Question 1

Consider a firm in the short run.If total product is at its maximum,then

Accepted Answer

A) average product must equal marginal product. 
B) average product must be rising and must lie above marginal product. 
C) marginal product must be greater than zero and must be falling. 
D) marginal product must be falling and be equal to zero. 
E) average product must be falling and be equal to zero.

Question 2

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 3

With regard to economic decision making for firms,the short run is

Accepted Answer

A) a definite number of months. 
B) a period over which the quantities of all factors of production and technology are variable. 
C) a period over which the quantity of at least one significant factor of production is fixed. 
D) a period over which the quantities of all factors of production are variable but technology is fixed. 
E) less than one year.

Question 4

Consider a basket-producing firm with fixed capital.If the firm can produce 36 baskets per day with 3 workers and then increases production to 44 baskets per day with 4 workers,then which of the following statements is true?

Accepted Answer

A) The marginal product of the fourth worker is 11. 
B) With 4 workers,the marginal product is above the average product. 
C) The firm has not yet reached the point of diminishing marginal productivity. 
D) The firm has passed the point of diminishing marginal productivity. 
E) With 4 workers,the firm's average product of labour is 8.

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 average total cost of producing 75 units of output is

Accepted Answer

A) $1. 
B) $2. 
C) $0.80. 
D) $0.67. 
E) $1.33.

Question 6

Which of the following statements describes an advantage to the owner of a single proprietorship?

Accepted Answer

A) The owner's liability is limited to the amount he or she actually invests in the firm. 
B) He or she has limited liability. 
C) The owner can readily maintain full and complete control over every aspect of the firm's operation. 
D) The firm has a legal existence separate from its owner. 
E) Shares of the firm can be traded on any stock exchange.

Question 7

With regard to economic decision making for firms,the long run is a period in which

Accepted Answer

A) all factors of production are variable but technology is fixed. 
B) technology is variable. 
C) only some of the factors of production are variable. 
D) technology may be variable,but some factors of production are fixed. 
E) only capital is variable.

Question 8

The table below provides information on output per month and short-run costs for a firm producing outdoor wooden lounge chairs.All costs are in dollars.
  TABLE 7-5
-Refer to Table 7-5.What is the average total cost of producing 30 chairs?

Accepted Answer

A) $13 
B) $14 
C) $22 
D) $23 
E) $33.67

Question 9

In economics,the term "fixed costs" means

Accepted Answer

A) implicit costs. 
B) opportunity costs. 
C) costs that are never accounted for. 
D) costs incurred in the past that involve no implicit costs. 
E) costs that do not vary with the level of output produced.

Question 10

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.Diminishing marginal productivity of labour is first observed when the firm changes the amount of labour hired from

Accepted Answer

A) 0 to 1 unit. 
B) 1 to 2 units. 
C) 2 to 3 units. 
D) 3 to 4 units. 
E) 4 to 5 units.

Question 11

FIGURE 7-1
-Refer to Figure 7-1.Total product is increasing at an increasing rate

Accepted Answer

A) from 0 to 32 units of output. 
B) from 0 to 140 units of output. 
C) between 140 to 200 units of output. 
D) between 200 to 250 units of output. 
E) over the whole production range.

Question 12

The table below provides the total revenues and costs for a small landscaping company in a recent year.
  TABLE 7-2
-Refer to Table 7-2.The economic profits for this firm are

Accepted Answer

A) $63 500. 
B) $32 700. 
C) $33 500. 
D) $31 200. 
E) $32 300.

Question 13

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 14

Which of the following is most likely a long-run decision for a firm?

Accepted Answer

A) The hours a store should stay open. 
B) How many warehouses to build. 
C) The number of workers to hire. 
D) The amount of inventory to stock. 
E) The price at which to sell the product.

Question 15

Marginal cost is defined as the

Accepted Answer

A) change in total cost resulting from an additional unit of output. 
B) change in fixed cost resulting from an additional unit of output. 
C) difference between average total cost and average variable cost. 
D) cost per unit when the firm is operating at capacity. 
E) cost of an additional unit of a variable factor of production.

Question 16

When a plant is operating at the level of output where its short-run average total cost is at its minimum,

Accepted Answer

A) average fixed cost is at a minimum. 
B) marginal cost is at a minimum. 
C) average variable cost is at a minimum. 
D) the plant is operating at its capacity. 
E) more of the variable factor of production should be employed.

Question 17

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.If this firm is producing 111 units of output per period,its marginal cost is

Accepted Answer

A) $1.00. 
B) 16.7 cents. 
C) 76 cents. 
D) 24 cents. 
E) 38 cents.

Question 18

In the short run,the firm's product curves show

Accepted Answer

A) AP is at its minimum when MP = AP. 
B) TP is at its maximum when MP = O. 
C) TP begins to decrease when AP begins to decrease. 
D) when MP > AP,AP is decreasing. 
E) when the MP curve cuts the AP curve from below,the AP curve begins to fall.

Question 19

Which of the following statements about the organization of firms is true?

Accepted Answer

A) Partnerships are the most common form of business organization in Canada. 
B) Owners of a corporation have unlimited liability. 
C) Corporations have limited access to money markets. 
D) Owners of a corporation are not personally liable for the firm's actions,though its directors may be. 
E) Crown corporations are never interested in increasing profits because they have other goals.

Question 20

Suppose sport-fishermen on the Campbell River in British Columbia are catching fewer fish and are having to fish many more hours to catch them.However,the total number of fish caught on the river continues to increase.The river is experiencing

Accepted Answer

A) diminishing total returns. 
B) constant marginal returns. 
C) increasing marginal returns. 
D) diminishing marginal returns. 
E) increasing average returns.

Exam 7: Producers in the Short Run