Deck 6: Technology,production and Costs

Question 1

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

Answer 1

True

Question 2

Describe the difference between technology and positive technological change.
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Answer 2

A firm's technology refers to the processes it uses to turn its land,labour,capital,and entrepreneurial inputs into outputs of goods and services.When a firm experiences positive technological change,it is able to produce more output using the same inputs or the same output using fewer inputs.Technological change can result from rearranging the layout of a store or manufacturing plant,the installation of faster or more durable equipment or other factors.

Question 3

When does a 'stockout' occur?

A) When brokers run out of shares of stock to sell of a particular company
B) When a disruption due to a power outage, etc., causes a temporary production shutdown
C) When a company holds too many goods in inventories
D) When a firm loses sales because goods consumers want are not available

Answer 3

D

Question 4

The statement that correctly describes the distinction between technology and technological change is:

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-centred in that it refers to developing new products with limited resources, while technological change is process-centred 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 5

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

Question 6

What are the processes called that a firm uses to turn inputs into outputs of goods and services?

A) Technology
B) Technological change
C) Marginal analysis
D) Positive economic analysis

Question 7

What happens 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

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 9

Is it possible for technological change to be negative? If so,give an example.
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Question 10

Which of the following does not determine a firm's cost of production?

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 11

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

Question 12

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 surfboards.
B) A firm buys an additional machine that it uses to make surfboards. As a result, the firm is able to increase its weekly production of surfboards.
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 surfboards they can produce per day.

Question 13

What is the difference between technology and technological change?

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 in seeking ways to improve production.
C) Technology is product centred, that is, developing new products with our limited resources, while technological change is process centred 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 14

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 15

What is the basic activity of a firm?

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 16

Suppose a chain of convenience stores reorganised its system of supplying its stores with food.This led to a sharp reduction in the number of trucks that the company had to use and increased the amount of fresh food on store shelves.Which of the following statements best describes the chain stores' actions?

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 (increase its sales) using fewer inputs (less trucks). Therefore, the chain of convenience stores has implemented a positive technological change.
D) The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business.

Question 17

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 18

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 19

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 Arts University stages a play at the local theatre.

Question 20

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

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

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 23

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

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

Question 24

Which of the following is an implicit cost of production?

A) Interest paid on a loan to a bank
B) Wages paid to labour 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 25

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 26

A factor of production that is generally fixed in the short run is ________.

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

Question 27

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 labour hired by the firm
C) Utilities cost
D) A business licensing fee

Question 28

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 29

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

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

Question 30

Which of the following would be categorised as an opportunity cost? a.Not being able to spend your $10 000 savings if you sink the money into your business
B)The cost of purchasing supplies for your housecleaning 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 31

How do economic costs of production differ from accounting costs?

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 costs.

Question 32

What does the production function show?

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

Question 33

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 times the level of output

Question 34

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

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

Question 35

Another name for the explicit cost of production is _______.

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

Question 36

When firms analyse 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 37

Which of the following is a characteristic of the long run?

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 38

How are implicit costs defined?

A) Accounting profit minus explicit cost
B) The nonmonetary opportunity cost of using the firm's own resources
C) The deferred cost of production
D) Total cost minus fixed costs

Question 39

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 40

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 per cent 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 per cent 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.
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Question 41

Jennifer Borts moves her office from the premises she rents at a local shopping centre 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 42

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 43

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 44

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 45

How is an explicit cost defined?

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

Question 46

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

Question 47

What is the relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs?

A) Production function
B) Supply curve, or supply schedule
C) Marginal product of labour
D) Average product of labour

Question 48

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 49

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 time and effort Stan spends on his software design business is an implicit cost.

Question 50

Bill owns 'Bill's Home of Blues' a store that specialises 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 51

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 52

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 53

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 54

What is average total cost?

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 55

A cost that is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books is ________.

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

Question 56

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

Question 57

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 58

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 59

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 possibility frontier
C) short-run production function
D) cost function

Question 60

Which of the following is the implicit cost for a typical firm?

A) The cost of labour
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 61

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

Question 62

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

Question 63

Economic costs include implicit costs but not explicit costs.

Question 64

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.
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Question 65

What happens as a firm hires more labour in the short run?

A) Level of total product stays constant.
B) Output per worker rises.
C) Extra output of another worker may rise at first, but eventually must fall.
D) Costs of production are increasing at a fixed rate per unit of output.

Question 66

Explain whether each of the following is a fixed cost or a variable cost for Damian Dandridge's tattoo parlour.
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.
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Question 67

What does the law of diminishing marginal return state?

A) That at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline.
B) That at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.
C) That in the presence of a fixed factor, at some point average product of labour starts to fall as more and more variable inputs are added.
D) That average total costs of production initially fall and after some point start to rise at a decreasing rate as output increases.

Question 68

Red Stone Creamery currently hires 5 workers.When it added a sixth worker,its output actually fell.Which of the following statements is true?

A) The marginal product of the sixth worker must be negative.
B) The average product of the sixth worker is negative.
C) The sixth worker is not as skilled as the fifth worker.
D) The total product becomes negative.

Question 69

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

Question 70

What is the difference between total costs,variable costs,and fixed costs?
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Question 71

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

Question 72

Accounting costs exclude implicit costs.

Question 73

Costs that change as output changes are called incremental costs.

Question 74

If four workers can product 18 chairs a day and five can produce 20 chairs a day,what is the marginal product of the fifth worker?

A) 2 chairs
B) 3 chairs
C) 4 chairs
D) 38 chairs

Question 75

Sally quit her job as an auto mechanic earning $50 000 per year to start her own business.To save money,she operates her business out of a small building she owns which,until she started her own business,she had rented out for $10 000 per year.She also invested her $20 000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.
Total revenue $120 000
Cost of labour 40 000
Cost of materials 15 000
Equipment rental 5 000
a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?
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Question 76

The definition for the marginal product of labour is ________.

A) the additional sales revenue that results when one more worker is hired
B) the additional output that results when one more worker is hired, holding all other resources constant
C) the additional number of workers required to produce one more unit of output
D) the cost of hiring one more worker

Question 77

In economics,what is the difference between the short run and the long run?
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Question 78

If diminishing marginal returns have already set in for Golden Lark Woodworks,and the marginal product of the sixth carpenter is eight chairs,what is the marginal product of the seventh carpenter?

A) Negative
B) Less than eight chairs
C) More than eight chairs
D) Zero

Question 79

Are the costs of utilities always fixed,always variable,or can they be both? Briefly explain.
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Question 80

The law of diminishing marginal returns _________.

A) explains why the average total cost and marginal cost curves are U-shaped in the short run
B) explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run
C) causes average total costs to rise at a decreasing rate as output increases
D) causes the difference between average total cost and average variable cost to get smaller as output increases