Question 1

The change in a firm's total cost from producing one more unit of a good or service is the firm's

Accepted Answer

A) explicit cost of production. 
B) marginal cost of production. 
C) average cost of production. 
D) implicit cost of production. 
A) explicit cost of production. 
B) marginal cost of production. 
C) average cost of production. 
D) implicit cost of production.

Question 2

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 3

Diminishing marginal product of labour occurs when adding another unit of labour

Accepted Answer

A) decreases output. 
B) changes output by an amount smaller than the output added by the previous unit of labour. 
C) increases output by an amount larger than the output added by the previous unit of labour. 
D) decreases output by an amount smaller than the output added by the previous unit of labour. 
A) decreases output. 
B) changes output by an amount smaller than the output added by the previous unit of labour. 
C) increases output by an amount larger than the output added by the previous unit of labour. 
D) decreases output by an amount smaller than the output added by the previous unit of labour.

Question 4

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

Accepted Answer

Yes.As long as the marginal co

Question 5

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1000 routers each month,but to exhaust economies of scale in its industry,ABC would have to sell 3000 routers each month.Therefore,

Accepted Answer

A) ABC is experiencing diseconomies of scale. 
B) ABC is experiencing diminishing returns. 
C) to reach minimum efficient scale,ABC would have to sell at least 3000 routers each month. 
D) ABC will soon go out of business. 
A) ABC is experiencing diseconomies of scale. 
B) ABC is experiencing diminishing returns. 
C) to reach minimum efficient scale,ABC would have to sell at least 3000 routers each month. 
D) ABC will soon go out of business.

Question 6

Suppose a chain of convenience stores reorganised its system of supplying its stores with food.This led to a sharp reduction in the number of trucks that the company had to use and increased the amount of fresh food on store shelves.Which of the following statements best describes the chain stores' actions?

Accepted Answer

A) The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B) Technological change refers only to the introduction of new products or improvements to existing products.As such,the scenario described in the question is not technological change. 
C) The firm is able to produce more output (increase its sales)using fewer inputs (less trucks).Therefore,the chain of convenience stores has implemented a positive technological change. 
D) The scenario described is an example of management efficiency and not technological change.Essentially,the chain changes its way of operating its business. 
A) The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B) Technological change refers only to the introduction of new products or improvements to existing products.As such,the scenario described in the question is not technological change. 
C) The firm is able to produce more output (increase its sales)using fewer inputs (less trucks).Therefore,the chain of convenience stores has implemented a positive technological change. 
D) The scenario described is an example of management efficiency and not technological change.Essentially,the chain changes its way of operating its business.

Question 7

Which of the following statements is true?

Accepted Answer

A) An explicit cost is an actual cost;an implicit cost is a theoretical cost. 
B) Economic costs include both explicit costs and implicit costs. 
C) An explicit cost is more important,dollar for dollar,than an implicit cost. 
D) Explicit costs are accounting costs,not economic costs;implicit costs are economic costs,not accounting costs. 
A) An explicit cost is an actual cost;an implicit cost is a theoretical cost. 
B) Economic costs include both explicit costs and implicit costs. 
C) An explicit cost is more important,dollar for dollar,than an implicit cost. 
D) Explicit costs are accounting costs,not economic costs;implicit costs are economic costs,not accounting costs.

Question 8

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

Accepted Answer

A) opportunity cost of inputs. 
B) marginal rate of technical substitution. 
C) input trade-off rate. 
D) isoquant substitution rate. 
A) opportunity cost of inputs. 
B) marginal rate of technical substitution. 
C) input trade-off rate. 
D) isoquant substitution rate.

Question 9

The change in a firm's total cost from producing one more unit of a good or service is

Accepted Answer

A) the result of economies of scale. 
B) the definition of marginal product. 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants. 
A) the result of economies of scale. 
B) the definition of marginal product. 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants.

Question 10

As output increases,average fixed cost gets smaller and smaller.

Accepted Answer

A) True 
 B)False

Question 11

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes.These costs are sometimes called ________ costs.

Accepted Answer

A) economic;legal 
B) real;explicit 
C) total;economic 
D) explicit;accounting 
A) economic;legal 
B) real;explicit 
C) total;economic 
D) explicit;accounting

Question 12

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor,who has a store of the same size as yours,is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price,you expect to incur a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

Accepted Answer

A) The competing store probably has a lower marginal cost of production. 
B) The competing store probably has a lower average variable cost of production. 
C) The competing store's goal is to maximise revenue and not profit. 
D) The competing store probably has a lower average cost because average fixed cost falls as output increases. 
A) The competing store probably has a lower marginal cost of production. 
B) The competing store probably has a lower average variable cost of production. 
C) The competing store's goal is to maximise revenue and not profit. 
D) The competing store probably has a lower average cost because average fixed cost falls as output increases.

Question 13

The shape of the average total cost curve is determined by the shape of

Accepted Answer

A) the marginal cost curve. 
B) the average fixed cost curve. 
C) the average product curve. 
D) the firm's production function. 
A) the marginal cost curve. 
B) the average fixed cost curve. 
C) the average product curve. 
D) the firm's production function.

