Question 1

Which of the following is TRUE for a firm in the long run?

Accepted Answer

A) Variable costs will initially increase and then decrease. 
B) The law of diminishing marginal product holds. 
C) All costs are variable costs. 
D) Variable costs will equal marginal cost at all output levels. 
A) Variable costs will initially increase and then decrease. 
B) The law of diminishing marginal product holds. 
C) All costs are variable costs. 
D) Variable costs will equal marginal cost at all output levels.

Question 2

The law of diminishing marginal product is responsible for

Accepted Answer

A) economies of scale. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) none of the long-run relationships. 
A) economies of scale. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) none of the long-run relationships.

Question 3

-In the above figure,the long-run cost curve between points E and F illustrates

Accepted Answer

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

Question 4

Which of the following statement is correct?

Accepted Answer

A) When Marginal Product is greater than Average Physical Product,Average Physical Product is increasing. 
B) When Marginal Product is greater than Average Physical Product,Average Physical Product is decreasing. 
C) When Marginal Product is greater than Average Physical Product,Average Physical Product is equal to Total Product. 
D) When Marginal Product is greater than Average Physical Product,Total Product is increasing at a decreasing rate. 
A) When Marginal Product is greater than Average Physical Product,Average Physical Product is increasing. 
B) When Marginal Product is greater than Average Physical Product,Average Physical Product is decreasing. 
C) When Marginal Product is greater than Average Physical Product,Average Physical Product is equal to Total Product. 
D) When Marginal Product is greater than Average Physical Product,Total Product is increasing at a decreasing rate.

Question 5

$$\begin{array} { c c r r r r r r } 
\text { Q (output) } & \text { TFC } & \text { TVC } & \text { TC } & \text { AFC } & \text { AVC } & \text { ATC } & \text { MC } \
\hline 0 & \$ 0 & - & & - & & - & - \
1 & & & & & \$ 10 & & \
2 & \$ 5 & & & & \$ 15 & & \
3 & & & & & \$ 15 & & \
4 & & & & &\$16.75
\end{array}$$
-Using the above table,the AFC,the AVC,and the ATC when output is 1 unit are

Accepted Answer

A) $10,$10,and $20,respectively. 
B) $5,$10,and $15,respectively. 
C) $0,$10,and $10,respectively. 
D) $5,$10,and $5,respectively. 
A) $10,$10,and $20,respectively. 
B) $5,$10,and $15,respectively. 
C) $0,$10,and $10,respectively. 
D) $5,$10,and $5,respectively.

Question 6

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Input of Labor } \
\text { (no. of workers } \
\text { in weeks) }
\end{array} & \begin{array} { c } 
\text { Total Product } \
\text { (no. of snowboards } \
\text { produced) }
\end{array} \
\hline 0 & 0 \
1 & 30 \
2 & 68 \
3 & 110 \
4 & 140 \
5 & 135 \
\hline
\end{array}$$
-In the above table,diminishing marginal product occurs after employing the

Accepted Answer

A) first worker. 
B) second worker. 
C) third worker. 
D) fourth worker. 
A) first worker. 
B) second worker. 
C) third worker. 
D) fourth worker.

Question 7

Marginal cost equals

Accepted Answer

A) TC/Q. 
B) TVC/Q. 
C) TFC/Q. 
D) change in total cost/change in output. 
A) TC/Q. 
B) TVC/Q. 
C) TFC/Q. 
D) change in total cost/change in output.

Question 8

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 9

$$\begin{array} { l l l l l l l } 
\text { Q } & \text { TFC } & \text { TVC } & \text { TC } & \text { AFC } & \text { AVC } & \text { ATC } \
1 & & & & & & \
2 & & & & \$ 75 & \$ 25 & \
3 & & & & & \$ 40 & \
\hline
\end{array}$$
-Refer to the above table.What are total costs at an output of 3 units?

Accepted Answer

A) $90 
B) $120 
C) $150 
D) $270 
A) $90 
B) $120 
C) $150 
D) $270

Question 10

$$\begin{array} { c c } 
\text { Total Output } & \text { Total Costs } \
\hline 0 & \$ 10 \
1 & 18 \
2 & 21 \
3 & 23 \
4 & 24 \
5 & 26 \
6 & 29 \
7 & 33 \
8 & 38 \
9 & 44 \
10 & 51
\end{array}$$
-In the above table,when output is 8 units,average variable costs are

Accepted Answer

A) $4.75. 
B) $3.50. 
C) $1.25. 
D) $4.50. 
A) $4.75. 
B) $3.50. 
C) $1.25. 
D) $4.50.

