Deck 10: Output and Costs

Question 1

A firm's opportunity cost includes

A)the cost of using resources bought in the market and owned by the firm only.
B)the cost of using resources bought in the market,owned by the firm,and supplied by the firm's owner.
C)only costs that are paid in cash or by cheque.
D)the cost of using resources supplied by the firm's owner only.
E)economic profit.

Answer 1

the cost of using resources bought in the market,owned by the firm,and supplied by the firm's owner.

Question 2

The long run is a time frame in which

A)the firm can hire all the workers it wants to employ,but it does not have sufficient time to buy more equipment.
B)the firm is able to maximize revenue.
C)the firm may want to build a bigger plant,but cannot do so.
D)economic efficiency is achieved.
E)the quantities of all factors of production can be varied.

Answer 2

the quantities of all factors of production can be varied.

Question 3

Plant refers to those factors of production

A)that are too expensive for the firm to purchase.
B)that must be held in storage for at least one year.
C)that are fixed in the short run.
D)that have a decreasing marginal product as more of the factor is used.
E)which can be purchased only in fixed quantity lots.

Answer 3

that are fixed in the short run.

Question 4

Normal profit is the ________.Normal profit ________ part of a firm's opportunity cost.

A)return that an entrepreneur can expect to receive on average;is
B)profit used by the Canada Revenue Agency to calculate tax owing;is
C)profit used by the Canada Revenue Agency to calculate tax owing;is not
D)return that an entrepreneur can expect to receive on average;is not
E)difference between total revenue and total cost;is

Question 5

Economic depreciation is

A)the same as depreciation calculated by an accountant.
B)equal to economic profit minus normal profit.
C)the change in the market price of capital over a given period.
D)the deterioration of the physical appearance of a capital.
E)paid in cash.

Question 6

Which one of the following is included in the implicit rental rate of capital?

A)economic depreciation
B)the cost of electricity
C)the cost of raw materials
D)the cost of labour
E)the cost of heating

Question 7

Which of the following is part of a firm's opportunity cost of production? I.wages
II.utility costs
III.interest on a bank loan
IV.interest forgone on funds used to buy capital equipment

A)I only
B)II only
C)III only
D)IV only
E)I,II,III,and IV

Question 8

Economic profit equals total revenue minus

A)the cost of resources bought in the market.
B)the implicit rental rate.
C)the opportunity cost of production.
D)the cost of resources supplied by the owner.
E)the cost of resources owned by the firm.

Question 9

The short run is a time frame in which

A)the firm is not able to hire more workers.
B)the amount of output produced is fixed.
C)there is a shortage of most factors of production.
D)at least one factor of production is fixed.
E)there is not enough time to make all of the decisions necessary to maximize profit.

Question 10

The difference in the market value of a new van owned by a firm and the market value of the same van one year later is

A)economic depreciation.
B)physical depreciation.
C)economic deterioration.
D)physical deterioration.
E)conventional depreciation.

Question 11

In general, (1)opportunity cost is greater than accounting cost.
(2)opportunity cost is less than accounting cost.
(3)economic profit is greater than accounting profit.
(4)economic profit is less than accounting profit.

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

Question 12

A firm's goal is to

A)maximize revenue.
B)maximize customer satisfaction.
C)maximize profit.
D)minimize costs.
E)minimize risk.

Question 13

Flora's Flowers bought a new van last year for $10,000.It can now sell the van for $8,500.To buy this year's model of the same van it would have to pay $11,000.What is the implicit rental rate using the car for one year at a zero percent interest rate?

A)$2,500
B)$3,500
C)$1,000
D)$10,000
E)$1,500

Question 14

Flora's Flowers bought a new van last year for $10,000.It can now sell the van for $8,500.To buy this year's model of the same van it would have to pay $11,000.What is the one-year amount of economic depreciation?