Question 14

Which of the following statements is false?

Accepted Answer

A) Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B) When marginal cost is less than average total cost,average total cost will fall. 
C) When marginal cost is greater than average total cost,average total cost will rise. 
D) Marginal cost will equal average total cost when average total cost is at its lowest point. 
A) Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B) When marginal cost is less than average total cost,average total cost will fall. 
C) When marginal cost is greater than average total cost,average total cost will rise. 
D) Marginal cost will equal average total cost when average total cost is at its lowest point.

Question 15

Consider a firm that uses two inputs,labour and capital,to produce its output.Assume labour is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Accepted Answer

A) The law of diminishing returns: For a given decline in capital,decreasing amounts of labour are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: If a firm uses less and less capital it must use more and more labour,which drives up the cost of labour. 
C) The law of diminishing returns: For a given decline in capital,increasing amounts of labour are required to produce the same level of output. 
D) The law of imperfect substitutability: Labour and capital are not perfect substitutes;therefore,a firm must replace decreases in capital with increases in labour. 
A) The law of diminishing returns: For a given decline in capital,decreasing amounts of labour are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: If a firm uses less and less capital it must use more and more labour,which drives up the cost of labour. 
C) The law of diminishing returns: For a given decline in capital,increasing amounts of labour are required to produce the same level of output. 
D) The law of imperfect substitutability: Labour and capital are not perfect substitutes;therefore,a firm must replace decreases in capital with increases in labour.

Question 16

In the short run,if average product is at its maximum,then average variable cost is at its minimum.

Accepted Answer

A) True 
 B)False

Question 17

Table 7-2
   Table 7-2 summarises production at the Crunchy Apple Orchard for the month of April 2005.
-Refer to Table 7-2.What is the average product of labour when the orchard employs 5 workers?

Accepted Answer

A) 270 bushels 
B) 54 bushels 
C) 40 bushels 
D) 8 bushels 
A) 270 bushels 
B) 54 bushels 
C) 40 bushels 
D) 8 bushels

Question 18

A downward-sloping marginal product of labour curve demonstrates the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true?

Accepted Answer

A) Opportunity cost = explicit cost - implicit cost. 
B) Total cost = fixed cost + implicit cost. 
C) Total cost = fixed cost + variable cost. 
D) Variable cost = wages + salaries + benefits. 
A) Opportunity cost = explicit cost - implicit cost. 
B) Total cost = fixed cost + implicit cost. 
C) Total cost = fixed cost + variable cost. 
D) Variable cost = wages + salaries + benefits.

Question 20

Table 7-2
   Table 7-2 summarises production at the Crunchy Apple Orchard for the month of April 2005.
-Refer to Table 7-2.What is the marginal product of the 4th worker?

Accepted Answer

A) 230 bushels 
B) 57.4 bushels 
C) 50 bushels 
D) 12.4 bushels 
A) 230 bushels 
B) 57.4 bushels 
C) 50 bushels 
D) 12.4 bushels

The change in a firm's total cost from producing one more unit of a good or service is the firm's

The short run is the time period during which a firm has at least one input constraint.

Diminishing marginal product of labour occurs when adding another unit of labour

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1000 routers each month,but to exhaust economies of scale in its industry,ABC would have to sell 3000 routers each month.Therefore,

Which of the following statements is true?

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

The change in a firm's total cost from producing one more unit of a good or service is

As output increases,average fixed cost gets smaller and smaller.

The rules of accounting generally require that costs be used for purposes of keeping a company's financial records and for paying taxes.These costs are sometimes called costs.

The shape of the average total cost curve is determined by the shape of

Which of the following statements is false?

In the short run,if average product is at its maximum,then average variable cost is at its minimum.

Table 7-2 Table 7-2 summarises production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 7-2.What is the average product of labour when the orchard employs 5 workers?

A downward-sloping marginal product of labour curve demonstrates the law of diminishing marginal returns.

Which of the following statements is true?

Table 7-2 Table 7-2 summarises production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 7-2.What is the marginal product of the 4th worker?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 7: Technology, Production and Costs

The change in a firm's total cost from producing one more unit of a good or service is the firm's

The short run is the time period during which a firm has at least one input constraint.

Diminishing marginal product of labour occurs when adding another unit of labour

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1000 routers each month,but to exhaust economies of scale in its industry,ABC would have to sell 3000 routers each month.Therefore,

Which of the following statements is true?

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

The change in a firm's total cost from producing one more unit of a good or service is

As output increases,average fixed cost gets smaller and smaller.

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes.These costs are sometimes called ________ costs.

The shape of the average total cost curve is determined by the shape of

Which of the following statements is false?

In the short run,if average product is at its maximum,then average variable cost is at its minimum.

Table 7-2 Table 7-2 summarises production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 7-2.What is the average product of labour when the orchard employs 5 workers?

A downward-sloping marginal product of labour curve demonstrates the law of diminishing marginal returns.

Which of the following statements is true?

Table 7-2 Table 7-2 summarises production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 7-2.What is the marginal product of the 4th worker?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

The rules of accounting generally require that costs be used for purposes of keeping a company's financial records and for paying taxes.These costs are sometimes called costs.