Question 1

At the output rate at which diminishing marginal product begins, a firm will experience

Accepted Answer

A)  constant average total costs. 
B)  increasing average fixed costs. 
C)  increasing marginal costs. 
D)  decreasing average variable costs. 
A)  constant average total costs. 
B)  increasing average fixed costs. 
C)  increasing marginal costs. 
D)  decreasing average variable costs.

Question 2

When a firm is at its minimum efficient scale of operation, it produces the

Accepted Answer

A)  maximum rate of output at which long-run average cost is minimized. 
B)  minimum rate of output at which long-run average cost is minimized. 
C)  maximum rate of output consistent with lowest long-run marginal cost. 
D)  minimum rate of output consistent with lowest long-run marginal cost. 
A)  maximum rate of output at which long-run average cost is minimized. 
B)  minimum rate of output at which long-run average cost is minimized. 
C)  maximum rate of output consistent with lowest long-run marginal cost. 
D)  minimum rate of output consistent with lowest long-run marginal cost.

Question 3

Describe the concept of the production function. What happens to the production function when a firm becomes less efficient, so that it now requires more labor to produce the same amount of output as before?

Accepted Answer

The production function is the maximum p

Question 4

"In the short run, a firm cannot change any of its inputs." Do you agree or disagree? Explain.

Accepted Answer

Disagree. The short run is a p

Question 5

-Refer to the above figure. Marginal costs are represented by curve

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
A)  1. 
B)  2. 
C)  3. 
D)  4.

Question 6

-In the above table, the marginal cost of the seventh unit is

Accepted Answer

A)  $4.00. 
B)  $5.00. 
C)  $3.00. 
D)  $33.00. 
A)  $4.00. 
B)  $5.00. 
C)  $3.00. 
D)  $33.00.

Question 7

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n) ________ decision.

Accepted Answer

A)  immediate-run 
B)  long-run 
C)  short-run 
D)  variable-input 
A)  immediate-run 
B)  long-run 
C)  short-run 
D)  variable-input

Question 8

If the long-run average cost curve continuously slopes upward as output rises, minimum efficient scale would be

Accepted Answer

A)  zero. 
B)  at the midpoint of the long-run average cost curve. 
C)  at the rate of output associated with the smallest sized plant the firm can build. 
D)  nonexistent. 
A)  zero. 
B)  at the midpoint of the long-run average cost curve. 
C)  at the rate of output associated with the smallest sized plant the firm can build. 
D)  nonexistent.

Question 9

The long-run average cost curve

Accepted Answer

A)  is always a downward sloping straight line. 
B)  is a curve which is tangent to each member of a set of short-run average cost curves. 
C)  is identical to the marginal cost curve. 
D)  should always be horizontal. 
A)  is always a downward sloping straight line. 
B)  is a curve which is tangent to each member of a set of short-run average cost curves. 
C)  is identical to the marginal cost curve. 
D)  should always be horizontal.

Question 10

Which of the following would NOT be considered a fixed cost of production?

Accepted Answer

A)  Wages paid to labor 
B)  The opportunity cost of capital 
C)  Interest payments on a loan 
D)  Insurance payments on plant and equipment 
A)  Wages paid to labor 
B)  The opportunity cost of capital 
C)  Interest payments on a loan 
D)  Insurance payments on plant and equipment

Question 11

-In the above table, the marginal product of the second worker is

Accepted Answer

A)  68. 
B)  98. 
C)  38. 
D)  It cannot be determined. 
A)  68. 
B)  98. 
C)  38. 
D)  It cannot be determined.

Question 12

-In the above table, what is the average total cost to produce 5 units of output?

Accepted Answer

A)  $80 
B)  $55 
C)  $40 
D)  $60 
A)  $80 
B)  $55 
C)  $40 
D)  $60

Question 13

A single-plant firm trying to select the rate of output consistent with an overall plant size that yields the minimum efficient scale will choose a rate of output for which

Accepted Answer

A)  the short-run marginal cost curve crosses the short-run average total cost curve at that rate of output. 
B)  the long-run marginal cost curve crosses the long-run average fixed cost curve at that rate of output. 
C)  long-run average total cost is lowest at that rate of output. 
D)  total fixed costs are minimized at that rate of output. 
A)  the short-run marginal cost curve crosses the short-run average total cost curve at that rate of output. 
B)  the long-run marginal cost curve crosses the long-run average fixed cost curve at that rate of output. 
C)  long-run average total cost is lowest at that rate of output. 
D)  total fixed costs are minimized at that rate of output.