Question 11

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 12

$$\begin{array} { l l l l l l l } 
\text { Q } & \text { TFC } & \text { TVC } & \text { TC } & \text { AFC } & \text { AVC } & \text { ATC } \
1 & & & & & & \
2 & & & & \$ 75 & \$ 25 & \
3 & & & & & \$ 40 & \
\hline
\end{array}$$
-Refer to the above table.What are total variable costs at an output of 3 units?

Accepted Answer

A) $90 
B) $120 
C) $150 
D) $270 
A) $90 
B) $120 
C) $150 
D) $270

Question 13

For an economist,the short run means a time period

Accepted Answer

A) during which new firms are prohibited from entering the industry. 
B) during which firms are not allowed to change the amount of imported resources they use. 
C) that is between one and five years. 
D) during which the firm is unable to change its plant size. 
A) during which new firms are prohibited from entering the industry. 
B) during which firms are not allowed to change the amount of imported resources they use. 
C) that is between one and five years. 
D) during which the firm is unable to change its plant size.

Question 14

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 15

The physical output that is due to the addition of one more unit of a variable factor of production 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 16

Fixed costs are

Accepted Answer

A) costs that never change. 
B) costs that a firm incurs even when output is zero. 
C) not actually costs since they do not affect the decisions of a firm. 
D) costs that increase at a constant rate when output increases. 
A) costs that never change. 
B) costs that a firm incurs even when output is zero. 
C) not actually costs since they do not affect the decisions of a firm. 
D) costs that increase at a constant rate when output increases.

Question 17

$$\begin{array} { c c c c c c c } 
\text { Output } & \begin{array} { c } 
\text { Fixed } \
\text { Costs }
\end{array} & \begin{array} { c } 
\text { Variable } \
\text { Costs }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Costs }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Total Costs }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable Costs }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Costs }
\end{array} \
\hline 0 & & \$ 0 & \$ 100 & & & \
1 & & 30 & & & & \
2 & & 50 & & & & \
3 & & 60 & & & & \
4 & & 120 & & & & \
5 & & 200 & & & & \
\hline
\end{array}$$
-In the above table,what is the average variable cost to produce 2 units of output?

Accepted Answer

A) $30 
B) $60 
C) $55 
D) $20 
A) $30 
B) $60 
C) $55 
D) $20

Question 18

In economics,how long is the long run?

Accepted Answer

A) More than 12 months 
B) 24 months or longer 
C) 5 years or more 
D) Whatever time it takes a firm to vary all inputs 
A) More than 12 months 
B) 24 months or longer 
C) 5 years or more 
D) Whatever time it takes a firm to vary all inputs

Question 19

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 20

Diseconomies of scale occur

Accepted Answer

A) only in the short run. 
B) only in the long run. 
C) because of fixed costs. 
D) none of the above. 
A) only in the short run. 
B) only in the long run. 
C) because of fixed costs. 
D) none of the above.

Exam 9: The Firm: Cost and Output Determination

Which of the following is TRUE for a firm in the long run?

The law of diminishing marginal product is responsible for

-In the above figure,the long-run cost curve between points E and F illustrates

Which of the following statement is correct?

Q (output) TFC TVC TC AFC AVC ATC MC 0 \ 0 - - - - 1 \ 10 2 \ 5 \ 15 3 \ 15 4 \1 6.75 -Using the above table,the AFC,the AVC,and the ATC when output is 1 unit are

Input of Labor (no. of workers in weeks) Total Product (no. of snowboards produced) 0 0 1 30 2 68 3 110 4 140 5 135 -In the above table,diminishing marginal product occurs after employing the

Marginal cost equals

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

Q TFC TVC TC AFC AVC ATC 1 2 \ 75 \ 25 3 \ 40 -Refer to the above table.What are total costs at an output of 3 units?

Total Output Total Costs 0 \ 10 1 18 2 21 3 23 4 24 5 26 6 29 7 33 8 38 9 44 10 51 -In the above table,when output is 8 units,average variable costs are

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

Q TFC TVC TC AFC AVC ATC 1 2 \ 75 \ 25 3 \ 40 -Refer to the above table.What are total variable costs at an output of 3 units?

For an economist,the short run means a time period

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

The physical output that is due to the addition of one more unit of a variable factor of production is

Fixed costs are

Output Fixed Costs Variable Costs Total Costs Average Total Costs Average Variable Costs Marginal Costs 0 \ 0 \ 100 1 30 2 50 3 60 4 120 5 200 -In the above table,what is the average variable cost to produce 2 units of output?

In economics,how long is the long run?

Short-run cost relationships for a firm are

Diseconomies of scale occur

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

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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