Deck 4: Firm Production, Cost, and Revenue

Question 1

Refer to Figure 4.1, the increase in output from point A to B and from point B to C happens because

A)more workers will produce more.
B)better workers are usually hired after the earlier ones.
C)a small number of workers cannot take as good advantage of the division of labor as a larger number.
D)eventually workers are up against the fact that there are fixed inputs and more workers do not add as much.

Answer 1

A

Question 2

When firms add workers and get more efficient they are benefiting from

A)the division of labor.
B)the law of large numbers.
C)diminishing returns.
D)diminishing marginal utility.

Answer 2

A

Question 3

If the level of an input cannot be increased because there is insufficient time to put them in place, they are called

A)fixed input.
B)changeable input.
C)variable input.
D)unchangeable input.

Answer 3

A

Question 4

When you derive the marginal product of labor curve you use

A)The slope of the ray out of the origin to the production function.
B)The slope of the production function.
C)The vertical distance from the production function to the horizontal axis.
D)The horizontal distance from the production function to the vertical axis.

Question 5

A graph that maps output against the input required to make that output is called a/an

A)average cost function.
B)a production function.
C)a cost function.
D)a marginal cost function.

Question 6

Refer to Figure 4.1, the increase in output from point A to B is less than the increase in output from point B to C because

A)more workers always produce more.
B)better workers are usually hired after the earlier ones .
C)a small number of workers cannot take as good advantage of the division of labor as a larger number.
D)eventually workers are up against the fact that there are fixed inputs and more workers do not add as much.

Question 7

The average product of labor is

A)The change in output that results from an increase of labor by one unit.
B)Total output divided by total labor.
C)The percentage change in output divided by the percentage change in labor.
D)The output produced by a worker of average quality.

Question 8

The marginal product of labor is

A)The change in output that results from an increase of labor by one unit.
B)Total output divided by total labor.
C)The percentage change in output divided by the percentage change in labor.
D)The output produced by a worker of average quality.

Question 9

When workers subdivide the tasks of a job in such a way so as to become more efficient economists refer to this as

A)the division of labor.
B)the separation of powers.
C)the division of tasks.
D)the degrees of freedom.

Question 10

A key assumption about the way firms behave is that they

A)minimize costs.
B)maximize profit.
C)maximize market share.
D)maximize revenue.

Question 11

If an input must be increased for output to increase it is called a

A)fixed input.
B)changeable input.
C)variable input.
D)unchangeable input.

Question 12

The source of diminishing returns is

A)The efficiency that results from workers specializing in one aspect of production.
B)The fact that anytime you increase labor you get more output.
C)The inefficiency that results from the fact that capital is fixed.
D)The when each worker is equally capable, each worker adds to production exactly the same as the previous one.

Question 13

When you derive the average product of labor curve you use

A)The slope of the ray out of the origin to the production function.
B)The slope of the production function.
C)The vertical distance from the production function to the horizontal axis.
D)The horizontal distance from the production function to the vertical axis.

Question 14

A graph which maps the total costs of production against the amount made is called the

A)average cost function.
B)a production function.
C)a cost function.
D)a marginal cost function.

Question 15

The source of the benefits of the division of labor is

A)The efficiency that results from workers specializing in one aspect of production.
B)The fact that anytime you increase labor you get more output.
C)The inefficiency that results from the fact that capital is fixed.
D)The when each worker is equally capable, each worker adds to production exactly the same as the previous one.

Question 16

A production function will begin

A)at the origin.
B)on the vertical axis.
C)on the horizontal axis.
D)in the middle of the diagram (at a positive L and positive output).

Question 17

When you derive the marginal and average product of labor curve

A)The marginal product of labor cuts the average product labor at the point where the marginal product of labor is at its maximum.
B)The marginal product of labor cuts the average product labor at the point where the average product of labor is at its maximum.
C)The marginal product of labor cuts the average product labor at the point where the marginal product of labor is at its minimum.
D)The marginal product of labor cuts the average product labor at the point where the average product of labor is at its minimum.