A)$2,500
B)$1,500
C)$1,000
D)$10,000
E)$3,500

Question 15

Flora's Flowers bought a new van last year for $10,000.It can now sell the van for $8,500.To buy this year's model it would have to pay $11,000.Flora's also had to take out a $9,000 loan to buy the van which had to be paid back in yearly installments of $3,300 per year over three years.What is the implicit rental rate of the first year's use of the van?

A)$2,800
B)$1,300
C)$1,800
D)$13,300
E)$4,800

Question 16

The implicit rental rate

A)is the firm's opportunity cost of using the capital it owns.
B)is paid with cash.
C)is the depreciation measured by an accountant.
D)equals the forgone interest on an alternative investment.
E)is economic depreciation.

Question 17

The implicit rental rate to a firm of owning a building is

A)the sum of economic depreciation and forgone interest.
B)economic depreciation only.
C)forgone interest only.
D)the cost of using an alternative building.
E)the rent paid on the building.

Question 18

Which one of the following statements about the implicit rental rate of capital is true?

A)It is the market value of capital.
B)It is the opportunity cost to a firm of using its own capital.
C)It includes normal profit.
D)It is the amount paid for the use of land or buildings.
E)It is the depreciated value of capital.

Question 19

A firm's opportunity cost of production is the sum of the cost of using resources

A)bought in the market.
B)owned by the firm.
C)supplied by the firm's owner.
D)bought in the market and supplied by the firm's owner.
E)bought in the market,owned by the firm,and supplied by the firm's owner.

Question 20

Gerald is a freelance writer who could work for a newspaper at $25,000 a year but instead runs his own business making revenue of $40,000 a year.His only business expenses are $1,000 for writing materials and $12,000 for rent.What is Gerald's economic profit from working as a freelance writer?

A)$2,000
B)$28,000
C)$15,000
D)$25,000
E)$27,000

Question 21

A firm's total product curve describes

A)the minimum cost of producing a given amount of output.
B)the maximum output that a given quantity of labour can produce.
C)how the maximum attainable output varies as the size of the firm's plant varies,given the quantity of labour employed.
D)how the management of the firm makes decisions over the short run.
E)how the amount of labour varies as the amount of output varies.

Question 22

The total product curve is a graph that shows the

A)minimum cost of producing a given amount of output using a given technology.
B)maximum profit from each unit of output sold.
C)maximum output that a given quantity of labour can produce.
D)maximum output that can be produced as technology advances.
E)change in total product for a given change in marginal product.

Question 23

Which of the following factors are fixed in the long run?

A)labour
B)capital
C)land
D)entrepreneurship
E)No factors of production are fixed in the long run.

Question 24

Use the figure below to answer the following questions. Figure 10.2.1
Refer to Figure 10.2.1 which illustrates Tania's Teapots' total product curve.Which one of the following statements is true?

A)The points above the curve are attainable and inefficient.
B)The points below the curve are attainable and inefficient.
C)The points below the curve are inefficient and unattainable.
D)The points on the curve are efficient and unattainable.
E)Marginal product is equal at every point on the total product curve.

Question 25

Choose the statement that is incorrect.

A)Expenditure on a plant that has no resale value is a sunk cost.
B)A sunk cost is irrelevant to a firm's current decisions.
C)A cost that influences a firm's current decisions is the short-run cost of changing its labour inputs.
D)A cost that influences a firm's current decisions is the long-run cost of changing its plant.
E)The short run is a time frame in which a firm can change its plant.

Question 26

Choose the correct statement.

A)The long run is a period of time in which the quantity of at least one input is fixed.
B)The short run is a period of time in which the firm has sufficient time to change all its inputs.
C)The long run is a time frame that lasts for 10 years.
D)In the short run,the firm's plant is fixed.
E)A firm always has plenty of time to make decisions about changing its inputs no matter if it is in a short run or long run position.

