Deck 11: Technology, Production, and Costs

Question 1

Is it possible for technological change to be negative? If so, give an example.

Answer 1

Technological change could be negative, for instance, when a natural disaster hits, or when a firm hires less-experienced workers.In these cases, the firm would produce a lower level of output with the same inputs.

Question 2

In economics, technology only refers to the development of new products.

Answer 2

False

Question 3

Which of the following is an example of positive technological change?

A)A firm offers workers a higher wage to work on weekends and at night. As a result, the firm is able to increase its weekly production of surf boards.
B)A firm buys an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards.
C)A firm conducts a new advertising campaign. As a result, the demand for the firm's surf boards increases.
D)A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.

Answer 3

A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.

Question 4

Which of the following is an example of market "production," as used by economists?

A)Garvey takes out a low-cost government loan to start his pet-sitting business.
B)Heidi makes a pizza for her family's dinner.
C)Katrina works as a cashier at the local produce stand.
D)The theatre and film studies department in Fine Art's College stages a play at the local theatre.

Question 5

If a firm experiences positive technological change, it is able to produce more output using the same inputs.

Question 6

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Question 7

When a firm experiences a positive technological change

A)the price of a share of the firm's stock rises.
B)the firm is able to produce more output using the same inputs, or the same output using fewer inputs.
C)the value of the firm's assets rises.
D)the firm will hire additional workers in order to increase production.

Question 8

The difference between technology and technological change is that

A)technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs.
B)technology is carried out by firms producing physical goods but technological change is an intellectual exercise into seeking ways to improve production.
C)technology is product-centered, that is, developing new products with our limited resources while technological change is process-centered in that it focuses on developing new production techniques.
D)technology involves the use of capital equipment while technological change requires the use of brain power.

Question 9

Which of the following statements correctly describes the distinction between technology and technological change?

A)Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs.
B)Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain.
C)Technology is product-centered; its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques.
D)Technology involves research and development while technological change involves the use of more efficient machinery.

Question 10

The basic activity of a firm is

A)to set the prices of its products as high as possible.
B)to compete with other firms that produce similar products.
C)to provide jobs for its employees.
D)to use inputs to produce outputs of goods and services.

Question 11

To improve the work environment for its engineers, Segment.com rearranged its work areas to move the engineers to the quietest area of its building, and moved its sales and marketing force to to the loudest area.The result was an increase in output equivalent to hiring 10 to 15 additional workers.Which of the following statements best describes this change at Segment.com?

A)The change implemented is not an example of technological change because it did not require the use of new machinery or equipment.
B)Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change.
C)The firm is able to produce more output using the same number of inputs. Therefore, Segment.com has implemented a positive technological change.
D)The scenario described is an example of management efficiency and not technological change. Essentially, the firm changed its way of operating its business.

Question 12

To improve delivery, Joe's Pizza Emporium made a change that involved taking better account of traffic to avoid delays in delivering pizzas.This is an example of

A)positive technological change.
B)increasing marginal returns.
C)a reduction in fixed costs.
D)diseconomies of scale.

Question 13

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

A)investment in human capital.
B)economies of scale.
C)positive technological change.
D)inspired management.

Question 14

A firm has successfully adopted a positive technological change when

A)it can produce more output using the same inputs.
B)it produces less pollution in its production process.
C)it can pay its workers less yet increase its output.
D)it sees an increase in worker productivity.

Question 15

When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm

A)experiences an increase in demand.
B)experiences positive technological change.
C)will hire more workers in order to produce more output.
D)is operating in the short run.

Question 16

Which of the following is not a source of technological advancement for a producer?

A)better trained workers
B)more efficient physical capital
C)higher skill level of managers
D)outsourcing some aspect of production

Question 17

When a firm experiences negative technological change it can produce the same output with fewer inputs.

Question 18

When Segment.com implemented changes which allowed it to increase productivity with the same number of workers, this represented a positive technological change.

