Question 1

Angel Rodriguez pulls up in his 24-foot panel truck in front of Sezz Medi Brick Oven Pizza in Upper Manhattan. Even though it's the middle of the summer, he's delivering- firewood. He says even though fuel costs have doubled in the past year, it's still worth the premium he gets delivering ash and cherry to the captive and growing market in NYC. Which of the following statements is true about short run costs for Angel?

Accepted Answer

A)  His truck is a fixed cost and gasoline is a variable cost. 
B)  His truck is a variable cost and gasoline is a fixed cost. 
C)  Both his truck and gasoline is a variable cost. 
D)  Neither his truck nor gasoline is a variable cost.

Question 2

A firm's total variable cost (TVC) is defined as a cost that

Accepted Answer

A)  does not change (is not "variable") as the firm changes its output. 
B)  changes as the firm changes its output. 
C)  falls as the firm increases its output. 
D)  varies only when the firm reaches the long run.

Question 3

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

Accepted Answer

A)  the marginal product of labor must be increasing as labor increases. 
B)  there must be increasing marginal returns. 
C)  the average product of labor is decreasing as labor increases. 
D)  None of the above answers is correct

Question 4

-The table above gives a firm's total product schedule. Suppose labor is the only variable factor of production. The price of labor is $500 per week and total fixed costs are $600 per week. If 95 units are produced, the average total cost is

Accepted Answer

A)  $6.31. 
B)  $17.45. 
C)  $26.32. 
D)  $32.63.

Question 5

The marginal cost curve intersects the average fixed, average variable, and average total cost curves all at their minimum points.

Accepted Answer

A) True 
 B)False

Question 6

Economies of scale occur when the percentage increase in output

Accepted Answer

A)  exceeds the percentage increase in all inputs. 
B)  is less than the percentage increase in all inputs. 
C)  exceeds the percentage decrease in all inputs. 
D)  is less than the percentage decrease in all inputs.

Question 7

The marginal product of labor is the

Accepted Answer

A)  change in output resulting from a one-unit increase in labor with all other inputs remaining the same. 
B)  maximum output attainable with fixed factors of production when labor is the only variable factor of production. 
C)  output level above which the slope of the total product curve falls. 
D)  output level above which the rate of total product per unit of labor falls.

Question 8

-In the above figure, the total cost curve is curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  none of the curves in the figure

Question 9

-Using the data in the above table, when the firm increases its output from 4 to 9 units, the marginal cost of a unit is

Accepted Answer

A)  $4.00 a unit. 
B)  $5.00 a unit. 
C)  $6.00 a unit. 
D)  $7.00 a unit.

Question 10

-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's kitchen currently has enough room for only one oven. If Silvio employs 3 workers, producing 200 pizzas per week is ________ in the short run and ________ in the long run.

Accepted Answer

A)  impossible; impossible 
B)  impossible; possible 
C)  possible; impossible 
D)  possible; possible

Question 11

If the ATC curve has a positive slope, then the MC curve must be

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  above the ATC curve. 
D)  below the ATC curve.

Question 12

-The above figure shows the costs at Barney's Bagel Bakery. For which of the following levels of output does the average product of labor exceed the marginal product of labor?

Accepted Answer

A)  at 1000 bagels daily 
B)  at 2000 bagels daily 
C)  at 3000 bagels daily 
D)  all of the above

Question 13

Describe the relationship between the marginal and average products of labor as the employment of labor increases in the short run.

Accepted Answer

The answer of Describe the relationship between the marginal and...

Question 14

The marginal product and average product curves

Accepted Answer

A)  never intersect. 
B)  intersect at the maximum point of the marginal product curve. 
C)  intersect at the maximum point of the average product curve. 
D)  do not intersect at any predictable point.

Question 15

-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant 2. The firm's average total cost is minimized when ________ pizzas per week are produced.

Accepted Answer

A)  180 
B)  130 
C)  220 
D)  60

Question 16

The long run is a period of time in which

Accepted Answer

A)  all factors of production are variable. 
B)  all factors of production are fixed. 
C)  some but not all factors of production are fixed. 
D)  some but not all factors of production are variable.

Question 17

All the decisions made by people who operate firms have one overriding objective, which is to ________.

Accepted Answer

A)  make maximum attainable profit 
B)  maximize the firm's total revenue 
C)  maximize the firm's market share 
D)  maximize the quantity that the firm sells

Question 18

"If the marginal product of labor curve slopes downward, then the average product of labor curve necessarily must slope downward." Explain whether the previous statement is correct or incorrect?

Accepted Answer

The answer of "If the marginal product of labor curve...

Question 19

As output increases, AVC approaches ATC because of

Accepted Answer

A)  diseconomies of scale. 
B)  diminishing marginal returns. 
C)  decreasing average fixed cost. 
D)  increasing marginal cost.

Question 20

Total Product, Marginal Product, Average Product 
-In the above table, the marginal product of the fourth worker is

Accepted Answer

A)  1. 
B)  3. 
C)  4. 
D)  6.

Exam 11: Output and Costs