Question 1

Fixed costs include all but

Accepted Answer

A)  a normal rate of return on investment. 
B)  temporary labor. 
C)  property tax on the existing buildings. 
D)  machines that have been producing output. 
A)  a normal rate of return on investment. 
B)  temporary labor. 
C)  property tax on the existing buildings. 
D)  machines that have been producing output.

Question 2

-If, in the short run, the level of output is zero, which of the following statement is TRUE?

Accepted Answer

A)  Total variable cost is zero but total cost equals total fixed cost, and both of the latter exceed zero. 
B)  Total cost and total fixed cost graphs will begin at the origin. 
C)  Total fixed cost will also be zero at first but will rise once output rises. 
D)  none of the above 
A)  Total variable cost is zero but total cost equals total fixed cost, and both of the latter exceed zero. 
B)  Total cost and total fixed cost graphs will begin at the origin. 
C)  Total fixed cost will also be zero at first but will rise once output rises. 
D)  none of the above

Question 3

If in the short run total product is decreasing as more workers are hired, then the marginal physical product is

Accepted Answer

A)  increasing. 
B)  zero. 
C)  negative. 
D)  positive. 
A)  increasing. 
B)  zero. 
C)  negative. 
D)  positive.

Question 4

The time frame in which all factors of production can vary is

Accepted Answer

A)  the short run. 
B)  the intermediate run. 
C)  the long run. 
D)  indeterminate. 
A)  the short run. 
B)  the intermediate run. 
C)  the long run. 
D)  indeterminate.

Question 5

-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 6

A negative value for the marginal physical product would indicate that

Accepted Answer

A)  the company has not yet reached the point of saturation. 
B)  total output increased by a significant amount. 
C)  total output decreased when the extra unit of the variable input was added. 
D)  total output increased, but the increase was very small. 
A)  the company has not yet reached the point of saturation. 
B)  total output increased by a significant amount. 
C)  total output decreased when the extra unit of the variable input was added. 
D)  total output increased, but the increase was very small.

Question 7

When the average physical product is rising

Accepted Answer

A)  total cost is falling. 
B)  average total cost is increasing. 
C)  average variable cost is falling. 
D)  marginal cost is always rising. 
A)  total cost is falling. 
B)  average total cost is increasing. 
C)  average variable cost is falling. 
D)  marginal cost is always rising.

Question 8

-Refer to the above table. At what quantity of labor is the average product of labor maximized?

Accepted Answer

A)  1 unit 
B)  2 units 
C)  3 units 
D)  6 units 
A)  1 unit 
B)  2 units 
C)  3 units 
D)  6 units

Question 9

-In the above table, average product is 30 tablets when

Accepted Answer

A)  4 workers are employed. 
B)  3 workers are employed. 
C)  2 workers are employed. 
D)  1 worker is employed. 
A)  4 workers are employed. 
B)  3 workers are employed. 
C)  2 workers are employed. 
D)  1 worker is employed.

Question 10

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 11

Graphically, diseconomies 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 12

Any activity that results in the conversion of resources into products that can be used in consumption is

Accepted Answer

A)  planning. 
B)  investment. 
C)  production. 
D)  discounting. 
A)  planning. 
B)  investment. 
C)  production. 
D)  discounting.

Question 13

-Use the above figure. The AVC at output 10 is

Accepted Answer

A)  $20.00. 
B)  $1.00. 
C)  $2.00. 
D)  $3.00. 
A)  $20.00. 
B)  $1.00. 
C)  $2.00. 
D)  $3.00.

Question 14

-In the above table, the marginal product of the 3rd worker is

Accepted Answer

A)  5. 
B)  4. 
C)  3. 
D)  12. 
A)  5. 
B)  4. 
C)  3. 
D)  12.

Question 15

A horizontal long-run average cost curve indicates

Accepted Answer

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

Question 16

The long run is defined as a time period during which full adjustment can be made to any change in the economic environment. Thus in the long run, all factors of production are variable. Long-run curves are sometimes called planning curves, and the long run is sometimes called the

Accepted Answer

A)  foreseeable future. 
B)  minimum efficient time period. 
C)  non-adjustment period. 
D)  planning horizon. 
A)  foreseeable future. 
B)  minimum efficient time period. 
C)  non-adjustment period. 
D)  planning horizon.

Question 17

The production function

Accepted Answer

A)  shows the maximum level of output for a given set of inputs. 
B)  is an economic relationship between revenue and cost. 
C)  shows the relationship between input prices and amount of input used. 
D)  always shows increasing marginal product of labor. 
A)  shows the maximum level of output for a given set of inputs. 
B)  is an economic relationship between revenue and cost. 
C)  shows the relationship between input prices and amount of input used. 
D)  always shows increasing marginal product of labor.

Question 18

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

Accepted Answer

A)  increase continuously. 
B)  decrease continuously. 
C)  initially decrease and then increase. 
D)  initially increase and then decrease. 
A)  increase continuously. 
B)  decrease continuously. 
C)  initially decrease and then increase. 
D)  initially increase and then decrease.

Question 19

Which of the following statements with respect to the figure below is INCORRECT?

Accepted Answer

A)  All the possible short-run average cost curves that correspond to the different plant sizes are shown as SAC1 - SAC8. 
B)  If the anticipated permanent rate of output per unit time period is Q1 in panel (a), the optimal plant would correspond to SAC1. 
C)  If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3. 
D)  The long-run average cost curve LAC in panel (b) is sometimes called the planning curve representing the locus (path) of points. 
A)  All the possible short-run average cost curves that correspond to the different plant sizes are shown as SAC1 - SAC8. 
B)  If the anticipated permanent rate of output per unit time period is Q1 in panel (a), the optimal plant would correspond to SAC1. 
C)  If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3. 
D)  The long-run average cost curve LAC in panel (b) is sometimes called the planning curve representing the locus (path) of points.

Question 20

-Refer to the above table. What does total product equal when 2 units of labor are used?

Accepted Answer

A)  320 
B)  335 
C)  350 
D)  670 
A)  320 
B)  335 
C)  350 
D)  670

Exam 22: The Firm: Cost and Output Determination

Fixed costs include all but

-If, in the short run, the level of output is zero, which of the following statement is TRUE?

If in the short run total product is decreasing as more workers are hired, then the marginal physical product is

The time frame in which all factors of production can vary is

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

A negative value for the marginal physical product would indicate that

When the average physical product is rising

-Refer to the above table. At what quantity of labor is the average product of labor maximized?

-In the above table, average product is 30 tablets when

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

Graphically, diseconomies to scale are illustrated by

Any activity that results in the conversion of resources into products that can be used in consumption is

-Use the above figure. The AVC at output 10 is

-In the above table, the marginal product of the 3rd worker is

A horizontal long-run average cost curve indicates

The long run is defined as a time period during which full adjustment can be made to any change in the economic environment. Thus in the long run, all factors of production are variable. Long-run curves are sometimes called planning curves, and the long run is sometimes called the

The production function

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

Which of the following statements with respect to the figure below is INCORRECT?

-Refer to the above table. What does total product equal when 2 units of labor are used?

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

Filters