Question 1

Which of the following would NOT be a short-run decision for the firm?

Accepted Answer

A) Recall workers who were previously laid-off 
B) Have labor work two hours overtime each day in order to expand output 
C) Build another wing on the plant in order to add a new assembly line 
D) Place an order with a supplier for additional raw materials 
A) Recall workers who were previously laid-off 
B) Have labor work two hours overtime each day in order to expand output 
C) Build another wing on the plant in order to add a new assembly line 
D) Place an order with a supplier for additional raw materials

Question 2

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

Accepted Answer

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

Question 3

$$\begin{array}{l}
\begin{array} {lll } 
\text {Quantity of}&\text {Total}\
Labor & Product \
\hline 1 & 20 \
2 & 46 \
3 & 63 \
4 & 72\\hline
\end{array}
\end{array}$$
-Refer to the above table.What does the marginal product equal when the quantity of labor goes from 2 to 3?

Accepted Answer

A) 21 
B) 17 
C) 63 
D) 189 
A) 21 
B) 17 
C) 63 
D) 189

Question 4

If a firm can vary all of its factors of production,it is operating in

Accepted Answer

A) the long run. 
B) the immediate run. 
C) equilibrium. 
D) the short run. 
A) the long run. 
B) the immediate run. 
C) equilibrium. 
D) the short run.

Question 5

The planning curve is the

Accepted Answer

A) long-run average cost curve. 
B) production function. 
C) short-run marginal cost curve. 
D) short-run average cost curve. 
A) long-run average cost curve. 
B) production function. 
C) short-run marginal cost curve. 
D) short-run average cost curve.

Question 6

Constant returns to scale are illustrated by

Accepted Answer

A) a downward sloping long-run average cost curve. 
B) a horizontal long-run average cost curve. 
C) an upward sloping long-run average cost curve. 
D) a long-run average cost curve that is shaped like an upside down U. 
A) a downward sloping long-run average cost curve. 
B) a horizontal long-run average cost curve. 
C) an upward sloping long-run average cost curve. 
D) a long-run average cost curve that is shaped like an upside down U.

Question 7

$$\begin{array} { l c r l } 
\text { Q } & \text { TFC } & \text { TVC } & \text { TC } \
\hline 0 & \$ 90 & \$ 0 & \$ 90 \
1 & 90 & 25 & 115 \
2 & 90 & 32 & 122 \
3 & 90 & 42 & 132 \
4 & 90 & 64 & 154 \
5 & 90 & 95 & 185
\end{array}$$
-Refer to the above table.When output rises from 2 units to 5 units,marginal costs are

Accepted Answer

A) $26.50. 
B) $31. 
C) $21. 
D) $63. 
A) $26.50. 
B) $31. 
C) $21. 
D) $63.

Question 8

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 9

-In the above figure,the firm experiences constant returns to scale between output levels of

Accepted Answer

A) zero and Q1. 
B) Q2 and Q3. 
C) Q3 and Q4. 
D) any level greater than Q4. 
A) zero and Q1. 
B) Q2 and Q3. 
C) Q3 and Q4. 
D) any level greater than Q4.

Question 10

In economics,the planning horizon is defined as

Accepted Answer

A) 10 years for every firm. 
B) the longest time period over which the firm can make decisions. 
C) the period of time for which technology is fixed. 
D) the long run,during which all inputs are variable. 
A) 10 years for every firm. 
B) the longest time period over which the firm can make decisions. 
C) the period of time for which technology is fixed. 
D) the long run,during which all inputs are variable.

Question 11

Marginal costs will begin to rise at the point where

Accepted Answer

A) fixed costs increase. 
B) variable costs increase. 
C) average variable costs increase. 
D) diminishing marginal product begins. 
A) fixed costs increase. 
B) variable costs increase. 
C) average variable costs increase. 
D) diminishing marginal product begins.

Question 12

A basic distinction between the long run and the short run is that

Accepted Answer

A) if a firm produces no output in the long run,it still incurs a cost. 
B) the opportunity costs of production are lower in the short run than in the long run. 
C) in the long run,some inputs are fixed,while in the short run,all inputs are variable. 
D) in the short run,complete adjustment of all inputs is impossible,while in the long run all inputs can be adjusted. 
A) if a firm produces no output in the long run,it still incurs a cost. 
B) the opportunity costs of production are lower in the short run than in the long run. 
C) in the long run,some inputs are fixed,while in the short run,all inputs are variable. 
D) in the short run,complete adjustment of all inputs is impossible,while in the long run all inputs can be adjusted.

Question 13

An increase in output would result in a rise in long-run average costs when there are

Accepted Answer

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

Question 14

As long as marginal product of labor exceeds the average product of labor,then average product of labor

Accepted Answer

A) must fall. 
B) must rise. 
C) will stay unchanged. 
D) will be at its maximum value. 
A) must fall. 
B) must rise. 
C) will stay unchanged. 
D) will be at its maximum value.

Question 15

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 16

What is minimum efficient scale? Why is it important?

Accepted Answer

Minimum efficient scale (MES)is the lowe

Question 17

All of the following are reasons for economies of scale EXCEPT

Accepted Answer

A) diminishing marginal product. 
B) specialization. 
C) dimensional factors. 
D) improved production equipment. 
A) diminishing marginal product. 
B) specialization. 
C) dimensional factors. 
D) improved production equipment.

Question 18

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

Accepted Answer

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

Question 19

Economies of scale occur when there are

Accepted Answer

A) decreases in long-run average costs resulting from increases in output. 
B) no changes in long-run average costs when output increases. 
C) increases in long-run average costs when output increases. 
D) decreases in output resulting from decreases in input. 
A) decreases in long-run average costs resulting from increases in output. 
B) no changes in long-run average costs when output increases. 
C) increases in long-run average costs when output increases. 
D) decreases in output resulting from decreases in input.

Question 20

When the marginal physical product is falling,

Accepted Answer

A) marginal cost is rising. 
B) average fixed costs are rising. 
C) total costs are falling. 
D) average variable costs are falling. 
A) marginal cost is rising. 
B) average fixed costs are rising. 
C) total costs are falling. 
D) average variable costs are falling.

Exam 9: The Firm: Cost and Output Determination

Which of the following would NOT be a short-run decision for the firm?

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,marginal product becomes negative after employing the

Quantity of Total Labor Product 1 20 2 46 3 63 4 72 -Refer to the above table.What does the marginal product equal when the quantity of labor goes from 2 to 3?

If a firm can vary all of its factors of production,it is operating in

The planning curve is the

Constant returns to scale are illustrated by

Q TFC TVC TC 0 \ 90 \ 0 \ 90 1 90 25 115 2 90 32 122 3 90 42 132 4 90 64 154 5 90 95 185 -Refer to the above table.When output rises from 2 units to 5 units,marginal costs are

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 above figure,the firm experiences constant returns to scale between output levels of

In economics,the planning horizon is defined as

Marginal costs will begin to rise at the point where

A basic distinction between the long run and the short run is that

An increase in output would result in a rise in long-run average costs when there are

As long as marginal product of labor exceeds the average product of labor,then average product of labor

Costs that do not vary with output are

What is minimum efficient scale? Why is it important?

All of the following are reasons for economies of scale EXCEPT

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 4 units of output?

Economies of scale occur when there are

When the marginal physical product is falling,

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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