Question 1

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

Accepted Answer

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

Question 2

The marginal cost curve shows the per-unit cost associated with various levels of output.

Accepted Answer

A) True 
 B)False  False

Question 3

Aunt Rose owned a dress shop on 81st Street and Broadway in Manhattan, selling limited-edition dresses to wealthy clients.One day, her landlord tripled her rent.What effect would this have on her dress price in the short run, assuming she is following the rules of profit maximization?

Accepted Answer

Assuming she continues to operate, the higher rent will not affect dress prices in the short run.Rent is unrelated to the production cost of dresses; that is, it is a fixed cost.Only costs that enter into direct costs influence price.Fixed costs do not alter price or output of dresses in short-run profit maximization.

Question 4

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 5

Which of the following observations is true?

Accepted Answer

A)  TFC remains the same irrespective of units of output produced.
B)  TVC remains the same irrespective of units of output produced.
C)  TVC falls as the unit of output increases.
D)  AFC increases as output increases further and further.

Question 6

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

Accepted Answer

A)  MRP/$ of additional labor falls below MRP/$ of additional tools.
B)  MRP/$ of additional capital increases above MRP/$ of additional tools.
C)  MRP/$ of additional labor becomes equal to MRP/$ of additional tools.
D)  MRP/$ of the additional labor falls to zero.

Question 7

A firm that is seeking to minimize costs to produce a certain output:

Accepted Answer

A)  ​has a fixed budget 
B)  ​has a large budget 
C)  ​wants to use the smallest possible budget possible 
D)  ​wants to use the same budget as that used last year

Question 8

The "law" of diminishing returns is also referred to as

Accepted Answer

A)  the "law" of diminishing returns to scale.
B)  the "law" of variable input proportions.
C)  diminishing average physical product.
D)  the "law" of decreasing cost.

Question 9

Total physical product shows what happens to the quantity of an output when the firm changes the quantity of an input.

Accepted Answer

A) True 
 B)False

Question 10

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

Accepted Answer

A) True 
 B)False

Question 11

If the price of one input changes, the firm will change its use of that input only.

Accepted Answer

A) True 
 B)False

Question 12

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Accepted Answer

A)  increasing returns to scale.
B)  decreasing returns to scale.
C)  constant returns to scale.
D)  increasing costs per unit of output.

Question 13

If a firm is using optimal input proportions, it is minimizing its costs.

Accepted Answer

A) True 
 B)False

Question 14

"A producer wanting to employ optimal quantity of inputs should choose the point where diminishing returns sets in."

Accepted Answer

A) True 
 B)False

Question 15

AC is lower in the long run than in the short run because

Accepted Answer

A)  prices often fall, allowing savings on purchases.
B)  inputs can be combined more efficiently in the long run.
C)  over time the prices of all inputs tend to decrease.
D)  AFC falls with output over all ranges of output.

Question 16

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.

Question 17

A.B.Denson Company had been employing 6 workers and 8 tons of raw materials, using 2,000 square feet of plant space.The firm increased its work force to 12 workers utilizing 16 tons of raw materials in a plant space increased to 4,000 square feet.Total number of units of output increased from 78 to 160.What kind of returns to scale is the firm experiencing?
 Defend your answer.

Accepted Answer

The answer of A.B.Denson Company had been employing 6 workers...

Question 18

Average physical product measures the output per unit of input.

Accepted Answer

A) True 
 B)False

Question 19

Figure 7-8
 
-Of the graphs in Figure 7-8, which resembles marginal cost?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Question 20

Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.The last worker hired picked 100 peppers, and the last machine added 1,000 peppers.If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?

Accepted Answer

The answer of Peter Piper picks a peck of pickled...

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

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

The marginal cost curve shows the per-unit cost associated with various levels of output.

Aunt Rose owned a dress shop on 81st Street and Broadway in Manhattan, selling limited-edition dresses to wealthy clients.One day, her landlord tripled her rent.What effect would this have on her dress price in the short run, assuming she is following the rules of profit maximization?

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

Which of the following observations is true?

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

A firm that is seeking to minimize costs to produce a certain output:

The "law" of diminishing returns is also referred to as

Total physical product shows what happens to the quantity of an output when the firm changes the quantity of an input.

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

If the price of one input changes, the firm will change its use of that input only.

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

If a firm is using optimal input proportions, it is minimizing its costs.

"A producer wanting to employ optimal quantity of inputs should choose the point where diminishing returns sets in."

AC is lower in the long run than in the short run because

The short run is the time period during which

Average physical product measures the output per unit of input.

Figure 7-8 -Of the graphs in Figure 7-8, which resembles marginal cost?

Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.The last worker hired picked 100 peppers, and the last machine added 1,000 peppers.If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?