Question 18

Refer to Figure 4.1, the increase in output from point B to C is greater than the increase in output from point C to D because

A)more workers always produce more.
B)better workers are usually hired after the earlier ones.
C)a small number of workers cannot take as good advantage of the division of labor as a larger number.
D)eventually workers are up against the fact that there are fixed inputs and more workers do not add as much.

Question 19

A production function begins at the origin because

A)A firm can always choose to have no employees.
B)A firm with no employees will have no output.
C)It takes a certain number of employees to produce anything.
D)When a firm divides tasks they can get more output.

Question 20

When firms add workers and find that the additional workers add less to output than their predecessors did, they are experiencing

A)the division of labor.
B)the law of large numbers.
C)diminishing returns.
D)diminishing marginal utility.

Question 21

A total cost function will start

A)At the origin if there are no fixed costs.
B)On the vertical axis if there are no fixed costs.
C)At the origin if there are fixed costs.
D)On the horizontal axis.

Question 22

A total cost function will start

A)At the origin if there are fixed costs.
B)On the vertical axis if there are no fixed costs.
C)On the vertical axis if there are fixed costs.
D)On the horizontal axis.

Question 23

Suppose a lawn-mowing business has a mower for which it paid $1000 and workers for which they pay $10 per hour. Suppose each mower can mow a lawn per hour.

A)Their total fixed cost is $1000.
B)Their variable cost per lawn is $10 + $1000/lawns mowed.
C)Their total fixed cost is $1000/lawns mowed.
D)Their total fixed cost is $10 per lawn mowed.

Question 24

In Figure 4.2 , the reason that point D is higher than point C and C is higher than B is that

A)it always costs more money to increase output.
B)small levels of production are often inefficient and that significant increases in production can occur thereafter at only a small additional cost.
C)it is very difficult and very expensive to increase output once the capacity of the machinery has been reached.
D)there is waste.

Question 25

In Figure 4.2, the reason that the increase in output from point A to B is much less than the increase in output from point B to C is that

A)it always costs more money to increase output.
B)small levels of production are often inefficient and that significant increases in production can occur thereafter at only a small additional cost.
C)it is very difficult and very expensive to increase output once the capacity of the machinery has been reached.
D)there is waste.

Question 26

Suppose a lawn-mowing business has a mower for which it paid $1000 and workers for which they pay $10 per hour. Suppose each mower can mow a lawn per hour.

A)Their average fixed cost is $1000.
B)Their variable cost per lawn is $10 + $1000/lawns mowed.
C)Their total fixed cost is $1000/lawns mowed.
D)Their average variable cost is $10 per lawn mowed.

Question 27

Marginal Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 28

Suppose you have a firm in which the owner pays $10,000 per month on rent of the plant and equipment and will pay that regardless of much output they produce, and once they get going they need $10 in materials and $20 in labor for everyone they produce,

A)Their variable costs are $10,000 plus $10 per unit.
B)Their fixed costs are $10,000 and variable costs are $20 per unit.
C)Their fixed costs are $10,000 and variable costs are $30 per unit.
D)Their fixed costs are $10,000 and $10 per unit.

Question 29

Which of the following algebraic expressions is inaccurate

A)TC=TVC+TFC
B)ATC=AFC+AVC
C)MC=ATC-AVC
D)AFC=ATC-AVC

Question 30

Costs which do not increase with an increase in output are called

A)fixed costs.
B)changeable costs.
C)variable costs.
D)unchangeable costs.

Question 31

Average Fixed Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 32

A total cost function will

A)Never slope up.
B)Never flatten.
C)Never steepen.
D)Never slope down.

Question 33

Which of the following algebraic expressions is inaccurate

A)TC=TVC+TFC
B)ATC=AFC-AVC
C)MC=TC(Q)-TC(Q-1)
D)AFC=ATC-AVC

Question 34

In Figure 4.2, the reason that point A is not through the origin but starts up on the vertical axis is that

A)there are fixed outputs.
B)there are fixed costs.
C)there is no cost associated with producing no output.
D)there is waste.

