Question 1

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Accepted Answer

The answer of Use the general relationship between marginal and...

Question 2

Table 11-8
  Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data.
-Refer to Table 11-8. Elegant Settings experiences

Accepted Answer

A)  economies of scale up to an output level of 400. 
B)  diminishing returns up to an output level of 400. 
C)  increasing returns beyond an output level of 400. 
D)  economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Question 3

Which of the following statements best describes the economic short run?

Accepted Answer

A)  It is a period of one year or less. 
B)  It is a period during which firms are free to vary all of their inputs. 
C)  It is a period during which at least one of the firm's inputs is fixed. 
D)  It is a period during which fixed inputs become variable inputs because of depreciation.

Question 4

What is an isoquant? What is the slope of an isoquant?

Accepted Answer

The answer of What is an isoquant? What is the...

Question 5

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs.

Question 6

Increases in the marginal product of labor result from

Accepted Answer

A)  the use of new technology. 
B)  hiring more efficient workers. 
C)  the division of labor and specialization. 
D)  increasing the usage of all inputs.

Question 7

Which of the following would be categorized as an opportunity cost? a. not being able to spend your $10,000 savings if you sink the money in your business
B. the cost of purchasing supplies for your house-cleaning business
C. the cost of purchasing auto insurance for your dry-cleaning delivery business

Accepted Answer

A)  a only 
B)  a and c only 
C)  b and c only 
D)  all of the above

Question 8

The law of diminishing marginal returns

Accepted Answer

A)  explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B)  explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run. 
C)  causes average total costs to rise at a decreasing rate as output increases. 
D)  causes the difference between average total cost and average variable cost to get smaller as output increases.

Question 9

Figure 11-13 
-Refer to Figure 11-13. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

Accepted Answer

A)  the movement from AF to BF 
B)  the movement from BF to AF 
C)  the movement from BF to BD 
D)  the movement from BF to CE

Question 10

Figure 11-2 
-Refer to Figure 11-2. Short-run output is maximized at

Accepted Answer

A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine

Question 11

The change in a firm's total cost from producing one more unit of a good or service is the firm's

Accepted Answer

A)  explicit cost of production. 
B)  marginal cost of production. 
C)  average cost of production. 
D)  implicit cost of production.

Question 12

If production displays diseconomies of scale, the long-run average cost curve is

Accepted Answer

A)  above the short-run average total cost curve. 
B)  above the long-run marginal cost curve. 
C)  upward sloping. 
D)  downward sloping.

Question 13

In the short run, if average product is at its maximum, then average variable cost is at its minimum.

Accepted Answer

A) True 
 B)False

Question 14

Figure 11-7  Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. When output level is 100, what is the total cost of production?

Accepted Answer

A)  $20 
B)  $1,000 
C)  $1,200 
D)  $2,000

Question 15

If a firm experiences positive technological change, it is able to produce more output using the same inputs.

Accepted Answer

A) True 
 B)False

Question 16

Figure 11-11  Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc.
-Refer to Figure 11-11. Constant returns to scale

Accepted Answer

A)  occur for output rates greater than 5,000 picture frames. 
B)  occur between 5,000 and 20,000 picture frames per month. 
C)  occur between 10,000 and 20,000 pictures frames per month. 
D)  will shift the long-run average cost curve downward.

Question 17

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs.

Question 18

If the long-run average total cost curve is downward sloping, then the firm is experiencing decreasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 19

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Accepted Answer

A) True 
 B)False

Question 20

Figure 11-6  Figure 11-6 contains information about the short-run cost structure of a firm.
-Refer to Figure 11-6. In the figure above, which letter represents the average total cost curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D

Exam 11: Technology, Production, and Costs

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Table 11-8 Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data. -Refer to Table 11-8. Elegant Settings experiences

Which of the following statements best describes the economic short run?

What is an isoquant? What is the slope of an isoquant?

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

Increases in the marginal product of labor result from

The law of diminishing marginal returns

Figure 11-13 -Refer to Figure 11-13. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

Figure 11-2 -Refer to Figure 11-2. Short-run output is maximized at

The change in a firm's total cost from producing one more unit of a good or service is the firm's

If production displays diseconomies of scale, the long-run average cost curve is

In the short run, if average product is at its maximum, then average variable cost is at its minimum.

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. When output level is 100, what is the total cost of production?

If a firm experiences positive technological change, it is able to produce more output using the same inputs.

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 11-11. Constant returns to scale

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

If the long-run average total cost curve is downward sloping, then the firm is experiencing decreasing returns to scale.

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Figure 11-6 Figure 11-6 contains information about the short-run cost structure of a firm. -Refer to Figure 11-6. In the figure above, which letter represents the average total cost curve?