Question 1

"Marginal cost is the increase in total cost that results from a one-unit increase in a variable input." True or false? Explain.

Accepted Answer

The answer of "Marginal cost is the increase in total...

Question 2

Marginal product is

Accepted Answer

A)  the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. 
B)  total amount of output produced. 
C)  total amount of output produced divided by the quantity of labor employed. 
D)  total amount of output produced divided by price of the output.

Question 3

A student wrote: "When the average product of labor exceeds the marginal product, the marginal product is increasing." If you were the instructor, how would you correct this statement?

Accepted Answer

The answer of A student wrote: "When the average product...

Question 4

Marginal cost is

Accepted Answer

A)  all the costs of the fixed inputs. 
B)  all the costs of production of goods. 
C)  all the costs that vary with output. 
D)  the change in the total cost resulting from a one-unit change in output.

Question 5

When the demand for electricity peaks during the hottest days of summer, Florida Power and Light Company can generate more electricity by using more fuel and increasing the working hours of many of its employees. The company cannot, however, increase electric power production by building additional generating capacity. This means that the company is in the

Accepted Answer

A)  market run. 
B)  short run. 
C)  intermediate run. 
D)  long run.

Question 6

The firm's production function is the relationship between the ________ and ________.

Accepted Answer

A)  output produced; the quantities of all inputs 
B)  maximum output attainable; the quantity of variable inputs 
C)  possible range of maximum output; the quantity of variable inputs 
D)  maximum output attainable; the quantities of both labor and capital

Question 7

As output increases, average fixed cost

Accepted Answer

A)  always decreases. 
B)  increases, then decreases. 
C)  decreases, then increases. 
D)  remains constant.

Question 8

The marginal cost (MC) curve intersects the

Accepted Answer

A)  ATC, AVC, and AFC curves at their minimum points. 
B)  ATC and AFC curves at their minimum points. 
C)  AVC and AFC curves at their minimum points. 
D)  ATC and AVC curves at their minimum points.

Question 9

When a firm is experiencing diseconomies of scale

Accepted Answer

A)  the MP curve has a negative slope. 
B)  the LRAC curve has a positive slope. 
C)  it must also experience diminishing returns to labor. 
D)  the MC curve has a negative slope.

Question 10

Health care costs rose more than 10 percent in 2011, according to a survey of insurers by Aon Consulting Worldwide. If the increase in costs solely comes from increased wages to nurses and doctors, then for the health care industry

Accepted Answer

A)  variable costs are increasing. 
B)  fixed costs are increasing. 
C)  long run average total cost is decreasing. 
D)  productivity is increasing.

Question 11

In the short run

Accepted Answer

A)  all inputs are variable. 
B)  all firms experience increasing returns to scale. 
C)  some firms experience economies of scale. 
D)  no firm experiences economies of scale.

Question 12

-In the above figure, the total fixed cost curve is curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  none of the curves in the figure.

Question 13

-The table shows some data that describes Tom's T-Shirts' total product when Tom's has 1 sewing machine. When 4 workers are employed, ________.

Accepted Answer

A)  average product of labor is a maximum 
B)  marginal product of labor is less than average product of labor 
C)  marginal product of labor exceeds average product of labor 
D)  marginal product of labor equals average product of labor

Question 14

Cost schedule 
-In the above table, the average fixed cost of producing 15 units of output is

Accepted Answer

A)  $0.50. 
B)  $2.00. 
C)  $6.66. 
D)  $8.66.

Question 15

-The above table shows the short-run total product schedule for the campus book store. When the fifth employee is hired, the marginal product is ________ and is ________ the average product.

Accepted Answer

A)  increasing; greater than 
B)  increasing; less than 
C)  decreasing; greater than 
D)  decreasing; less than

Question 16

-In the above figure, the minimum efficient scale of output is

Accepted Answer

A)  5,000 pounds of coffee. 
B)  10,000 pounds of coffee. 
C)  13,000 pounds of coffee. 
D)  15,000 pounds of coffee.

Question 17

Cost schedule 
-In the above table, when output increases from 8 to 12 units, the marginal cost of one of those 4 units is

Accepted Answer

A)  $1.20. 
B)  $2.00. 
C)  $5.00. 
D)  $15.00.

Question 18

-The table above shows some data that describe Tom's T-Shirts' total product when Tom's has 1 sewing machine. Diminishing marginal returns begin when the ________ is employed.

Accepted Answer

A)  second worker 
B)  fifth worker 
C)  fourth worker 
D)  third worker

Question 19

A firm's total fixed cost (TFC) is a cost

Accepted Answer

A)  it is certain ("fixed") that the firm must pay. 
B)  that does not change as output changes. 
C)  that is dependent on marginal cost. 
D)  that is paid in only the long run.

Question 20

Which of the following statements is TRUE?

Accepted Answer

A)  When marginal product is less than average product, average product is increasing. 
B)  When marginal product is less than average product, average product is decreasing. 
C)  When marginal product is falling, average product is decreasing. 
D)  When marginal product is rising, average product is decreasing.

Exam 11: Output and Costs