Deck 9: The Firm: Cost and Output Determination

Question 1

Which of the following would NOT be a short-run decision for the firm?

A)Recall workers who were previously laid-off
B)Have labor work two hours overtime each day in order to expand output
C)Build another wing on the plant in order to add a new assembly line
D)Place an order with a supplier for additional raw materials

Answer 1

Build another wing on the plant in order to add a new assembly line

Question 2

The time period during which a firm's capital is fixed but its labor is variable is called

A)the planning horizon.
B)the short run.
C)the long run.
D)the very long run.

Answer 2

the short run.

Question 3

The time period during at least one input cannot be changed is the

A)production time.
B)calendar year.
C)long run.
D)short run.

Answer 3

short run.

Question 4

During the short run,a firm cannot

A)increase its use of labor.
B)change its plant size.
C)purchase more raw materials.
D)change its variable costs.

Question 5

Which of the following is a short-run decision for a firm?

A)Downsizing the firm's manufacturing plant
B)Expanding the firm's distribution network of long-haul freight trucks and smaller delivery trucks.
C)Firing workers
D)Investing in a new addition to the firm's manufacturing plant

Question 6

Mr.James' company produces candy bars.Which is NOT a variable input for this firm?

A)Sugar
B)Assembly line workers
C)The big chocolate-stirring machines
D)Packaging materials

Question 7

The focus of firm decisions in the short run is primarily on

A)variable inputs.
B)capital investment.
C)plant size.
D)economies of scale.

Question 8

The time period during which all factors of production can be varied is the

A)production time.
B)calendar year.
C)long run.
D)short run.

Question 9

For a hotdog vendor,the hotdog buns represents his

A)fixed input.
B)variable input.
C)sunk cost.
D)none of the above.

Question 10

In economics,how long is the long run?

A)More than 12 months
B)24 months or longer
C)5 years or more
D)Whatever time it takes a firm to vary all inputs

Question 11

For a hotdog vendor,the hotdog stand represents his

A)fixed input.
B)variable input.
C)diseconomies of scale.
D)none of the above.

Question 12

Which of the following would be a fixed input for an amusement park?

A)Ticket takers
B)Unpopped popcorn
C)Concession workers
D)The roller coaster

Question 13

A basic distinction between the long run and the short run is that

A)if a firm produces no output in the long run,it still incurs a cost.
B)the opportunity costs of production are lower in the short run than in the long run.
C)in the long run,some inputs are fixed,while in the short run,all inputs are variable.
D)in the short run,complete adjustment of all inputs is impossible,while in the long run all inputs can be adjusted.

Question 14

A fixed resource is one that

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 15

Ajax Corporation has recently finished building a new factory.They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce.Ajax is operating in the

A)production time.
B)corporation time.
C)long run.
D)short run.

Question 16

Economists generally define the short run as being

A)that period of time in which at least one of the firm's inputs,usually plant size,is fixed.
B)that period of time in which all inputs are variable.
C)any period of time less than one year.
D)any period of time less than six months.

Question 17

Which of the following is TRUE about the long run?

A)All resources are variable.
B)All resources are fixed.
C)At least one resource is fixed.
D)None of the above.

Question 18

The long run is defined as the time period in which

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.

Question 19

Which of the following would be a fixed input to an automobile firm?

A)Steel
B)A factory in Detroit
C)Car batteries
D)Engineers

Question 20

The short run is

A)a year or less.
B)up to three years.
C)the period of time in which the firm can vary its rate of output.
D)the period of time in which the firm cannot change its use of at least one input.

Question 21

"In the short run,a firm cannot change any of its inputs." Do you agree or disagree? Explain.

Question 22

When El Torito Restaurant is deciding how many waiters to hire for a holiday weekend,it is making a ________ decision.

