Question 1

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

Accepted Answer

A)  marginal costs increase. 
B)  marginal costs decrease. 
C)  fixed costs increase. 
D)  total costs decrease. 
A)  marginal costs increase. 
B)  marginal costs decrease. 
C)  fixed costs increase. 
D)  total costs decrease.

Question 2

-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 3

Economies of scale exist where the long-run average cost curve is

Accepted Answer

A)  horizontal. 
B)  downward sloping. 
C)  upward sloping. 
D)  tangent to the marginal cost curve. 
A)  horizontal. 
B)  downward sloping. 
C)  upward sloping. 
D)  tangent to the marginal cost curve.

Question 4

-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 5

With a given plant size, an increase in output will NOT result in an increase in

Accepted Answer

A)  total cost. 
B)  average fixed cost. 
C)  total fixed cost. 
D)  average variable cost. 
A)  total cost. 
B)  average fixed cost. 
C)  total fixed cost. 
D)  average variable cost.

Question 6

In economics, the planning horizon is defined as

Accepted Answer

A)  one year 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)  one year 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 7

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 8

Graphically, what happens to the production function if a firm uses automation to raise the amount of output per worker? Explain.

Accepted Answer

The production function is the relations

Question 9

-Refer to the above table. At an output of 4 units, average variable costs are

Accepted Answer

A)  $16. 
B)  $22. 
C)  $38.50. 
D)  $44. 
A)  $16. 
B)  $22. 
C)  $38.50. 
D)  $44.

Question 10

-In the above table, what is the average total 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 11

In the short run, average total cost is

Accepted Answer

A)  higher than average variable cost. 
B)  equal to average variable cost. 
C)  less than average variable cost. 
D)  sometimes higher and sometimes lower than average variable cost. 
A)  higher than average variable cost. 
B)  equal to average variable cost. 
C)  less than average variable cost. 
D)  sometimes higher and sometimes lower than average variable cost.

Question 12

The shape of the short-run average total cost curve is a result of

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of diminishing marginal product. 
D)  falling profits. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  the law of diminishing marginal product. 
D)  falling profits.

Question 13

-Refer to the above table. When output rises from 3 units to 4 units, marginal costs are

Accepted Answer

A)  $16. 
B)  $10. 
C)  $22. 
D)  $31. 
A)  $16. 
B)  $10. 
C)  $22. 
D)  $31.

Question 14

In the table below, what are the marginal costs of the fourth unit of output?

Accepted Answer

A)  $10,000 
B)  $20,000 
C)  $30,000 
D)  $40,000 
A)  $10,000 
B)  $20,000 
C)  $30,000 
D)  $40,000

Question 15

The total cost of the firm

Accepted Answer

A)  includes explicit costs but excludes implicit costs. 
B)  includes implicit costs but excludes explicit costs. 
C)  includes implicit and explicit costs. 
D)  includes implicit and explicit costs but excludes a normal rate of return on investment. 
A)  includes explicit costs but excludes implicit costs. 
B)  includes implicit costs but excludes explicit costs. 
C)  includes implicit and explicit costs. 
D)  includes implicit and explicit costs but excludes a normal rate of return on investment.

Question 16

Marginal cost is equal to

Accepted Answer

A)  change in total cost divided by change in output. 
B)  change in total variable cost divided by change in output. 
C)  total variable cost divided by quantity of output. 
D)  Both A and B are correct. 
A)  change in total cost divided by change in output. 
B)  change in total variable cost divided by change in output. 
C)  total variable cost divided by quantity of output. 
D)  Both A and B are correct.

Question 17

The time period during at least one input cannot be changed is the

Accepted Answer

A)  production time. 
B)  calendar year. 
C)  long run. 
D)  short run. 
A)  production time. 
B)  calendar year. 
C)  long run. 
D)  short run.

Question 18

If the marginal product of an input is falling, then

Accepted Answer

A)  average fixed cost is constant. 
B)  marginal cost is falling. 
C)  average total cost is constant. 
D)  marginal cost is rising. 
A)  average fixed cost is constant. 
B)  marginal cost is falling. 
C)  average total cost is constant. 
D)  marginal cost is rising.

Question 19

-Refer to the above table. At what quantity of labor does the average variable 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

Question 20

A decrease in long-run average costs resulting from decreases in output is

Accepted Answer

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

Exam 22: The Firm: Cost and Output Determination

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

-In the above table, diminishing marginal product occurs after employing the

Economies of scale exist where the long-run average cost curve is

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 2 to 3?

With a given plant size, an increase in output will NOT result in an increase in

In economics, the planning horizon is defined as

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

Graphically, what happens to the production function if a firm uses automation to raise the amount of output per worker? Explain.

-Refer to the above table. At an output of 4 units, average variable costs are

-In the above table, what is the average total cost to produce 4 units of output?

In the short run, average total cost is

The shape of the short-run average total cost curve is a result of

-Refer to the above table. When output rises from 3 units to 4 units, marginal costs are

In the table below, what are the marginal costs of the fourth unit of output?

The total cost of the firm

Marginal cost is equal to

The time period during at least one input cannot be changed is the

If the marginal product of an input is falling, then

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

A decrease in long-run average costs resulting from decreases in output is

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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