Question 1

The textbook identifies two sources of economies of scale.What are these sources?

Accepted Answer

Economies of scale can be derived from the specialization of labor or from indivisible inputs.

Question 2

Marginal cost:

Accepted Answer

A) is the increase in total cost resulting from producing one more unit of output. 
B) is the average cost of production divided by output. 
C) equals the increase in average variable cost resulting from producing one more unit of output. 
D) always equals average cost. 
A) is the increase in total cost resulting from producing one more unit of output. 
B) is the average cost of production divided by output. 
C) equals the increase in average variable cost resulting from producing one more unit of output. 
D) always equals average cost. A

Question 3

When indivisible inputs are being used,the average cost of production increases as output decreases.

Accepted Answer

A) True 
 B)False  True

Question 4

How do economies of scale affect the shape of the long-run average cost curve?

Accepted Answer

When the firm faces increasing

Question 5

Most firms seem to exhibit constant returns to scale after some level of output.

Accepted Answer

A) True 
 B)False

Question 6

-Which segment of the LAC in Figure 8.9 represents constant returns to scale?

Accepted Answer

A) ab 
B) cd 
C) de 
D) all of the above 
A) ab 
B) cd 
C) de 
D) all of the above

Question 7

Suppose that at Pollo Loco's Restaurant 5 cooks can make 70 meals.Assuming that there are diminishing returns to labor,it will require ________ to make 70 more meals.

Accepted Answer

A) an additional 5 cooks 
B) more than an additional 5 cooks 
C) less than an additional 5 cooks 
D) a total of 10 cooks 
A) an additional 5 cooks 
B) more than an additional 5 cooks 
C) less than an additional 5 cooks 
D) a total of 10 cooks

Question 8

Additional Application
Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand.
"Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70.
-Which of the following would be an implicit cost of playing a round of golf?

Accepted Answer

A) the value of meeting new friends or improving business relationships 
B) the value of another activity the golfer could be doing 
C) the cost of property insurance;the value of fresh air and exercise for five hours 
D) the value of competition and improving your skill level 
A) the value of meeting new friends or improving business relationships 
B) the value of another activity the golfer could be doing 
C) the cost of property insurance;the value of fresh air and exercise for five hours 
D) the value of competition and improving your skill level

Question 9

Mario has a company that produces plastic freezer bags.His company objective is to maximize:

Accepted Answer

A) his company's revenues. 
B) his company's total out-of-pocket costs. 
C) his company's opportunity costs of each factor of production. 
D) his company's economic profits,the difference between total revenue and total cost. 
A) his company's revenues. 
B) his company's total out-of-pocket costs. 
C) his company's opportunity costs of each factor of production. 
D) his company's economic profits,the difference between total revenue and total cost.

Question 10

Average total cost is equal to:

Accepted Answer

A) total cost divided by quantity. 
B) variable cost divided by quantity. 
C) average fixed cost minus average variable cost. 
D) the extra cost of producing one more unit of output. 
A) total cost divided by quantity. 
B) variable cost divided by quantity. 
C) average fixed cost minus average variable cost. 
D) the extra cost of producing one more unit of output.

Question 11

When El Guapo's Mexican Restaurant hires one waiter,5 tables can be served in an hour.When El Guapo's Mexican Restaurant hires two waiters,12 tables can be served in an hour.The marginal product of labor of the second waiter is ________ tables served per hour.

Accepted Answer

A) 5 
B) 7 
C) 12 
D) 17 
A) 5 
B) 7 
C) 12 
D) 17

Question 12

-Refer to Figure 8.4.The marginal cost of the 10th basketball is:

Accepted Answer

A) $2. 
B) $30. 
C) $28. 
D) $1. 
A) $2. 
B) $30. 
C) $28. 
D) $1.

Question 13

Average fixed costs rise continuously as the quantity of output rises.

Accepted Answer

A) True 
 B)False

Question 14

-Refer to Figure 8.2.Diminishing marginal returns set in after the ________ worker is hired.

Accepted Answer

A) first 
B) second 
C) third 
D) fifth 
A) first 
B) second 
C) third 
D) fifth

Question 15

Explain the difference between accounting costs and economic costs.

Accepted Answer

Accounting costs are the firm's explicit

Question 16

Table 8.3
-Refer to Table 8.3.If the firm hires seven workers,then:

Accepted Answer

A) marginal product is negative. 
B) marginal product is less than one. 
C) total product is negative. 
D) marginal product is equal to three. 
A) marginal product is negative. 
B) marginal product is less than one. 
C) total product is negative. 
D) marginal product is equal to three.