Question 27

The long run refers to a time period

A)of one year or less.
B)in which all factors of production are variable.
C)in which labour is variable,but plant is fixed.
D)when there is at least one variable factor of production.
E)of at least 5 years.

Question 28

In the long run,a firm has no factors of production that are

A)variable.
B)marginal.
C)significant.
D)taxable.
E)fixed.

Question 29

The short run refers to a time period

A)of one year or less.
B)in which all factors of production are variable.
C)in which all factors of production are fixed.
D)in which some factors of production are variable,but at least one factor of production is fixed.
E)in which all factors of production are variable,but the technology is fixed.

Question 30

Refer to the table below to answer the following questions.
Table 10.2.1

Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule.The marginal product when the number of workers increases from 1 to 2 is

A)3 teapots.
B)12 teapots.
C)7 teapots.
D)9 teapots.
E)6 teapots.

Question 31

When the demand for electricity peaks during the hottest days of summer,Hydro One can generate more electricity by using more fuel and increasing the working hours of many of its employees.The company cannot,however,increase electric power production by building additional generating capacity.This means that the company is operating in the

A)market run.
B)intermediate run.
C)long run.
D)immediate run.
E)short run.

Question 32

Marginal product of labour is the increase in total product that results from a

A)one-unit increase in the quantity of labour employed,other inputs remaining the same.
B)one-unit increase in the quantity of fixed inputs employed,holding the quantity of labour constant.
C)$1 increase in the cost of labour.
D)change in the total cost of labour.
E)one-unit increase in the minimum efficient scale.

Question 33

Refer to the table below to answer the following questions.
Table 10.2.1

Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule.The average product when Tania's hires two workers is

A)3 teapots per worker.
B)6 teapots per worker.
C)7 teapots per worker.
D)9 teapots per worker.
E)12 teapots per worker.

Question 34

A cost that has been incurred and cannot be recovered is a

A)marginal cost.
B)sunk cost.
C)variable cost.
D)business cost.
E)significant cost.

Question 35

Refer to the table below to answer the following questions.
Table 10.2.1

Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule.Average product of labour reaches its maximum for the ________ worker.

A)first
B)second
C)third
D)fourth
E)fifth

Question 36

Refer to the table below to answer the following questions.
Table 10.2.1

Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule.The marginal product when Tania's increases the number of workers from 3 to 4 per day is

A)6 teapots.
B)2 teapots.
C)9 teapots.
D)7 teapots.
E)4 teapots.

Question 37

Use the figure below to answer the following questions. Figure 10.2.1
Refer to Figure 10.2.1 which illustrates Tania's Teapots' total product curve.Which one of the following statements is false?

A)All the points above the curve are unattainable.
B)All the points below the curve are attainable.
C)All the points below the curve are inefficient.
D)The cost of producing at point B equals the cost of producing at point C.
E)All the points on the curve are attainable.

Question 38

Use the figure below to answer the following questions. Figure 10.2.1
Refer to Figure 10.2.1 which illustrates Tania's Teapots' total product curve.Marginal product of labour reaches its maximum when the number of workers increases from

A)zero to 1.
B)1 to 2.
C)2 to 3.
D)3 to 4.
E)4 to 5.

Question 39

Use the figure below to answer the following questions. Figure 10.2.1
Refer to Figure 10.2.1 which illustrates Tania's Teapots' total product curve.Average product of labour reaches its maximum for the ________ worker.

A)first
B)second
C)third
D)fourth
E)fifth

Question 40

In the long run,a firm can vary

A)all of its factors of production.
B)labour but not capital.
C)capital but not labour.
D)labour and capital but not land.
E)labour,capital and entrepreneurship but not land.

Question 41

The steeper the slope of the total product curve,

A)the smaller the average product.
B)the smaller the marginal product.
C)the greater the total cost.
D)the more efficient the technology employed.
E)the greater the marginal product.

Question 42

Use the table below to answer the following questions.
Table 10.2.3

Refer to Table 10.2.3.The value of A is

A)1.75.
B)2.
C)3.
D)7.
E)4.