A)plant-size
B)long-run
C)short-run
D)fixed-input

Question 23

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

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

Question 24

For a firm,we define the short run as a period of time during which

A)at least one input cannot be changed.
B)all inputs can be changed.
C)only the plant size can be changed.
D)all inputs cannot be changed.

Question 25

The best way to think of the short run and the long run is as

A)specific periods of time,although the time periods may differ across industries.
B)planning terms that apply to managers.
C)concepts that apply to all people who work for a firm.
D)a concept that only accountants are concerned with.

Question 26

Production functions indicate the relationship between

A)factor costs and output prices.
B)factor inputs and the quantity of output.
C)the value of inputs and average costs.
D)factor inputs and factor prices.

Question 27

The difference between the short run and the long run is

A)economic profits are negative in the short run and positive in the long run.
B)economic and accounting profits are not equal in the short run but are equal in the long run.
C)that in the short run at least one factor of production cannot be varied while in the long run all factors of production can be varied.
D)the short run is a period less than a year while the long run is a period greater than a year.

Question 28

The amount of calendar time associated with the long run

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

Question 29

Which of the following statements is not true about the short run and the long run?

A)The short run for a firm is today while the long run is next week.
B)These terms apply to the planning decisions of firms.
C)The firm is always operating in the short run.
D)In the short run,the firm can change the amount of variable inputs.

Question 30

For a wheat farmer in the middle of harvesting system,a fixed input would be

A)workers hired.
B)combines rented.
C)the land that had been planted.
D)trucks rented to haul the wheat.

Question 31

In the long run,a firm can change

A)nothing.
B)only one input,such as plant size.
C)all inputs.
D)None of the above are correct.

Question 32

If a farmer seeks to buy one-hundred more acres for her kiwi fruit farm,she is making a

A)long-run decision.
B)short-run decision.
C)immediate-run decision.
D)variable-input decision.

Question 33

The short run is

A)a period of time during which at least one input cannot be changed.
B)a period of time during which no inputs can be changed.
C)a period of time during which all inputs can be changed.
D)a period of time shorter than one year.

Question 34

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

A)the long run.
B)the immediate run.
C)equilibrium.
D)the short run.

Question 35

If the firm can vary all factors of production,it is operating

A)at a profit.
B)at a zero economic profit.
C)in the short run.
D)in the long run.

Question 36

What is the difference between the short run and the long run? What is the appropriate time dimension of the long run?

Question 37

"In economics,the short run commonly refers to a period within one year and the long run is a period longer than one year." Do you agree or disagree? Explain your answer.

Question 38

For an economist,the short run means a time period

A)during which new firms are prohibited from entering the industry.
B)during which firms are not allowed to change the amount of imported resources they use.
C)that is between one and five years.
D)during which the firm is unable to change its plant size.

Question 39

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico,it is making a(n)________ decision.

A)immediate-run
B)long-run
C)short-run
D)variable-input

Question 40

Which of the following is a long-run adjustment?

A)A restaurant hires a new chef.
B)A company builds a new manufacturing plant.
C)A bank hires a new CEO.
D)A company hires ten new management trainees.

Question 41

If the marginal product curve is increasing from workers 1-89 and then decreases steadily,crossing the horizontal axis at 190 workers,we know that

A)the total output curve increases from workers 1-89,decreases from workers 90-189,and becomes 0 at the 190th worker.
B)the total output curve is increasing at an increasing rate from workers 1-89,then increases at a decreasing rate until the 190th worker,after which it decreases.
C)the total output curve is increasing throughout,although at an increasing rate for the first 190 workers and at a decreasing rate after the 190th worker.
D)diminishing marginal product sets in with the 190th worker.

Question 42

Suppose that one worker can produce 15 cookies,two workers can produce 35 cookies together,and three workers can produce 65 cookies together.What is the average product of the first three workers?

A)65 cookies
B)30 cookies
C)17.5 cookies
D)21.67 cookies

Question 43

Changes in production functions are associated with changes in

A)the level of output.
B)demand.
C)the levels of costs.
D)technology.

