Question 1

Use the figure below to answer the following questions.
  
Figure 11.4.1
-Refer to Figure 11.4.1 which shows the total product curves for four different plant sizes as Tania varies the quantity of capital and workers. The curve that represents the plant using the largest amount of capital is

Accepted Answer

A) plant A. 
B) plant B. 
C) plant C. 
D) plant D. 
E) all curves because each plant uses the same number of machines, just different amounts of labour.

Question 2

If ATC is falling, then MC must be

Accepted Answer

A) rising. 
B) falling. 
C) equal to ATC. 
D) above ATC. 
E) below ATC.

Question 3

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 4

Use the information below to answer the following questions.
Fact 11.3.1 A Pepsi, A Business Decision
PepsiCo has done a deal with 300 small Mexican farmers close to their two factories to buy corn at a guaranteed price. PepsiCo saves transportation costs and the use of local farms assures it access to the type of corn best suited to its products and processes. "That gives us great leverage because corn prices don't fluctuate so much, but transportation costs do," said Pedro Padierna, president of PepsiCo in Mexico.
Source: The New York Times, February 21, 2011
-Refer to Fact 11.3.1. The deal with farmers to avoid fluctuations in costs benefits PepsiCo for all the following reasons except

Accepted Answer

A) the type of corn it is buying is best suited to its products. 
B) it eliminates variable costs. 
C) transportation costs are lower. 
D) corn costs remain low and stable. 
E) the type of corn it is buying is best suited to its processes.

Question 5

A firm experiences ________ when its ________ as output increases.

Accepted Answer

A) economies of scale; long-run average cost curve slopes downward 
B) diseconomies of scale; average total cost curve slopes downward 
C) economies of scale; long-run average cost curve shifts upward 
D) diminishing marginal returns; average total cost curve shifts upward 
E) constant returns to scale; long-run average cost curve shifts upward

Question 6

The range over which average variable cost is decreasing is the same as the range over which

Accepted Answer

A) marginal cost is increasing. 
B) average fixed cost is decreasing. 
C) marginal product is decreasing. 
D) average product is decreasing. 
E) average product is increasing.

Question 7

If the marginal product of the fifth worker is 34, then the total product of five workers

Accepted Answer

A) is 35. 
B) is 24. 
C) is 170. 
D) is 6.8. 
E) cannot be calculated with the information given.

Question 8

Use the table below to answer the following questions.
Table 11.2.2
 
-Refer to Table 11.2.2 which gives Tania's total product schedule. The average product when the firm hires three workers is

Accepted Answer

A) 1 teapot per worker. 
B) 2 teapots per worker. 
C) 3 teapots per worker. 
D) 4 teapots per worker. 
E) 12 teapots per worker.

Question 9

Use the table below to answer the following questions.
Table 11.3.2
 
-Refer to Table 11.3.2, which gives Tania's total cost schedule. The average total cost of producing 14 teapots is

Accepted Answer

A) $7.86. 
B) $6.75. 
C) $7. 
D) $1.75. 
E) $27.50.

Question 10

The marginal cost curve slopes downward at low outputs because of ________. The marginal cost curve eventually slopes upward because of ________.

Accepted Answer

A) greater specialization and division of labour; the law of diminishing returns 
B) the law of diminishing returns; increasing average fixed cost 
C) falling average fixed cost; the law of diminishing returns 
D) the law of diminishing returns; greater specialization and division of labour 
E) greater specialization and division of labour; rising average fixed cost

Question 11

If diseconomies of scale are present,

Accepted Answer

A) average total cost is decreasing. 
B) the long-run average cost curve has a negative slope. 
C) economies of scale are also present. 
D) the long-run average cost curve has a positive slope. 
E) the average total cost shifts downward.

Question 12

If energy (E)is the only input used to produce output (Q), what is the formula for average product of energy?

Accepted Answer

A) ΔQ/ΔE 
B) Q/E 
C) ΔE/ΔQ 
D) E/Q 
E) Q ∗ E

Question 13

Which one of the following statements is false?

Accepted Answer

A) The average total cost curve and average variable cost curve are U-shaped. 
B) The gap between the average total cost curve and the average variable cost curve equals marginal cost. 
C) The gap between the average total cost curve and the average variable cost curve narrows as output increases. 
D) The marginal cost curve intersects the average variable cost curve at minimum average variable cost. 
E) The marginal cost curve intersects the average total cost curve at minimum average total cost.

Question 14

Suppose a firm increases the quantity of labour employed from 5 to 6 workers, and as a result, the firm's total output increases from 100 units to 400 units. The marginal product of the sixth worker is

Accepted Answer

A) 150 units. 
B) 100 units. 
C) 400 units. 
D) 300 units. 
E) 66.67 units.

Question 15

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 16

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

Question 17

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 18

If the total product of three workers is 214 units and the total product of four workers is 221 units, then the marginal product of the fourth worker is

Accepted Answer

A) 71.3 units. 
B) 55.25 units. 
C) 7 units. 
D) 62.14 units. 
E) 1.75 units.

Question 19

The short run is a time frame in which

Accepted Answer

A) the firm is not able to hire more workers. 
B) the amount of output produced is fixed. 
C) there is a shortage of most factors of production. 
D) at least one factor of production is fixed. 
E) there is not enough time to make all of the decisions necessary to maximize profit.

Question 20

Table 11.2.1
 
-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

Exam 11: Output and Costs

Use the figure below to answer the following questions. Figure 11.4.1 -Refer to Figure 11.4.1 which shows the total product curves for four different plant sizes as Tania varies the quantity of capital and workers. The curve that represents the plant using the largest amount of capital is

If ATC is falling, then MC must be

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

A firm experiences when its as output increases.

The range over which average variable cost is decreasing is the same as the range over which

If the marginal product of the fifth worker is 34, then the total product of five workers

Use the table below to answer the following questions. Table 11.2.2 -Refer to Table 11.2.2 which gives Tania's total product schedule. The average product when the firm hires three workers is

Use the table below to answer the following questions. Table 11.3.2 -Refer to Table 11.3.2, which gives Tania's total cost schedule. The average total cost of producing 14 teapots is

The marginal cost curve slopes downward at low outputs because of . The marginal cost curve eventually slopes upward because of .