Question 43

When the 7th worker is hired,output increases from 100 units per week to 110 units per week.When the 8th worker is hired,output increases from 110 units to 118 units.This is an example of

A)diminishing marginal returns.
B)diminishing marginal cost.
C)decreasing returns to scale.
D)labour-intensive production.
E)increasing returns to scale.

Question 44

Diminishing marginal returns refers to a situation where the ________ of an additional worker is less than the ________ of the previous worker.

A)marginal cost;marginal cost
B)average cost;average cost
C)marginal product;marginal product
D)average product;average product
E)marginal product;average product

Question 45

Use the table below to answer the following questions.
Table 10.2.2
Refer to Table 10.2.2 which gives Rob's Repair Shop's total product schedule.The marginal product when the number of workers increases from 2 to 3 is

A)1 repair.
B)2 repairs.
C)3 repairs.
D)4 repairs.
E)3.75 repairs.

Question 46

Use the table below to answer the following questions.
Table 10.2.3

Refer to Table 10.2.3.The maximum value of marginal product occurs where output equals ________,while the maximum value of average product occurs where output equals ________.

A)5;6
B)6;5
C)7;14
D)9;14
E)14;11

Question 47

Suppose a firm increases the quantity of labour employed from 5 to 6 workers,and as a result,the firm's total output increases from 100 units to 400 units.The marginal product of the sixth worker is

A)150 units.
B)100 units.
C)400 units.
D)300 units.
E)66.67 units.

Question 48

If the total product of three workers is 214 units and the total product of four workers is 221 units,then the marginal product of the fourth worker is

A)71.3 units.
B)55.25 units.
C)7 units.
D)62.14 units.
E)1.75 units.

Question 49

Use the table below to answer the following questions.
Table 10.2.2
Refer to Table 10.2.2 which gives Rob's Repair Shop's total product schedule.The average product when Rob's hires three workers is

A)1 repair per worker.
B)2 repairs per worker.
C)3 repairs per worker.
D)4 repairs per worker.
E)12 repairs per worker.

Question 50

The law of diminishing marginal returns states:

A)As the size of a plant increases,marginal product eventually decreases.
B)As the size of a firm's plant increases,average cost eventually decreases.
C)As a firm uses more of a variable factor of production,with a given quantity of the fixed factor of production,the marginal product of the variable factor eventually diminishes.
D)As a firm uses more of a variable factor of production,its average cost eventually decreases.
E)As a firm uses more of a variable factor or production,total product eventually decreases.

Question 51

The law of diminishing marginal returns refers to the tendency for the ________ to eventually decrease as more labour is employed,everything else remaining the same.

A)average total cost
B)marginal cost
C)total product
D)marginal product of labour
E)average product of labour

Question 52

When the marginal product of labour is less than the average product of labour,

A)the average product of labour is increasing.
B)the marginal product of labour is increasing.
C)the total product curve is negatively sloped.
D)the firm is experiencing diminishing marginal returns.
E)the average product of labour is at its maximum.

Question 53

Marginal product

A)is always negative.
B)equals the slope of the total product curve.
C)is always zero.
D)lies between zero and one.
E)equals average product minus total product.

Question 54

Refer to the table below to answer the following questions.
Table 10.2.1

Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule.Marginal product of labour reaches its maximum when the number of workers increases from

A)0 to 1.
B)1 to 2.
C)2 to 3.
D)3 to 4.
E)4 to 5

Question 55

If the total product of four workers is 156 units,the average product of each worker is

A)39 units.
B)19.5 units.
C)78 units.
D)152 units.
E)624 units.

Question 56

Suppose a 1-unit increase in labour,from 2 to 3 workers,increases output at a woollen mill from 10 to 15 sweaters.The marginal product from the increase in the quantity of labour is

A)1 sweater.
B)3 sweaters.
C)10 sweaters.
D)5 sweaters.
E)15 sweaters.