Question 44

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,when the firm employs 3 workers,the marginal product will be

A)42 snowboards.
B)30 snowboards.
C)36.67 snowboards.
D)208 snowboards.

Question 45

Suppose that one worker can produce 15 cookies,two workers can produce 35 cookies together,and three workers can produce 65 cookies together.What is the marginal product of the 3rd worker?

A)21.67 cookies
B)65 cookies
C)30 cookies
D)35 cookies

Question 46

Marginal physical product of the first worker is 100,120 for the second,80 for the third,30 for the fourth,5 for the fifth,3 for the sixth,2 for the seventh,1 for the eighth,and 0 for the ninth.What is total product for the fifth worker and the ninth worker respectively?

A)335; 341
B)335; 0
C)5; 0
D)0; 5

Question 47

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,average physical product is 30 snowboards when

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

Question 48

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

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

Question 49

A negative value for the marginal physical product would indicate that

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 50

Suppose that one worker can produce 15 cookies,two workers can produce 35 cookies together,and three workers can produce 65 cookies together.What is the average product of the first two workers?

A)15 cookies
B)20 cookies
C)17.5 cookies
D)35 cookies

Question 51

Which of the following statements is FALSE?

A)Included in the firm's short-run production function are both fixed and variable inputs.
B)An efficient firm can obtain more output than the production function shows.
C)The production function shows the technical relationship between a firm's inputs and outputs.
D)The production function presents the technically efficient methods of combining inputs to produce output.

Question 52

Suppose that one worker can produce 15 cookies,two workers can produce 35 cookies together,and three workers can produce 65 cookies together.What is the marginal product of the 2nd worker?

A)15 cookies
B)20 cookies
C)30 cookies
D)35 cookies

Question 53

Which of the following changes a firm's production function?

A)Hiring additional workers
B)Acquiring additional physical capital
C)Adding a second production facility exactly like its first production site
D)Adopting new technology

Question 54

If marginal product is negative,then

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

Question 55

When total product is rising,

A)fixed cost must be rising.
B)marginal product must be positive.
C)variable cost must be declining.
D)marginal product must be negative.

Question 56

Fred's Franks originally sold hotdogs and soft drinks from a cart located in front of City Hall.Then Fred purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school.Both locations have been successful.When Fred's Franks expanded to two locations,which of the following did NOT occur?

A)Fred's production function changed.
B)Production increased.
C)The company increased the inputs it employs.
D)The firm employed additional capital.

Question 57

The concept of the production function implies that a firm using resources inefficiently will

A)obtain less output than the theoretical production function shows.
B)obtain more output than the theoretical production function shows.
C)obtain exactly the amount that the theoretical production function shows.
D)not be subject to diminishing marginal product.

Question 58

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,when the firm employs 4 workers,the marginal product will be

A)140 snowboards.
B)30 snowboards.
C)35 snowboards.
D)208 snowboards.

Question 59

The production function

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 60

When a firm uses technological improvements to increase output from the same amount of inputs,the result is

A)a new production function.
B)losses.
C)guaranteed profits.
D)diseconomies of scale.

Question 61

A firm has the following production relationship between labor and output,for a fixed capital stock. $$\begin{array} { c r } \hline\text { Labor } & \text { Output } \\\hline0 & 0 \\1 & 5 \\2 & 11 \\3 & 18 \\4 & 23 \\5 & 26\\\hline\end{array}$$

-According to the above table,what is the average product of labor when three laborers are employed?

A)3
B)4
C)5
D)6

Question 62

The marginal physical product of labor is calculated assuming other factor inputs

A)increase more than proportionately.
B)increase less than proportionately.
C)remain constant.
D)decrease.