Question 35

Suppose a lawn-mowing business has a mower for which it paid $1000 and workers for which they pay $10 per hour. Suppose each mower can mow a lawn per hour.

A)Their average fixed cost is $1000.
B)Their variable cost per lawn is $10 + $1000/lawns mowed.
C)Their average fixed cost is $1000/lawns mowed.
D)Their average fixed cost is $10 per lawn mowed.

Question 36

Average Total Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 37

In Figure 4.2, the reason that the increase in output from point B to C is much greater than the increase in output from point C to D is that

A)it always costs more money to increase output.
B)small levels of production are often inefficient and that significant increases in production can occur thereafter at only a small additional cost.
C)it is very difficult and very expensive to increase output once the capacity of the machinery has been reached.
D)there is waste.

Question 38

Average Variable Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 39

The Total Cost Function in the book

A)is an up-ward sloping straight line.
B)is U-shaped.
C)is shaped as an upside down U.
D)begins by sharply rising, flattens out then sharply rises again.

Question 40

Costs which increase with an increase in output are called

A)fixed costs.
B)changeable costs.
C)variable costs.
D)unchangeable costs.

Question 41

In the derivation of ATC, to find its minimum you need

A)The minimum-slope ray out of the origin to the TC
B)The minimum-slope ray out of the origin to the ATC
C)The minimum-slope ray out of the origin to the TVC
D)The flattest slope on the TC.

Question 42

In the derivation of TVC, you

A)The minimum-slope ray out of the origin to the TC.
B)Move the TC to the right a fixed distance.
C)subtract the amount of the vertical intercept of the TC down from the TC at each quantity.
D)The vertical intercept of the TC and draw a horizontal line.

Question 43

In order to be drawn correctly the gap between ATC and AVC is

A)Constant.
B)Diminishing until they cross at which point they diverge.
C)Diminishing until they cross at which point they quickly reconverge.
D)Shrinking but they never cross.

Question 44

In order to be drawn correctly the minimum of the ATC is

A)To the right and up from the minimum of the MC.
B)To the right and down of the minimum of the AVC.
C)To the left and down of the minimum of the AVC.
D)Vertically straight up from the minimum of the AVC (neither to the right nor left).

Question 45

The gap between the ATC and AVC curve will

A)Shrink to nearly zero
B)Shrink and go negative
C)Growth
D)Remain the same

Question 46

In order to be drawn correctly the minimum of the AVC is

A)To the left and up from the minimum of the MC.
B)To the left and down from the minimum of the ATC.
C)To the left and up of the minimum of the ATC.
D)Vertically straight down from the minimum of the ATC (neither to the right nor left).

Question 47

AFC is the same as

A)ATC
B)AVC
C)MC
D)ATC-AVC

Question 48

In the derivation of TFC, you find

A)The minimum-slope ray out of the origin to the TC.
B)The minimum-slope ray out of the origin to the ATC.
C)The minimum-slope ray out of the origin to the TVC.
D)The vertical intercept of the TC and draw a horizontal line.

Question 49

Given the production function and total cost function shown in Chapter 4, as production increases, marginal costs

A)decrease constantly.
B)decrease for a while and then increase.
C)increase constantly.
D)increase for a while and then decrease.

Question 50

Given the production function and total cost function shown in Chapter 4, as production increases, average fixed costs

A)decrease constantly.
B)decrease for a while and then increase.
C)increase constantly.
D)increase for a while and then decrease.

Question 51

Suppose a firm has $1,000,000 in fixed costs and variable costs equal to $100 for every unit they produce,

A)their marginal costs are decreasing.
B)their average costs are decreasing.
C)their fixed costs are decreasing.
D)the marginal costs are increasing.

Question 52

Marginal Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 53

At any particular quantity on the TC, its slope will be

A)The same as the slope of the TVC
B)Greater than the slope at the quantity on the TVC
C)Smaller than the slope at the quantity on the TVC
D)Greater than the slope of the ray out of the origin to that point on the TC

Question 54

Average Total Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 55

The Marginal Cost curve usually

A)is J-shaped.
B)cuts through the minimum of the average variable cost curve.
C)cuts through the minimum of the average total cost curve.
D)all of the options are correct.