Question 19

The processes a firm uses to turn inputs into outputs of goods and services is called

A)technology.
B)technological change.
C)marginal analysis.
D)positive economic analysis.

Question 20

A firm's cost of production is determined by all of the following except

A)the technology used to produce its output.
B)the productivity of its workers.
C)the cost of raw material used in production.
D)the amount of corporate taxes it must pay on its profit.

Question 21

Which of the following is an implicit cost of production?

A)the loss in the value of capital equipment due to wear and tear
B)the salary you pay yourself for running your business
C)the utility bill paid to water, electricity, and natural gas companies
D)the interest you pay your mother for the money she loaned you to start your business

Question 22

Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California.Holding everything else constant, as a result of this move

A)her explicit cost falls and her implicit cost rises.
B)her implicit cost falls and her explicit cost rises.
C)her economic cost rises.
D)her opportunity cost rises.

Question 23

Economic costs of production differ from accounting costs in that

A)economic costs include expenditures for hired resources while accounting costs do not.
B)economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.
C)accounting costs include expenditures for hired resources while economic costs do not.
D)accounting costs are always larger than economic cost.

Question 24

The explicit cost of production is also called

A)variable cost.
B)accounting cost.
C)direct cost.
D)overhead cost.

Question 25

Which of the following is the best example of a short-run adjustment?

A)A local bakery purchases another commercial oven as part of its capacity expansion.
B)Your local Walmart hires two more associates.
C)Smith University completed negotiations to acquire a large piece of land to build its new library.
D)Toyota builds a new assembly plant in Texas.

Question 26

Describe the difference between technology and positive technological change.

Question 27

Which of the following is a fixed cost?

A)payment to hire a security worker to guard the gate to the factory around the clock
B)wages to hire assembly line workers
C)payments to an electric utility
D)costs of raw materials

Question 28

Which of the following are implicit costs for a typical firm?

A)opportunity costs of capital owned and used by the firm
B)the cost of labor hired by the firm
C)utilities cost
D)a business licensing fee

Question 29

Which of the following would be categorized as an implicit cost?
A.not being able to spend your $10,000 savings if you sink the money in your business
B.the cost of purchasing supplies for your house-cleaning business
C.the cost of purchasing auto insurance for your dry-cleaning delivery business

A)a only
B)a and c only
C)b and c only
D)all of the above

Question 30

If a producer is not able to expand its plant capacity immediately, it is

A)bankrupt.
B)operating in the long run.
C)operating in the short run.
D)losing money.

Question 31

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks.She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest)and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year.In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material.Based on this information, what is the amount of her explicit costs for the first year?

A)$45,000
B)$45,500
C)$47,000
D)$87,000

Question 32

Which of the following is a factor of production that generally is fixed in the short run?

A)raw materials
B)labor
C)a factory building
D)water

Question 33

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks.She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest)and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year.In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material.Based on this information, what is the amount of her implicit costs for the first year?

A)$80,000
B)$70,000
C)$42,000
D)$41,500

Question 34

The production function shows

A)the total cost of producing a given quantity of output.
B)the maximum output that can be produced from a set of inputs.
C)the technology used to produce output.
D)the incremental output gained by improving the production process.

Question 35

Which of the following is an example of a long-run adjustment?

A)Your university offers Saturday morning classes next fall.
B)Ford Motor Company lays off 2,000 assembly line workers.
C)A soybean farmer turns on the irrigation system after a month long dry spell.
D)Walmart builds another Supercenter.

Question 36

Academic book publishers hire editors, designers, and production and marketing managers who help prepare books for publication.Because these employees work on several books simultaneously, the number of people the company hires will not go up and down with the quantity of books the company publishes during any particular year.The salaries and benefits of people in these job categories will be included in

A)fixed cost and marginal cost but not variable cost.
B)fixed cost but not variable cost and total cost.
C)marginal cost and total cost but not fixed cost.
D)fixed cost and total cost but not variable cost.