Question 63

A firm has the following production relationship between labor and output,for a fixed capital stock. $$\begin{array} { c r } \hline\text { Labor } & \text { Output } \\\hline0 & 0 \\1 & 5 \\2 & 11 \\3 & 18 \\4 & 23 \\5 & 26\\\hline\end{array}$$

-According to the above table,what is the average product of labor when five laborers are employed?

A)3
B)5.2
C)5.75
D)6

Question 64

In the short run,the additional output that results from hiring an additional unit of a variable input is the

A)marginal physical product.
B)average product.
C)average variable cost.
D)marginal cost.

Question 65

Production

A)is a process by which resources are produced.
B)is a process by which resources are transferred into goods and services.
C)only applies to manufacturing of goods.
D)is carried on by corporations,but not by sole proprietorships.

Question 66

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,the marginal product of the second worker is

A)68.
B)98.
C)38.
D)It cannot be determined.

Question 67

Which of the following activities is not included in the production process?

A)Determining the value of the goods
B)Making the goods
C)Packaging the goods
D)Transporting the goods

Question 68

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,which two workers have the same marginal physical product?

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

Question 69

A firm has the following production relationship between labor and output,for a fixed capital stock. $$\begin{array} { c r } \hline\text { Labor } & \text { Output } \\\hline0 & 0 \\1 & 5 \\2 & 11 \\3 & 18 \\4 & 23 \\5 & 26\\\hline\end{array}$$

-According to the above table,what is the marginal product of the 4th unit of labor?

A)3
B)5
C)6
D)7

Question 70

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,diminishing marginal product occurs after employing the

A)first worker.
B)second worker.
C)third worker.
D)fourth worker.

Question 71

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,how many workers are employed when marginal product reaches its maximum?

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

Question 72

A firm has the following production relationship between labor and output,for a fixed capital stock. $$\begin{array} { c r } \hline\text { Labor } & \text { Output } \\\hline0 & 0 \\1 & 5 \\2 & 11 \\3 & 18 \\4 & 23 \\5 & 26\\\hline\end{array}$$

-According to the above table,at what usage of labor does diminishing marginal product begin?

A)1
B)2
C)4
D)5

Question 73

The relationship Q = f(K,L)is an example of a

A)cost function.
B)production function.
C)demand equation.
D)profit equation.

Question 74

Average physical product is calculated by dividing total product by the

A)amount of variable and fixed inputs employed.
B)quantity of the variable input.
C)quantity of the fixed input.
D)production function.

Question 75

The production function

A)gives the maximum amount of output for a given level of inputs.
B)gives the implicit costs for all inputs.
C)gives the amount of time necessary to reach the long run.
D)allows us to compute the difference between accounting and economic profits.

Question 76

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

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

Question 77

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,marginal product becomes negative after employing the

A)second worker.
B)third worker.
C)fourth worker.
D)fifth worker.

Question 78

$$\begin{array} { c c } \begin{array} { c } \text { Input of Labor } \\\text { (no. of workers } \\\text { in weeks) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (no. of snowboards } \\\text { produced) }\end{array} \\\hline 0 & 0 \\1 & 30 \\2 & 68 \\3 & 110 \\4 & 140 \\5 & 135 \\\hline\end{array}$$

-In the above table,the average product of the fifth worker is

A)35.
B)135.
C)-5.
D)27.

Question 79

A firm has the following production relationship between labor and output,for a fixed capital stock. $$\begin{array} { c r } \hline\text { Labor } & \text { Output } \\\hline0 & 0 \\1 & 5 \\2 & 11 \\3 & 18 \\4 & 23 \\5 & 26\\\hline\end{array}$$

-According to the above table,what is the marginal product of the 5th unit of labor?

A)3
B)4
C)5.2
D)5

Question 80

Which of the following statements is not true about the production function?

A)It gives the maximum output that can be obtained for a given level of inputs.
B)A new production function does not have to be developed when there is technical progress since technology is included in the function.
C)The production function depends upon the level of technology available to the firm.
D)It specifies the cost of inputs necessary to produce a certain level of outputs.