Question 57

Which one of the following statements is true?

A)The highest value of average product occurs where average product is greater than marginal product.
B)When the average product curve is rising,marginal product is less than average product.
C)When the average product curve is falling,marginal product is greater than average product.
D)The maximum total product occurs at minimum marginal product.
E)The highest value of average product occurs where average product equals marginal product.

Question 58

When the marginal product of labour is greater than the average product of labour,

A)the average product of labour is increasing.
B)the marginal product of labour is increasing.
C)the total product curve is negatively sloped.
D)the firm is experiencing diminishing marginal returns.
E)the firm is experiencing constant returns.

Question 59

Use the table below to answer the following questions.
Table 10.2.2
Refer to Table 10.2.2 which gives Rob's Repair Shop's total product schedule.The average product when Rob's employs four workers is

A)2 repairs per worker.
B)8 repairs per worker.
C)12 repairs per worker.
D)15 repairs per worker.
E)3.75 repairs per worker.

Question 60

When Coffee 'n' Cream in Victoria,British Columbia hires two students,64 customers can be served in one hour.Suppose the manager of the restaurant observes that after hiring the third student,80 customers are being served in one hour.The marginal product of the third student is ________ customers per hour.

A)4
B)16
C)8
D)26.67
E)32

Question 61

Use the table below to answer the following question.
Table 10.2.4

Refer to Table 10.2.4.The table gives the total product schedule of workers who harvest corn.Diminishing marginal returns begin when the ________ is hired.

A)1st labourer
B)2nd labourer
C)3rd labourer
D)4th labourer
E)There are no diminishing marginal returns since total product always rises.

Question 62

Which one of the following statements is correct?

A)When marginal product is increasing,average product is decreasing.
B)When average product is less than zero,marginal product is positive.
C)When marginal product is increasing and greater than average product,average product is increasing.
D)When marginal product is zero,total product is at its minimum.
E)When average product exceeds marginal product,marginal product is increasing.

Question 63

The average product of labour equals

A)the slope of the total product curve.
B)the slope of the marginal product curve.
C)the increase in total product divided by the increase in labour employed.
D)total product divided by the quantity of labour employed.
E)the difference between the total product and the marginal product of labour.

Question 64

Suppose the marginal product of energy equals the average product of energy.This implies that

A)marginal product is negative.
B)average product is at its maximum value.
C)marginal product is at its maximum value.
D)the marginal product curve is upward sloping.
E)average product is at its minimum value.

Question 65

Which of the following quotes best illustrates the idea of average product?

A)"If I have 10 workers on my assembly line,I can produce 13 tables a day."
B)"If I add an 11th worker,I can produce 1 extra table a day."
C)"Each worker produces 2 tables a day."
D)"I find if I add an extra shift at night,table production only rises by 80 percent because I need more maintenance time on the assembly line."
E)"If I double workers and double the assembly line,I can make 120 percent more tables."

Question 66

Which of the following are correct? According to the law of diminishing returns, (1)marginal product eventually rises.
(2)marginal product eventually falls.
(3)marginal cost eventually rises.
(4)marginal cost eventually falls.

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

Question 67

At that amount of output where diminishing marginal returns first sets in,

A)average product begins to decrease.
B)total product begins to decrease.
C)marginal cost begins to decrease.
D)marginal product begins to decrease.
E)average product is at its maximum.

Question 68

Use the table below to answer the following questions.
Table 10.3.1
Refer to Table 10.3.1,which gives Tania's Teapots' total cost schedule.The average total cost of producing 16 teapots per day is

A)$2.
B)$5.
C)$3.33.
D)$7.50.
E)$5.51.

Question 69

Use the table below to answer the following questions.
Table 10.3.1
Refer to Table 10.3.1,which gives Tania's Teapots' total cost schedule.The average fixed cost of producing 9 teapots per day is

A)$2.22.
B)$1.25.
C)$10.00.
D)$1.11.
E)$1.54.