Question 56

In the derivation of MC, to find its minimum you need

A)The minimum-slope ray out of the origin to the TC
B)The minimum-slope ray out of the origin to the ATC
C)The minimum-slope ray out of the origin to the TVC
D)The flattest slope on the TC.

Question 57

In the derivation of AVC, to find its minimum you need

A)The minimum-slope ray out of the origin to the TC
B)The minimum-slope ray out of the origin to the ATC
C)The minimum-slope ray out of the origin to the TVC
D)The flattest slope on the TC.

Question 58

Which of the following is true

A)the average total cost curve is U-shaped.
B)the average variable cost curve is U-shaped.
C)neither option is correct
D)both options are correct

Question 59

Average Variable Cost is

A)the addition to cost associated with one additional unit of output.
B)the per unit cost of production.
C)the per unit variable cost of production.
D)the per unit fixed cost of production.

Question 60

The Average Total Cost curve will be cut by the Marginal Cost curve from below as long as

A)fixed costs are rising.
B)marginal costs eventually increase.
C)average costs are decreasing.
D)marginal costs continually decrease.

Question 61

Refer to Table 4.2, Box C should be filled with

A)$0.
B)$5
C)$1
D)$2

Question 62

Refer to Table 4.1, Box H should be filled with

A)$0.
B)$110.
C)$125.
D)$150.

Question 63

Given the production function and total cost function shown in Chapter 4, as production increases, total fixed costs

A)decrease constantly.
B)remain constant.
C)increase constantly.
D)increase for a while and then decrease.

Question 64

Refer to Table 4.1, Box B should be filled with

A)$0.
B)$1
C)$100.
D)$200.

Question 65

Refer to Table 4.1, Box G should be filled with

A)$0.
B)$110.
C)$115.
D)$125.

Question 66

Refer to Table 4.1, Box A should be filled with

A)$0.
B)$10.
C)$100.
D)$200.

Question 67

Given the production function and total cost function shown in Chapter 4, as production increases, average total costs

A)decrease constantly.
B)decrease for a while and then increase.
C)increase constantly.
D)increase for a while and then decrease.

Question 68

Refer to Table 4.2, Box B should be filled with

A)$0.
B)$10.
C)$20.
D)$30.

Question 69

Refer to Table 4.1, Box E should be filled with

A)$0.
B)$10.
C)$100.
D)$200.

Question 70

Refer to Table 4.1, Box F should be filled with

A)$0.
B)$10.
C)$100.
D)$110.

Question 71

Refer to Table 4.1, Box I should be filled with

A)$0.
B)$115.
C)$150.
D)$200.

Question 72

Refer to Table 4.2, Box A should be filled with

A)$0.
B)$10.
C)$20.
D)nothing.

Question 73

Refer to Table 4.2, Box D should be filled with

A)$0
B)$2.
C)$17.
D)$27.

Question 74

Refer to Table 4.1, Box C should be filled with

A)$0.
B)$2.
C)$100.
D)$200.

Question 75

Refer to Table 4.2, Box F should be filled with

A)$0.
B)$10.
C)$30.
D)$40.

Question 76

Given the production function and total cost function shown in Chapter 4, as production increases, total costs

A)decrease constantly.
B)decrease for a while and then increase.
C)increase constantly.
D)increase for a while and then decrease.

Question 77

Given the production function and total cost function shown in Chapter 4, as production increases, total variable costs

A)decrease constantly.
B)decrease for a while and then increase.
C)increase constantly.
D)increase for a while and then decrease.

Question 78

Given the production function and total cost function shown in Chapter 4, as production increases, average variable costs

A)decrease constantly.
B)decrease for a while and then increase.
C)increase constantly.
D)increase for a while and then decrease.

Question 79

Refer to Table 4.1, Box D should be filled with

A)$0.
B)$1.
C)$100.
D)$200.

Question 80

Refer to Table 4.2, Box E should be filled with

A)$0.
B)$3.
C)$20.
D)$30.