Question 1

The long run refers to a time period

Accepted Answer

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 2

Diseconomies of scale are present when

Accepted Answer

A) the LRAC curve slopes downward. 
B) average total cost falls as input increases. 
C) average total cost rises as output increases. 
D) the LRAC curve is horizontal. 
E) total fixed cost increases.

Question 3

Economies of scale are present when

Accepted Answer

A) the LRAC curve slopes downward. 
B) average total cost remains constant as input increases. 
C) average total cost rises as output increases. 
D) the LRAC curve is horizontal. 
E) total fixed cost increases.

Question 4

Choose the correct statement.

Accepted Answer

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 5

If MC is rising then ATC must be

Accepted Answer

A) rising. 
B) falling. 
C) above MC. 
D) below MC. 
E) none of the above.

Question 6

Use the table below to answer the following questions.
Table 11.3.1
 $\begin{array}{ccccc}\hline\text { Labour }&\text { Output }&TFC&TVC&TC\
\text { (workers per }&\text { (teapots per }&\text { (dollars per }&\text { (dollars per }&\text { (dollars per }\
\text { day) } & \text { day) } & \text { day) } & \text { day) }& \text { day) }\
\hline 0 & 0 & 20 & 0 & 20 \
1 & 4 & 20 & -- & 45 \
2 & 9 & 20 & -- & 70 \
3 & 13 & 20 & -- & 95 \
4 & 16 & 20 & 100 & -- \
5 & 18 & 20 & 125 & 145\\hline
\end{array}$
-Refer to Table 11.3.1,which gives Tania's total cost schedule.When output increases from 4 to 9 teapots,the marginal cost of one of the 5 teapots is

Accepted Answer

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

Question 7

Refer to the table below to answer the following questions.
Table 11.2.1
 $$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Labour } \
\text { (workersper day) }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (teapots per day) }
\end{array} \
\hline 0 & 0 \
1 & 3 \
2 & 12 \
3 & 19 \
4 & 23 \
5 & 25 \
\hline
\end{array}$$
-Refer to Table 11.2.1 which gives Tania's total product schedule.Marginal product of labour reaches its maximum when the number of workers increases from

Accepted Answer

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

Question 8

Use the figure below to answer the following questions.
  Figure 11.4.2
-Refer to Figure 11.4.2,which illustrates the short-run average total cost curves for four different plant sizes.Which plant has the lowest average total cost for an output rate of 5 sweaters a day?

Accepted Answer

A) Plant A 
B) Plant B 
C) Plant C 
D) Plant D 
E) none of the above

Question 9

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.

Accepted Answer

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

Question 10

Refer to the table below to answer the following questions.
Table 11.2.1
 $$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Labour } \
\text { (workersper day) }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (teapots per day) }
\end{array} \
\hline 0 & 0 \
1 & 3 \
2 & 12 \
3 & 19 \
4 & 23 \
5 & 25 \
\hline
\end{array}$$
-Refer to Table 11.2.1 which gives Tania's total product schedule.Average product of labour reaches its maximum for the ________ worker.

Accepted Answer

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

Question 11

The average product of energy equals

Accepted Answer

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

Question 12

Plant refers to those factors of production

Accepted Answer

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.

Question 13

Marginal cost equals

Accepted Answer

A) Q/TVC. 
B) ΔTFC/ΔTC. 
C) ΔTC/ΔQ. 
D) ΔQ/ΔTVC. 
E) (TC-TV
C) /Q.

Question 14

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

Accepted Answer

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 15

Use the figure below to answer the following questions.
  Figure 11.2.1
-Refer to Figure 11.2.1 which illustrates Tania's total product curve.Average product of labour reaches its maximum for the ________ worker.

Accepted Answer

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

Question 16

Use the information below to answer the following questions.
Fact 11.1.1
January 31,2008: Starbucks will open 75 more stores abroad than originally predicted,for a total of 975.
February 25,2008: For three hours on Tuesday,Starbucks will shut down every single one of its 7,100 stores so that baristas can receive a refresher course.
June 2,2008: Starbucks replaces baristas with vending machines.
July 18,2008: Starbucks is closing 616 stores by the end of March.
-Refer to Fact 11.1.1.The decisions made on ________ are short-run decisions because they ________.

Accepted Answer

A) January 31 and July 18;change the number of stores but not necessarily the number of employees 
B) February 25 and June 2;change a variable factor of production but not a fixed factor of production 
C) February 25,June 2,and July 18;deal with stores located in the United States 
D) June 2 and July 18;are the more recent decisions 
E) None of the above.

Question 17

Diseconomies of scale refer to the range of output over which

Accepted Answer

A) long-run average cost rises as output increases. 
B) average cost exceeds marginal cost. 
C) long-run average cost falls as output increases. 
D) the marginal product of labour increases. 
E) marginal product equals average product.

Question 18

An increase in the cost of labour shifts the

Accepted Answer

A) total,average,and marginal product curves upward and total,average,and marginal cost curves upward. 
B) total,average,and marginal product curves upward and total,average,and marginal cost curves downward. 
C) total,average,and marginal product curves downward and total,average,and marginal cost curves upward. 
D) total,average,and marginal product curves downward and total,average,and marginal cost curves downward. 
E) none of the above.

Question 19

Use the table below to answer the following questions.
Table 11.3.1
 $\begin{array}{ccccc}\hline\text { Labour }&\text { Output }&TFC&TVC&TC\
\text { (workers per }&\text { (teapots per }&\text { (dollars per }&\text { (dollars per }&\text { (dollars per }\
\text { day) } & \text { day) } & \text { day) } & \text { day) }& \text { day) }\
\hline 0 & 0 & 20 & 0 & 20 \
1 & 4 & 20 & -- & 45 \
2 & 9 & 20 & -- & 70 \
3 & 13 & 20 & -- & 95 \
4 & 16 & 20 & 100 & -- \
5 & 18 & 20 & 125 & 145\\hline
\end{array}$
-Refer to Table 11.3.1,which gives Tania's total cost schedule.The average fixed cost of producing 9 teapots per day is

Accepted Answer

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

Question 20

Given an upward-sloping,straight line total variable cost curve,what does the marginal cost curve look like?

Accepted Answer

A) an upward-sloping straight line 
B) a downward-sloping straight line 
C) a U-shaped curve 
D) a horizontal line 
E) a vertical line

Exam 11: Output and Costs