Question 1

All of the following are most likely to be fixed costs EXCEPT the cost relating to

Accepted Answer

A)  insurance. 
B)  taxes. 
C)  rent. 
D)  packaging. 
A)  insurance. 
B)  taxes. 
C)  rent. 
D)  packaging.

Question 2

-Using the above table, the marginal product of the 2nd worker is

Accepted Answer

A)  12. 
B)  14. 
C)  15. 
D)  13. 
A)  12. 
B)  14. 
C)  15. 
D)  13.

Question 3

Short-run total cost is defined as

Accepted Answer

A)  the sum of marginal cost and total variable cost. 
B)  price of labor per unit multiplied by the number of labor units. 
C)  total fixed cost plus total variable cost. 
D)  total capital cost only. 
A)  the sum of marginal cost and total variable cost. 
B)  price of labor per unit multiplied by the number of labor units. 
C)  total fixed cost plus total variable cost. 
D)  total capital cost only.

Question 4

Suppose there are fixed costs and marginal costs that are constant. Then we know that

Accepted Answer

A)  average total costs are also constant. 
B)  average variable costs decrease continuously as output increases, and lie above the marginal cost curve. 
C)  average total costs decrease continuously as output increases, and lie above the average variable cost curve, which also is decreasing continuously. 
D)  average total costs decrease continuously as output increases, and lie above the average variable cost curve, which is constant. 
A)  average total costs are also constant. 
B)  average variable costs decrease continuously as output increases, and lie above the marginal cost curve. 
C)  average total costs decrease continuously as output increases, and lie above the average variable cost curve, which also is decreasing continuously. 
D)  average total costs decrease continuously as output increases, and lie above the average variable cost curve, which is constant.

Question 5

As successive equal increases in a variable factor of production are added to fixed factors of production, there will be a point beyond which the extra product that can be attributed to each additional unit of the variable factor of production will decline. This is known as the law of

Accepted Answer

A)  diminishing total product. 
B)  diminishing average product. 
C)  diminishing marginal product. 
D)  decreasing product. 
A)  diminishing total product. 
B)  diminishing average product. 
C)  diminishing marginal product. 
D)  decreasing product.

Question 6

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

Accepted Answer

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

Question 7

What happens to the marginal cost curve when the marginal physical product of labor is rising?

Accepted Answer

A)  It becomes upward sloping. 
B)  It becomes vertical. 
C)  It becomes downward sloping. 
D)  It becomes horizontal. 
A)  It becomes upward sloping. 
B)  It becomes vertical. 
C)  It becomes downward sloping. 
D)  It becomes horizontal.

Question 8

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

Accepted Answer

A)  exploiting the economies of scale available to it. 
B)  facing constant returns to scale. 
C)  facing diseconomies of scale. 
D)  not using the available technology efficiently. 
A)  exploiting the economies of scale available to it. 
B)  facing constant returns to scale. 
C)  facing diseconomies of scale. 
D)  not using the available technology efficiently.

Question 9

A negative value for the marginal physical product would indicate that

Accepted Answer

A)  the company has not yet reached the point of saturation. 
B)  total output increased by a significant amount. 
C)  total output decreased when the extra unit of the variable input was added. 
D)  total output increased, but the increase was very small. 
A)  the company has not yet reached the point of saturation. 
B)  total output increased by a significant amount. 
C)  total output decreased when the extra unit of the variable input was added. 
D)  total output increased, but the increase was very small.

Question 10

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

Accepted Answer

Given the information on total physical

Question 11

-Use the above figure. The AVC at output 10 is

Accepted Answer

A)  $20.00. 
B)  $1.00. 
C)  $2.00. 
D)  $3.00. 
A)  $20.00. 
B)  $1.00. 
C)  $2.00. 
D)  $3.00.

Question 12

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?

Accepted Answer

A)  $60 
B)  $70 
C)  $120 
D)  $84 
A)  $60 
B)  $70 
C)  $120 
D)  $84

Question 13

Which of the following changes a firm's production function?

Accepted Answer

A)  Hiring additional workers 
B)  Acquiring additional physical capital 
C)  Adding a second production facility exactly like its first production site 
D)  Adopting new technology 
A)  Hiring additional workers 
B)  Acquiring additional physical capital 
C)  Adding a second production facility exactly like its first production site 
D)  Adopting new technology

Question 14

At an output at which ATC is greater than MC,

Accepted Answer

A)  the ATC curve is downward sloping. 
B)  the ATC curve is upward sloping. 
C)  the AFC curve is upward sloping. 
D)  the AVC curve is upward sloping. 
A)  the ATC curve is downward sloping. 
B)  the ATC curve is upward sloping. 
C)  the AFC curve is upward sloping. 
D)  the AVC curve is upward sloping.

Question 15

-Use the above figure. The AVC at output 5 is

Accepted Answer

A)  $35.00. 
B)  $2.00. 
C)  $3.00. 
D)  $5.00. 
A)  $35.00. 
B)  $2.00. 
C)  $3.00. 
D)  $5.00.

Question 16

Which of the following is correct?

Accepted Answer

A)  TC = TFC + TVC 
B)  TC = TFC - TVC 
C)  TC = TFC * TVC 
D)  TC = TFC / TVC 
A)  TC = TFC + TVC 
B)  TC = TFC - TVC 
C)  TC = TFC * TVC 
D)  TC = TFC / TVC

Question 17

-Refer to the above table. What does total product equal when 4 units of labor are used?

Accepted Answer

A)  1328 
B)  332 
C)  320 
D)  960 
A)  1328 
B)  332 
C)  320 
D)  960

Question 18

Costs that do not vary with output are

Accepted Answer

A)  total costs. 
B)  variable costs. 
C)  fixed costs. 
D)  marginal costs. 
A)  total costs. 
B)  variable costs. 
C)  fixed costs. 
D)  marginal costs.

Question 19

-In the above table, when the firm employs 3 workers, the marginal product will be

Accepted Answer

A)  42 snowboards. 
B)  30 snowboards. 
C)  36.67 snowboards. 
D)  208 snowboards. 
A)  42 snowboards. 
B)  30 snowboards. 
C)  36.67 snowboards. 
D)  208 snowboards.

Question 20

-Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?

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

Exam 22: The Firm: Cost and Output Determination

All of the following are most likely to be fixed costs EXCEPT the cost relating to

-Using the above table, the marginal product of the 2nd worker is

Short-run total cost is defined as

Suppose there are fixed costs and marginal costs that are constant. Then we know that

As successive equal increases in a variable factor of production are added to fixed factors of production, there will be a point beyond which the extra product that can be attributed to each additional unit of the variable factor of production will decline. This is known as the law of

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

What happens to the marginal cost curve when the marginal physical product of labor is rising?

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

A negative value for the marginal physical product would indicate that

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

-Use the above figure. The AVC at output 10 is

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?

Which of the following changes a firm's production function?

At an output at which ATC is greater than MC,

-Use the above figure. The AVC at output 5 is

Which of the following is correct?

-Refer to the above table. What does total product equal when 4 units of labor are used?

Costs that do not vary with output are

-In the above table, when the firm employs 3 workers, the marginal product will be

-Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?

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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