Question 1

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.  TABLE 7-3
-Refer to Table 7-3.The average variable cost when this firm is producing 90 units of output is

Accepted Answer

A)  17 cents.
B)  33 cents.
C)  68 cents.
D)  89 cents.
E)  98 cents. B

Question 2

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.  TABLE 7-3
-Refer to Table 7-3.The average total cost when producing 150 units of output is approximately

Accepted Answer

A)  33 cents.
B)  40 cents.
C)  67 cents.
D)  80 cents.
E)  $1.50. C

Question 3

If increasing quantities of a variable factor are applied to a given quantity of fixed factors,then the law of diminishing returns tells us that

Accepted Answer

A)  the marginal product and the average product of the variable factor will eventually decrease.
B)  the marginal product will eventually decrease with constant average product.
C)  the average product will eventually decrease with constant marginal product.
D)  the average product will eventually decrease,but only if total product is held constant.
E)  total product will eventually begin to fall. A

Question 4

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.  TABLE 7-3
-Refer to Table 7-3.What is the total output per period when this firm is employing labour such that the marginal product of labour is at its maximum?

Accepted Answer

A)  30
B)  60
C)  90
D)  132
E)  150

Question 5

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.  TABLE 7-4
-Refer to Table 7-4.The total cost of producing 175 units of output is

Accepted Answer

A)  $75.
B)  $100.
C)  $150.
D)  $175.
E)  $350.

Question 6

Economic profits are less than accounting profits because the calculation of economic profit

Accepted Answer

A)  includes an amount for depreciation.
B)  includes an explicit charge for risk taking.
C)  includes the implicit charges for the use of capital owned by the firm and for risk taking.
D)  includes the implicit charges for the use of capital owned by the firm and for income taxes.
E)  is stipulated in regulations set forth by the Canada Revenue Agency.

Question 7

We can predict that resources will move into an industry whenever

Accepted Answer

A)  accounting profits for firms in that industry are greater than zero.
B)  accounting profits for firms in that industry are zero.
C)  economic profits for firms in that industry are zero.
D)  economic profits for firms in that industry are greater than zero.
E)  economic losses for firms in that industry are minimized.

Question 8

The table below provides the annual revenues and costs for a family-owned firm producing catered meals.  TABLE 7-1
-Refer to Table 7-1.The accounting profits for this family-owned firm are

Accepted Answer

A)  -$15 000.
B)  $0.
C)  $10 000.
D)  $30 000.
E)  $500 000.

Question 9

The point of diminishing marginal productivity is the point where

Accepted Answer

A)  marginal product has reached its maximum.
B)  average product has reached its maximum.
C)  the marginal product begins to fall at an increasing rate.
D)  the total product begins to fall.
E)  the marginal product curve lies below the average product curve.

Question 10

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month
2.raw material costs of $5000 per month
3.a one-year lease on a building of $12 000

Accepted Answer

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

Question 11

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.  TABLE 7-4
-Refer to Table 7-4. Marginal product of labour begins decreasing with the ________ unit of labour hired.Average product of labour begins decreasing with the ________ unit of labour hired.

Accepted Answer

A)  4th; 3rd
B)  3rd; 2nd
C)  2nd; 3rd
D)  3rd; 4th
E)  4th; 5th

Question 12

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.  TABLE 7-3
-Refer to Table 7-3. The average product of labour when the firm hires 3 units of labour is ________. The average product of labour when the firm hires 4 units of labour is ________.

Accepted Answer

A)  30; 33
B)  90; 132
C)  60; 42
D)  90; 222
E)  30; 90

Question 13

A firm that has two or more owners who share decision-making power as well as the firmʹs profits is called

Accepted Answer

A)  a single proprietorship.
B)  a partnership.
C)  a corporation.
D)  a non-profit organization.
E)  a joint-stock company.

Question 14

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.  TABLE 7-3
-Refer to Table 7-3.The average variable cost when producing 132 units of output is approximately

Accepted Answer

A)  24 cents.
B)  30 cents.
C)  45 cents.
D)  68 cents.
E)  89 cents.

Question 15

Which of the following statements about the relationship between marginal product and average product is correct?

Accepted Answer

A)  When average product exceeds marginal product,marginal product must be rising.
B)  When marginal product is falling,average product is falling.
C)  When marginal product exceeds average product,average product must be rising.
D)  Average product equals marginal product at marginal productʹs lowest point.
E)  Average product equals marginal product when marginal product is at its maximum.