Question 37

Which of the following are examples of a firm experiencing a positive technological change?
a.A firm is able to reduce its inputs by 15 percent and still produce the same level of output.
b.A seminar attended by the firm's workers makes them more productive.
c.A firm adds 5 percent to its workforce and is able to maintain its initial level of output.
d.A firm restructures its distribution system and is able to save on its shipping times.
e.A firm rearranges its warehouse and finds that it can use fewer workers to maintain its productivity level.

Question 38

Which of the following is an implicit cost of production?

A)interest paid on a loan to a bank
B)wages paid to labor plus the cost of carrying benefits for workers
C)the utility bill paid to water, electricity, and natural gas companies
D)rent that could have been earned on a building owned and used by the firm

Question 39

A characteristic of the long run is

A)there are fixed inputs.
B)all inputs can be varied.
C)plant capacity cannot be increased or decreased.
D)there are both fixed and variable inputs

Question 40

Implicit costs can be defined as

A)accounting profit minus explicit cost.
B)the non-monetary opportunity cost of using the firm's own resources.
C)the deferred cost of production.
D)total cost minus fixed costs.

Question 41

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books?

A)postage and supplies
B)travel
C)rent
D)wages and salaries

Question 42

Jennifer Borts moves her office from the premises she rents at a local mall to her home.As a result of this move,

A)Jennifer's explicit costs fall and her implicit costs rise.
B)Jennifer's total costs fall.
C)Jennifer's implicit costs fall.
D)Jennifer's opportunity costs fall.

Question 43

Which of the following statements best describes the economic short run?

A)It is a period of one year or less.
B)It is a period during which firms are free to vary all of their inputs.
C)It is a period during which at least one of the firm's inputs is fixed.
D)It is a period during which fixed inputs become variable inputs because of depreciation.

Question 44

Which of the following statements is true?

A)Opportunity cost = explicit cost - implicit cost.
B)Total cost = fixed cost + implicit cost.
C)Total cost = fixed cost + variable cost.
D)Variable cost = wages + salaries + benefits.

Question 45

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?

A)$100
B)$124.40
C)$220
D)$340

Question 46

Which of the following statements is true?

A)An explicit cost is an actual cost; an implicit cost is a theoretical cost.
B)Economic costs include both explicit costs and implicit costs.
C)An explicit cost is more important, dollar for dollar, than an implicit cost.
D)Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs.

Question 47

The long run refers to a time period

A)during which a firm is able to purchase all of its inputs, including its plant and equipment.
B)long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant.
C)long enough for a firm to pay all of its creditors in full.
D)long enough for a firm to change the use of its variable inputs.

Question 48

The Santa Fe Spark Plug Company supplies spark plugs to automotive parts dealers.An increase in the demand for its product led Santa Fe to hire 150 new workers.Santa Fe also plans to expand the capacity of its plant but this project will take 2 years to complete.Which of the following statements is true?

A)The wages and benefits paid to the new workers are implicit costs.
B)The long run for Santa Fe is longer than 1 year.
C)The short run for Santa Fe is 1 year.
D)In the short run Santa Fe's variable costs increase but its fixed costs decrease.

Question 49

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

A)$0
B)$2
C)$60
D)$120

Question 50

Which of the following statements is false?

A)An explicit cost is a nonmonetary opportunity cost.
B)In the short run: total cost = fixed cost + variable cost.
C)Variable costs are costs that change as output changes.
D)In the long run there are no fixed costs.

Question 51

Which of the following statements is false?

A)An implicit cost is a nonmonetary opportunity cost.
B)Economic costs include both accounting costs and implicit costs.
C)An explicit cost is a cost that involves spending money.
D)Economists consider all costs to be implicit costs.

Question 52

Which of the following are implicit costs for a typical firm?

A)the cost of labor
B)the opportunity cost of capital owned and used by the firm
C)the cost of energy used in production
D)a business licensing fee

Question 53

When firms analyze the relationship between their level of production and their costs, they separate the time period involved into

A)morning and evening.
B)6 months or less; 6 months to 1 year; more than 1 year.
C)a fixed period and a variable period.
D)the short run and the long run.