Question 14

At Phil's Hot Dog Stand, we found the following: 4 laborers produced 66 hot dogs
5 laborers produced 76 hot dogs
6 laborers produced 84 hot dogs
7 laborers produced 88 hot dogs
What was the marginal physical product of the sixth laborer?

Accepted Answer

A)  10 hot dogs 
B)  8 hot dogs 
C)  6 hot dogs 
D)  4 hot dogs 
A)  10 hot dogs 
B)  8 hot dogs 
C)  6 hot dogs 
D)  4 hot dogs

Question 15

If the price of labor is constant and a firm experiences diminishing marginal product, then its

Accepted Answer

A)  marginal costs decrease. 
B)  fixed costs increase. 
C)  average variable cost increases. 
D)  total costs decrease. 
A)  marginal costs decrease. 
B)  fixed costs increase. 
C)  average variable cost increases. 
D)  total costs decrease.

Question 16

A production function is a(n)

Accepted Answer

A)  cost relationship. 
B)  economic relationship. 
C)  accounting relationship. 
D)  technological relationship. 
A)  cost relationship. 
B)  economic relationship. 
C)  accounting relationship. 
D)  technological relationship.

Question 17

After some point successive equal increases in a variable factor of production, when added to a fixed amount of inputs, will result in smaller increases in output. This is known as

Accepted Answer

A)  the long run. 
B)  the law of diminishing marginal product. 
C)  marginal physical product. 
D)  short run average cost. 
A)  the long run. 
B)  the law of diminishing marginal product. 
C)  marginal physical product. 
D)  short run average cost.

Question 18

The law of diminishing marginal product is NOT responsible for the shape of

Accepted Answer

A)  the total cost curve. 
B)  the average variable cost curve. 
C)  total fixed cost curve. 
D)  marginal cost curve. 
A)  the total cost curve. 
B)  the average variable cost curve. 
C)  total fixed cost curve. 
D)  marginal cost curve.

Question 19

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

Accepted Answer

A)  $25.00. 
B)  $2.00. 
C)  $3.00. 
D)  $5.00. 
A)  $25.00. 
B)  $2.00. 
C)  $3.00. 
D)  $5.00.

Question 20

The marginal physical product of labor is calculated assuming other factor inputs

Accepted Answer

A)  increase more than proportionately. 
B)  increase less than proportionately. 
C)  remain constant. 
D)  decrease. 
A)  increase more than proportionately. 
B)  increase less than proportionately. 
C)  remain constant. 
D)  decrease.

Exam 22: The Firm: Cost and Output Determination

At the output rate at which diminishing marginal product begins, a firm will experience

When a firm is at its minimum efficient scale of operation, it produces the

Describe the concept of the production function. What happens to the production function when a firm becomes less efficient, so that it now requires more labor to produce the same amount of output as before?

"In the short run, a firm cannot change any of its inputs." Do you agree or disagree? Explain.

-Refer to the above figure. Marginal costs are represented by curve

-In the above table, the marginal cost of the seventh unit is

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n) ________ decision.

If the long-run average cost curve continuously slopes upward as output rises, minimum efficient scale would be

The long-run average cost curve

Which of the following would NOT be considered a fixed cost of production?

-In the above table, the marginal product of the second worker is

-In the above table, what is the average total cost to produce 5 units of output?

A single-plant firm trying to select the rate of output consistent with an overall plant size that yields the minimum efficient scale will choose a rate of output for which

At Phil's Hot Dog Stand, we found the following: 4 laborers produced 66 hot dogs 5 laborers produced 76 hot dogs 6 laborers produced 84 hot dogs 7 laborers produced 88 hot dogs What was the marginal physical product of the sixth laborer?

If the price of labor is constant and a firm experiences diminishing marginal product, then its

A production function is a(n)

After some point successive equal increases in a variable factor of production, when added to a fixed amount of inputs, will result in smaller increases in output. This is known as

The law of diminishing marginal product is NOT responsible for the shape of

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

The marginal physical product of labor is calculated assuming other factor inputs

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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