Question 17

Table 8.5
-Refer to Table 8.5.If Sherry produces two pair of earrings,her marginal cost is:

Accepted Answer

A) $40. 
B) $45. 
C) $72.50. 
D) $122.50. 
A) $40. 
B) $45. 
C) $72.50. 
D) $122.50.

Question 18

Table 8.3
-Refer to Table 8.3.The firm will experience diminishing marginal returns to labor as long it hires more than:

Accepted Answer

A) 0 units of labor. 
B) 1 unit of labor. 
C) 2 units of labor. 
D) 3 units of labor. 
A) 0 units of labor. 
B) 1 unit of labor. 
C) 2 units of labor. 
D) 3 units of labor.

Question 19

At Carolina's Bakery,the marginal products of the first,second,third,and fourth workers are 15,11,8,and 6 cakes produced respectively.The total product of the first three workers is:

Accepted Answer

A) 8. 
B) 15. 
C) 34. 
D) 42. 
A) 8. 
B) 15. 
C) 34. 
D) 42.

Question 20

Table 8.5
-Refer to Table 8.5.If Sherry produces three pair of earrings,her total variable costs are:

Accepted Answer

A) $26.67. 
B) $140. 
C) $175. 
D) $225. 
A) $26.67. 
B) $140. 
C) $175. 
D) $225.

The textbook identifies two sources of economies of scale.What are these sources?

Marginal cost:

When indivisible inputs are being used,the average cost of production increases as output decreases.

How do economies of scale affect the shape of the long-run average cost curve?

Most firms seem to exhibit constant returns to scale after some level of output.

-Which segment of the LAC in Figure 8.9 represents constant returns to scale?

Suppose that at Pollo Loco's Restaurant 5 cooks can make 70 meals.Assuming that there are diminishing returns to labor,it will require ________ to make 70 more meals.

Mario has a company that produces plastic freezer bags.His company objective is to maximize:

Average total cost is equal to:

When El Guapo's Mexican Restaurant hires one waiter,5 tables can be served in an hour.When El Guapo's Mexican Restaurant hires two waiters,12 tables can be served in an hour.The marginal product of labor of the second waiter is ________ tables served per hour.

-Refer to Figure 8.4.The marginal cost of the 10th basketball is:

Average fixed costs rise continuously as the quantity of output rises.

-Refer to Figure 8.2.Diminishing marginal returns set in after the ________ worker is hired.

Explain the difference between accounting costs and economic costs.

Table 8.3 -Refer to Table 8.3.If the firm hires seven workers,then:

Table 8.5 -Refer to Table 8.5.If Sherry produces two pair of earrings,her marginal cost is:

Table 8.3 -Refer to Table 8.3.The firm will experience diminishing marginal returns to labor as long it hires more than:

At Carolina's Bakery,the marginal products of the first,second,third,and fourth workers are 15,11,8,and 6 cakes produced respectively.The total product of the first three workers is:

Table 8.5 -Refer to Table 8.5.If Sherry produces three pair of earrings,her total variable costs are:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

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Exam 8: Production Technology and Cost

The textbook identifies two sources of economies of scale.What are these sources?

Marginal cost:

When indivisible inputs are being used,the average cost of production increases as output decreases.

How do economies of scale affect the shape of the long-run average cost curve?

Most firms seem to exhibit constant returns to scale after some level of output.

-Which segment of the LAC in Figure 8.9 represents constant returns to scale?

Suppose that at Pollo Loco's Restaurant 5 cooks can make 70 meals.Assuming that there are diminishing returns to labor,it will require ________ to make 70 more meals.

Mario has a company that produces plastic freezer bags.His company objective is to maximize:

Average total cost is equal to:

When El Guapo's Mexican Restaurant hires one waiter,5 tables can be served in an hour.When El Guapo's Mexican Restaurant hires two waiters,12 tables can be served in an hour.The marginal product of labor of the second waiter is ________ tables served per hour.

-Refer to Figure 8.4.The marginal cost of the 10th basketball is:

Average fixed costs rise continuously as the quantity of output rises.

-Refer to Figure 8.2.Diminishing marginal returns set in after the ________ worker is hired.

Explain the difference between accounting costs and economic costs.

Table 8.3 -Refer to Table 8.3.If the firm hires seven workers,then:

Table 8.5 -Refer to Table 8.5.If Sherry produces two pair of earrings,her marginal cost is:

Table 8.3 -Refer to Table 8.3.The firm will experience diminishing marginal returns to labor as long it hires more than:

At Carolina's Bakery,the marginal products of the first,second,third,and fourth workers are 15,11,8,and 6 cakes produced respectively.The total product of the first three workers is:

Table 8.5 -Refer to Table 8.5.If Sherry produces three pair of earrings,her total variable costs are:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

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