Question 54

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?

A)$100
B)$124.40
C)$220
D)$240

Question 55

Which of the following can a firm do in the long run but not in the short run?

A)decrease the size of its physical plant
B)reduce its rate of output by laying off workers
C)increase its variable costs
D)increase its use of raw materials

Question 56

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

A)$2.00
B)$2.40
C)$4.40
D)$6.80

Question 57

The average total cost of production

A)is the extra cost required to produce one more unit.
B)equals the explicit cost of production.
C)equals total cost of production divided by the level of output.
D)equals total cost of production multiplied by the level of output.

Question 58

In the long run which of the following is true?

A)Total cost = fixed cost + variable cost.
B)The size of a firm's physical plant can be changed but the firm cannot adopt new technology.
C)There are no fixed costs.
D)The firm can vary its explicit costs but not its implicit costs.

Question 59

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

A)production function.
B)supply curve, or supply schedule.
C)marginal product of labor.
D)average product of labor.

Question 60

An explicit cost is defined as

A)a cost that does not change as output changes.
B)a nonmonetary opportunity cost.
C)a cost that involves spending money.
D)a nonmonetary accounting cost.

Question 61

Accounting costs exclude implicit costs.

Question 62

Are the costs of utilities always fixed, always variable, or can they be both? Briefly explain.

Question 63

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes.These costs are sometimes called ________ costs.

A)economic; legal
B)real; explicit
C)total; economic
D)explicit; accounting

Question 64

Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours, asking his current employees to work more hours, or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his

A)long-run production function.
B)production possibilities frontier.
C)short-run production function.
D)cost function.

Question 65

The total cost schedule shows the relationship between different amounts of inputs and the resulting level of output.

Question 66

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Question 67

Stan owns a software design business.He obtained a bank loan to buy computer equipment for his business.He pays $1,000 per month for interest on the loan.He has 10 employees, each of whom is paid $4,000 per month.Because his business has been successful, next month he will increase employee wages to $5,000.If the revenue from his business remains at its current level, Stan is considering an addition to his office.Which of the following statements regarding Stan's business is false?

A)The payments Stan makes to his employees are variable costs and explicit costs.
B)The monthly payment Stan makes for his bank loan is an implicit cost.
C)The monthly payment Stan makes for his bank loan is a fixed cost.
D)The addition Stan is considering to make to his office would be an implicit cost.

Question 68

If a firm is producing no output in the short run, then its total costs are zero.

Question 69

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Question 70

Average total cost is

A)total cost divided by the quantity of output produced.
B)total explicit costs divided by the quantity of output produced.
C)variable cost divided by the quantity of output produced.
D)the change in fixed plus variable cost divided by the quantity of output produced.

Question 71

Economic costs include implicit costs but not explicit costs.

Question 72

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

A)is a long-run implicit cost.
B)is a fixed cost.
C)is a short-run implicit cost.
D)is a variable cost.

Question 73

Consider a manufacturing operation that uses specialized machinery and labor to produce its output.In this case, the input that is not fixed in the short run is labor.

Question 74

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

Question 75

In economics, what is the difference between the short run and the long run?

Question 76

Costs that change as output changes are called incremental costs.

Question 77

In the long run, all of a firm's inputs are variable.

Question 78

The short run is the time period during which a firm has at least one input constraint.

Question 79

Explain whether each of the following is a fixed cost or a variable cost for Damian Dandridge's tattoo parlor.
a.The payment he makes to buy tattoo ink.
b.The wages he pays his employees.
c.The $500-per-month payment he makes to advertise his shop on highway billboards.
d.The lease payment he makes to the landlord who owns the building where his shop is located.
e.The payment he makes on his liability insurance policy.

Question 80

What is the difference between total costs, variable costs, and fixed costs?