Question 1

The short run is the time period during which

Accepted Answer

A)  all of the firm's costs are fixed.
B)  the value of the firm's assets starts to decay.
C)  the firm can adjust all inputs freely.
D)  some of the firm's input decisions are constrained by previous commitments. D

Question 2

If diminishing marginal returns are present for an input, then the marginal revenue product will be decreasing.

Accepted Answer

A) True 
 B)False  True

Question 3

A change in input prices has no impact on a firm's budget line.

Accepted Answer

A) True 
 B)False  False

Question 4

Everything else equal, the AC curve will shift when

Accepted Answer

A)  the price of the product rises.
B)  technological change raises the MPP of one input.
C)  output rises.
D)  increasing returns to scale are present.

Question 5

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)

Accepted Answer

A)  analytical cost curve.
B)  long-run cost curve.
C)  historical cost curve.
D)  theoretical cost curve.

Question 6

Total fixed cost

Accepted Answer

A)  varies with the level of output.
B)  has a downward-sloping curve.
C)  has an upward-sloping curve.
D)  is constant at all levels of output.

Question 7

The average fixed cost curve increases as output increases.

Accepted Answer

A) True 
 B)False

Question 8

A firm is operating with an optimal combination of inputs. Suddenly the price of one input rises. The firm should

Accepted Answer

A)  buy less of that input and more of the other input.
B)  change its input mix so that the marginal physical product of the input whose price has risen falls and the marginal physical product of the other input rises.
C)  buy less of whichever input now has the highest money price and more of the other input.
D)  reduce its output.

Question 9

To determine total cost, the business owner must know

Accepted Answer

A)  input quantity and output price.
B)  output quantity and output price.
C)  output quantity and input price.
D)  input quantity and input price.

Question 10

A change in one input price will cause the slope of the firm's budget line to change.

Accepted Answer

A) True 
 B)False

Question 11

Higher production indifference curves correspond to larger amounts of one input in relation to a second input.

Accepted Answer

A) True 
 B)False

Question 12

For most industries, average costs decrease indefinitely as output expands.

Accepted Answer

A) True 
 B)False

Question 13

Decreasing returns to scale is strictly a short run phenomenon for firms.

Accepted Answer

A) True 
 B)False

Question 14

If a firm has increasing returns to scale at all levels of output, the

Accepted Answer

A)  slope of its long-run total cost curve is always negative.
B)  slopes of its short-run average cost curves are always negative.
C)  slope of its long-run average cost curve is always negative.
D)  slope of its production function is always negative.

Question 15

Figure 7-10

In Figure 7-10, the curve B is

Accepted Answer

A)  average fixed cost.
B)  average total cost.
C)  average variable cost.
D)  marginal cost.

Question 16

Table 7-4  The production relationship in Table 7-4 indicates a process characterized by

Accepted Answer

A)  decreasing returns to scale.
B)  constant returns to scale.
C)  increasing returns to scale.
D)  increasing then decreasing returns to scale.

Question 17

"Assuming the long-run average cost curve is U shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 18

A production indifference curve describes the input combinations that will produce a given output.

Accepted Answer

A) True 
 B)False

Question 19

In Table 7-1, the average physical product after five workers are hired is ​

Accepted Answer

A)  5.
B)  6.
C)  7.
D)  8.

Question 20

In the long run,

Accepted Answer

A)  all of the firm's input quantities are variable.
B)  the firm can vary the quantities of some but not all inputs.
C)  managers become less efficient.
D)  the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output.

Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

The short run is the time period during which

If diminishing marginal returns are present for an input, then the marginal revenue product will be decreasing.

A change in input prices has no impact on a firm's budget line.

Everything else equal, the AC curve will shift when

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)

Total fixed cost

The average fixed cost curve increases as output increases.

A firm is operating with an optimal combination of inputs. Suddenly the price of one input rises. The firm should

To determine total cost, the business owner must know

A change in one input price will cause the slope of the firm's budget line to change.

Higher production indifference curves correspond to larger amounts of one input in relation to a second input.

For most industries, average costs decrease indefinitely as output expands.

Decreasing returns to scale is strictly a short run phenomenon for firms.

If a firm has increasing returns to scale at all levels of output, the

Figure 7-10 In Figure 7-10, the curve B is

Table 7-4 The production relationship in Table 7-4 indicates a process characterized by

"Assuming the long-run average cost curve is U shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve.

A production indifference curve describes the input combinations that will produce a given output.

In Table 7-1, the average physical product after five workers are hired is ​

In the long run,

In Table 7-1, the average physical product after five workers are hired is