B)  $5.00. 
C)  $8.00. 
D)  $18.00.

Question 5

When average variable costs are rising,

Accepted Answer

A)  marginal physical product is also rising. 
B)  marginal costs is falling. 
C)  average physical product is rising. 
D)  average physical product is falling. 
A)  marginal physical product is also rising. 
B)  marginal costs is falling. 
C)  average physical product is rising. 
D)  average physical product is falling.

Question 6

Which of the following physical relationships might generate economies of scale?

Accepted Answer

A)  Proportionally larger pipes can transport more than a proportional increase in oil. 
B)  Larger equipment tends to weigh more and use more fuel on a per-unit-of-output basis. 
C)  Each lift truck requires one lift truck driver. 
D)  A doubling of all inputs leads to a doubling of output. 
A)  Proportionally larger pipes can transport more than a proportional increase in oil. 
B)  Larger equipment tends to weigh more and use more fuel on a per-unit-of-output basis. 
C)  Each lift truck requires one lift truck driver. 
D)  A doubling of all inputs leads to a doubling of output.

Question 7

Any activity that results in the conversion of resources into products that can be used in consumption is

Accepted Answer

A)  planning. 
B)  investment. 
C)  production. 
D)  discounting. 
A)  planning. 
B)  investment. 
C)  production. 
D)  discounting.

Question 8

During the short run, a firm cannot

Accepted Answer

A)  increase its use of labor. 
B)  change its plant size. 
C)  purchase more raw materials. 
D)  change its variable costs. 
A)  increase its use of labor. 
B)  change its plant size. 
C)  purchase more raw materials. 
D)  change its variable costs.

Question 9

When marginal product is rising,

Accepted Answer

A)  total product is falling. 
B)  marginal cost is falling. 
C)  marginal cost is rising. 
D)  average fixed cost is rising. 
A)  total product is falling. 
B)  marginal cost is falling. 
C)  marginal cost is rising. 
D)  average fixed cost is rising.

Question 10

The change in output caused by a one-unit change in labor is referred to as the

Accepted Answer

A)  compounded physical product of labor. 
B)  average physical product of labor. 
C)  marginal physical product of labor. 
D)  total physical product of labor. 
A)  compounded physical product of labor. 
B)  average physical product of labor. 
C)  marginal physical product of labor. 
D)  total physical product of labor.

Question 11

With a given plant size, an increase in output will NOT result in an increase in

Accepted Answer

A)  total cost. 
B)  average fixed cost. 
C)  total fixed cost. 
D)  average variable cost. 
A)  total cost. 
B)  average fixed cost. 
C)  total fixed cost. 
D)  average variable cost.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  TC = TFC + TVC 
B)  TC = average product + marginal product 
C)  TC = TFC - TVC 
D)  TC = average physical product - marginal physical product 
A)  TC = TFC + TVC 
B)  TC = average product + marginal product 
C)  TC = TFC - TVC 
D)  TC = average physical product - marginal physical product

Question 13

Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average fixed costs of $20. The firm's total variable cost at this output level is

Accepted Answer

A)  $120. 
B)  $80. 
C)  $8,000. 
D)  $12,000. 
A)  $120. 
B)  $80. 
C)  $8,000. 
D)  $12,000.

Question 14

"Diminishing marginal product is a basic law because new workers are always less qualified than the existing workers." Do you agree or disagree? Explain.

Accepted Answer

Disagree. Diminishing marginal product o

Question 15

How is the long-run average cost curve found? What is its importance to the firm?

Accepted Answer

The long-run average cost curve is the l

Question 16

The average product of labor is equal to

Accepted Answer

A)  total product divided by quantity of labor. 
B)  change in total product divided by quantity of labor. 
C)  total product divided by change in quantity of labor. 
D)  change in total product divided by change in quantity of labor. 
A)  total product divided by quantity of labor. 
B)  change in total product divided by quantity of labor. 
C)  total product divided by change in quantity of labor. 
D)  change in total product divided by change in quantity of labor.

Question 17

When output is 100 units, the firm's total fixed cost is $500. What will this firm's total fixed cost be if output doubles to 200 units?

Accepted Answer

A)  $1,000 
B)  $500 
C)  $250 
D)  Can't tell from the information provided 
A)  $1,000 
B)  $500 
C)  $250 
D)  Can't tell from the information provided

Question 18

Short-run cost relationships for a firm are

Accepted Answer

A)  determined by the law of diminishing marginal product. 
B)  determined by the specific long-run relationships that exist. 
C)  due to the level of wages relative to other input prices. 
D)  due to the normal contractual relations in a market. 
A)  determined by the law of diminishing marginal product. 
B)  determined by the specific long-run relationships that exist. 
C)  due to the level of wages relative to other input prices. 
D)  due to the normal contractual relations in a market.

Question 19

The marginal product of labor may increase rapidly initially as more

Accepted Answer

A)  workers are able to specialize. 
B)  total product is decreasing. 
C)  the amount of other inputs is held constant. 
D)  workers will get crowded in a fixed factory. 
A)  workers are able to specialize. 
B)  total product is decreasing. 
C)  the amount of other inputs is held constant. 
D)  workers will get crowded in a fixed factory.

Question 20

If the marginal product curve is increasing from workers 1-89 and then decreases steadily, crossing the horizontal axis at 190 workers, we know that

Accepted Answer

A)  the total output curve increases from workers 1-89, decreases from workers 90-189, and becomes 0 at the 190th worker. 
B)  the total output curve is increasing at an increasing rate from workers 1-89, then increases at a decreasing rate until the 190th worker, after which it decreases. 
C)  the total output curve is increasing throughout, although at an increasing rate for the first 190 workers and at a decreasing rate after the 190th worker. 
D)  diminishing marginal product sets in with the 190th worker. 
A)  the total output curve increases from workers 1-89, decreases from workers 90-189, and becomes 0 at the 190th worker. 
B)  the total output curve is increasing at an increasing rate from workers 1-89, then increases at a decreasing rate until the 190th worker, after which it decreases. 
C)  the total output curve is increasing throughout, although at an increasing rate for the first 190 workers and at a decreasing rate after the 190th worker. 
D)  diminishing marginal product sets in with the 190th worker.

Exam 22: The Firm: Cost and Output Determination

Total product divided by the variable input is

If the marginal product of an input is falling, then

If in the short run total product is decreasing as more workers are hired, then the marginal physical product is

-In the above table, total fixed costs are

When average variable costs are rising,

Which of the following physical relationships might generate economies of scale?

Any activity that results in the conversion of resources into products that can be used in consumption is

During the short run, a firm cannot

When marginal product is rising,

The change in output caused by a one-unit change in labor is referred to as the

With a given plant size, an increase in output will NOT result in an increase in

Which of the following statements is correct?

Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average fixed costs of $20. The firm's total variable cost at this output level is

"Diminishing marginal product is a basic law because new workers are always less qualified than the existing workers." Do you agree or disagree? Explain.

How is the long-run average cost curve found? What is its importance to the firm?

The average product of labor is equal to

When output is 100 units, the firm's total fixed cost is $500. What will this firm's total fixed cost be if output doubles to 200 units?

Short-run cost relationships for a firm are

The marginal product of labor may increase rapidly initially as more

If the marginal product curve is increasing from workers 1-89 and then decreases steadily, crossing the horizontal axis at 190 workers, we know that

The Nature of Economics

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