Question 1

-Refer to the above table. At an output of 3 units, average variable costs are

Accepted Answer

A)  $42. 
B)  $30. 
C)  $44. 
D)  $14. 
A)  $42. 
B)  $30. 
C)  $44. 
D)  $14.

Question 2

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 3

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 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

When increasing its output results in falling costs, a firm that can adjust all inputs is experiencing

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  loss. 
D)  capital gains. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  loss. 
D)  capital gains.

Question 6

A fixed resource is one that

Accepted Answer

A)  is physically tied to a specific location. 
B)  costs more than the average daily revenue of the firm. 
C)  cannot be varied in the short run. 
D)  can be disposed of only if the firm goes out of business. 
A)  is physically tied to a specific location. 
B)  costs more than the average daily revenue of the firm. 
C)  cannot be varied in the short run. 
D)  can be disposed of only if the firm goes out of business.

Question 7

What happens at a firm's point of saturation?

Accepted Answer

A)  For the first time, hiring an additional worker decreases total product. 
B)  Workers cannot take on any additional tasks without working overtime hours. 
C)  The market for a firm's output has been saturated and sales fall to zero. 
D)  The firm's total costs exceed its revenues. 
A)  For the first time, hiring an additional worker decreases total product. 
B)  Workers cannot take on any additional tasks without working overtime hours. 
C)  The market for a firm's output has been saturated and sales fall to zero. 
D)  The firm's total costs exceed its revenues.

Question 8

-Refer to the above table. At an output of 2 units, average total costs are

Accepted Answer

A)  $61. 
B)  $122. 
C)  $16. 
D)  $45. 
A)  $61. 
B)  $122. 
C)  $16. 
D)  $45.

Question 9

What is the law of diminishing marginal product?

Accepted Answer

The law of diminishing marginal product

Question 10

As the amount of a variable input increases, while all other inputs are held constant, total product will

Accepted Answer

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

Question 11

Marginal product is

Accepted Answer

A)  the change in total output from using an additional unit of one variable input, holding other inputs constant. 
B)  the change in total output from using an additional unit of all variable inputs. 
C)  the total output divided by the number of units of the variable input. 
D)  the change in total output divided by the number of units of the variable input, holding constant all other inputs. 
A)  the change in total output from using an additional unit of one variable input, holding other inputs constant. 
B)  the change in total output from using an additional unit of all variable inputs. 
C)  the total output divided by the number of units of the variable input. 
D)  the change in total output divided by the number of units of the variable input, holding constant all other inputs.

Question 12

If marginal product is negative, then

Accepted Answer

A)  total product is rising. 
B)  total product is falling. 
C)  marginal cost is falling. 
D)  average profit is rising. 
A)  total product is rising. 
B)  total product is falling. 
C)  marginal cost is falling. 
D)  average profit is rising.

Question 13

-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 14

When marginal product is rising

Accepted Answer

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

Question 15

The amount of calendar time associated with the long run

Accepted Answer

A)  is less than five years. 
B)  is greater than one year. 
C)  is between one and five years. 
D)  varies by industry. 
A)  is less than five years. 
B)  is greater than one year. 
C)  is between one and five years. 
D)  varies by industry.

Question 16

Which of the following statement is correct?

Accepted Answer

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

Question 17

In economics, a fixed cost is a cost that

Accepted Answer

A)  is present only in the short run. 
B)  goes up as the level of output goes up. 
C)  goes down as the level of output goes up. 
D)  does not vary with the level of output. 
A)  is present only in the short run. 
B)  goes up as the level of output goes up. 
C)  goes down as the level of output goes up. 
D)  does not vary with the level of output.

Question 18

When long-run average costs decline as output increases, the firm is experiencing

Accepted Answer

A)  negative returns to scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  economies of scale. 
A)  negative returns to scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  economies of scale.

Question 19

-Refer to the above figure. Average total costs are represented by curve

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
A)  1. 
B)  2. 
C)  3. 
D)  4.

Question 20

The long run is defined as the time period in which

Accepted Answer

A)  the firm can vary only one input. 
B)  the firm can make positive economic profits. 
C)  all factors of production can be altered. 
D)  the firm can alter its rate of production. 
A)  the firm can vary only one input. 
B)  the firm can make positive economic profits. 
C)  all factors of production can be altered. 
D)  the firm can alter its rate of production.

Exam 22: The Firm: Cost and Output Determination

-Refer to the above table. At an output of 3 units, average variable costs are

Constant returns to scale are illustrated by

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

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

When increasing its output results in falling costs, a firm that can adjust all inputs is experiencing

A fixed resource is one that

What happens at a firm's point of saturation?

-Refer to the above table. At an output of 2 units, average total costs are

What is the law of diminishing marginal product?

As the amount of a variable input increases, while all other inputs are held constant, total product will

Marginal product is

If marginal product is negative, then

-Using the above table, the AFC, the AVC, and the ATC when output is 1 unit are

When marginal product is rising

The amount of calendar time associated with the long run

Which of the following statement is correct?

In economics, a fixed cost is a cost that

When long-run average costs decline as output increases, the firm is experiencing

-Refer to the above figure. Average total costs are represented by curve

The long run is defined as the time period in which

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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