Question 16

Consider a house-construction firm with fixed capital.The firm can build 8 houses per year with 16 workers and 8.8 houses per year with 17 workers.If it is currently building 8.8 houses per year,which of the following is true?

Accepted Answer

A)  Average product is at a maximum with 16 workers.
B)  Average product is at a maximum with 17 workers.
C)  The marginal product is below the average product.
D)  The firm has already passed the point of diminishing marginal productivity.
E)  The firm has not yet reached the point of diminishing average productivity.

Question 17

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars.  TABLE 7-6
-Refer to Table 7-6.The firmʹs marginal product of its variable factor is maximized when it produces units of output.

Accepted Answer

A)  50
B)  90
C)  100
D)  110
E)  170

Question 18

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2)L2,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K =8)and 10 units of labour (L=10).What is the output of sweaters?

Accepted Answer

A)  30 sweaters per day
B)  60 sweaters per day
C)  80 sweaters per day
D)  140 sweaters per day
E)  155 sweaters per day

Question 19

ʺAn objective of firms is to maximize profits.ʺ This statement

Accepted Answer

A)  has been proven by empirical testing to be always true.
B)  is an assumption used by economists to predict the behaviour of firms.
C)  is a normative statement and thus cannot be tested.
D)  applies only to corporations.
E)  is an unrealistic assumption,and therefore of little use to economists.

Question 20

Which of the following items is part of a firmʹs financial capital as distinct from its real capital?

Accepted Answer

A)  a new bulldozer
B)  a $500 000 balance in a bank account
C)  a network of personal computers
D)  a fleet of delivery trucks
E)  inventory of goods valued at $1 000 000

Exam 7: Producers in the Short Run

If increasing quantities of a variable factor are applied to a given quantity of fixed factors,then the law of diminishing returns tells us that

Economic profits are less than accounting profits because the calculation of economic profit

We can predict that resources will move into an industry whenever

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1.The accounting profits for this family-owned firm are

The point of diminishing marginal productivity is the point where

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month 2.raw material costs of $5000 per month 3.a one-year lease on a building of $12 000

A firm that has two or more owners who share decision-making power as well as the firmʹs profits is called

Which of the following statements about the relationship between marginal product and average product is correct?

Consider a house-construction firm with fixed capital.The firm can build 8 houses per year with 16 workers and 8.8 houses per year with 17 workers.If it is currently building 8.8 houses per year,which of the following is true?

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars. TABLE 7-6 -Refer to Table 7-6.The firmʹs marginal product of its variable factor is maximized when it produces units of output.

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2) L²,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K =8) and 10 units of labour (L=10) .What is the output of sweaters?

ʺAn objective of firms is to maximize profits.ʺ This statement

Which of the following items is part of a firmʹs financial capital as distinct from its real capital?

Exam 7: Producers in the Short Run

If increasing quantities of a variable factor are applied to a given quantity of fixed factors,then the law of diminishing returns tells us that

Economic profits are less than accounting profits because the calculation of economic profit

We can predict that resources will move into an industry whenever

The table below provides the annual revenues and costs for a family-owned firm producing catered meals. TABLE 7-1 -Refer to Table 7-1.The accounting profits for this family-owned firm are

The point of diminishing marginal productivity is the point where

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month 2.raw material costs of $5000 per month 3.a one-year lease on a building of $12 000

A firm that has two or more owners who share decision-making power as well as the firmʹs profits is called

Which of the following statements about the relationship between marginal product and average product is correct?

Consider a house-construction firm with fixed capital.The firm can build 8 houses per year with 16 workers and 8.8 houses per year with 17 workers.If it is currently building 8.8 houses per year,which of the following is true?

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars. TABLE 7-6 -Refer to Table 7-6.The firmʹs marginal product of its variable factor is maximized when it produces units of output.

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2) L2,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K =8) and 10 units of labour (L=10) .What is the output of sweaters?

ʺAn objective of firms is to maximize profits.ʺ This statement

Which of the following items is part of a firmʹs financial capital as distinct from its real capital?

Suppose a production function for a firm takes the following algebraic form: Q = 2KL - (0.2) L²,where Q is the output of sweaters per day.Now suppose the firm is operating with 8 units of capital (K =8) and 10 units of labour (L=10) .What is the output of sweaters?