Question 70

Which of the following quotes best illustrates the idea of total product?

A)"If I have 10 workers on my assembly line,I can produce 13 tables a day."
B)"If I add an 11th worker,I can produce 1 extra table a day."
C)"Each worker produces 2 tables a day."
D)"I find if I add an extra shift at night,table production only rises by 80 percent because I need more maintenance time on the assembly line."
E)"If I double workers and double the assembly line,I can make 120 percent more tables."

Question 71

If capital is a variable input in a production process,the law of diminishing marginal returns implies that

A)total product is minimized.
B)capital's marginal product is positive and less than one.
C)total product is maximized.
D)marginal product of capital eventually decreases.
E)marginal product of capital is constant.

Question 72

Use the table below to answer the following questions.
Table 10.3.1
Refer to Table 10.3.1,which gives Tania's Teapots' total cost schedule.When output increases from 4 to 9 teapots,the marginal cost of one of the 5 teapots is

A)$4.25.
B)$4.
C)$25.
D)$6.25.
E)$5.

Question 73

If energy (E)is the only input used to produce output (Q),what is the formula for average product of energy?

A)ΔQ/ΔE
B)Q/E
C)ΔE/ΔQ
D)E/Q
E)Q ∗ E

Question 74

Which of the following statements by a restaurant owner refers to the law of diminishing returns?

A)"The higher the quality of the ingredients we use,the higher the cost of producing each meal."
B)"If we double the size of our premises and double everything else - kitchen staff,serving staff,equipment - we can increase the number of meals we serve,but not to double the current levels."
C)"We can increase the number of meals we serve by just adding more kitchen staff,but each additional worker adds less meals than the previous worker because traffic in the kitchen will get worse."
D)"We can serve the same number of meals with fewer kitchen staff,but we would have to buy more labour-saving kitchen equipment."
E)"We can serve the same number of meals with less kitchen equipment,but we would have to hire more kitchen staff."

Question 75

If energy (E)is the only input used to produce output (Q),what is the formula for marginal product of energy?

A)Q ∗ E
B)Q/E
C)ΔQ/ΔE
D)ΔE/ΔQ
E)E/Q

Question 76

Which of the following quotes best illustrates the idea of marginal product?

A)"If I have 10 workers on my assembly line,I can produce 13 tables a day."
B)"If I add an 11th worker,I can produce 1 extra table a day."
C)"Each worker produces 2 tables a day."
D)"I find if I add an extra shift at night,table production only rises by 80 percent because I need more maintenance time on the assembly line."
E)"If I double workers and double the assembly line,I can make 120 percent more tables."

Question 77

If the marginal product of the fifth worker is 34,then the total product of five workers

A)is 35.
B)is 24.
C)is 170.
D)is 6.8.
E)cannot be calculated with the information given.

Question 78

The total output produced with any quantity of labour is equal to the sum of the

A)average products of each of the workers hired.
B)marginal costs of each of the workers hired.
C)marginal products of each of the workers hired.
D)average costs of each of the workers hired.
E)fixed products of each of the workers hired.

Question 79

Choose the correct statement.

A)When marginal product of labour is greater than average product of labour and marginal product is either increasing or decreasing average product of labour is increasing.
B)When total product is increasing average product of labour and marginal product of labour are both increasing.
C)When marginal product of labour is greater than or equal to average product of labour,average product of labour is increasing.
D)When marginal product of labour is increasing,average product of labour is greater than marginal product of labour.
E)When total product is increasing,average product of labour is decreasing and marginal product of labour is increasing.

Question 80

The average product of labour is

A)the inverse of the average product of capital.
B)the slope of the marginal product of labour curve.
C)the slope of the total product curve.
D)greater than the marginal product of labour.
E)calculated as total product divided by the total quantity of labour employed.