Question 1

Ceteris paribus,the law of diminishing returns states that beyond some point,the

Accepted Answer

A) Returns on stocks and bonds diminish with higher security prices. 
B) Addition to total utility diminishes as more units of a good are consumed. 
C) Marginal physical product of a factor of production diminishes as more of it is employed with a given quantity of other inputs. 
D) Output of any good increases as more of a variable input is used. 
A) Returns on stocks and bonds diminish with higher security prices. 
B) Addition to total utility diminishes as more units of a good are consumed. 
C) Marginal physical product of a factor of production diminishes as more of it is employed with a given quantity of other inputs. 
D) Output of any good increases as more of a variable input is used.

Question 2

Refer to Table 21.5: Table 21.5
$\begin{array} { | c | c | c | c | c | c | } 
\hline \mathrm { Q } & \mathrm { TFC } & \mathrm { TVC } & \mathrm { TC } & \text { AVC } & \text { MC } \
\hline 0 & & & 15 & - & - \
\hline 1 & & & 23 & & \
\hline 2 & & & & & 4 \
\hline 3 & & 15 & & & \
\hline
\end{array}$ Total fixed costs in Table 21.5 are equal to

Accepted Answer

A) $0 because the problem involves the long run. 
B) $15. 
C) $30. 
D) $60. 
A) $0 because the problem involves the long run. 
B) $15. 
C) $30. 
D) $60.

Question 3

Table 21.4 $\begin{array}{|c|r|}
\hline \text { Output (Units per Day) } & \text { Total Cost (Dollars per Day) } \
\hline 0 & 16 \
\hline 1 & 30 \
\hline 2 & 42 \
\hline 3 & 58 \
\hline 4 & 78 \
\hline
\end{array}$
 At 4 units of output in Table 21.4,the total variable cost is

Accepted Answer

A) $5.00. 
B) $20.00. 
C) $19.50. 
D) $62.00. 
A) $5.00. 
B) $20.00. 
C) $19.50. 
D) $62.00.

Question 4

Table 21.1 $$\begin{array} { | c | r | } 
\hline \text { Units of Labor } & \text { Units of Output } \
\hline 0 &0 \
\hline 1 & 15 \
\hline 2 & 35 \
\hline 3 & 45 \
\hline 4 & 52 \
\hline
\end{array}$$ If a fifth unit of labor was added to Table 21.1,its MPP would most likely be

Accepted Answer

A) 0. 
B) 7. 
C) Less than 7. 
D) Greater than 7. 
A) 0. 
B) 7. 
C) Less than 7. 
D) Greater than 7.

Question 5

Table 21.2 $\begin{array}{|l|r|r|r|r|}
\hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \
\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80\
\hline
\end{array}$
 Average fixed cost at 20 units of output in Table 21.2 is

Accepted Answer

A) $1.00. 
B) $2.00. 
C) $2.50. 
D) $4.00. 
A) $1.00. 
B) $2.00. 
C) $2.50. 
D) $4.00.

Question 6

Diseconomies of scale are reflected in

Accepted Answer

A) The downward-sloping segment of the long-run average total cost curve. 
B) The downward-sloping segment of the long-run marginal cost curve. 
C) A downward shift of the long-run average total cost curve. 
D) The upward-sloping segment of the long-run average total cost curve. 
A) The downward-sloping segment of the long-run average total cost curve. 
B) The downward-sloping segment of the long-run marginal cost curve. 
C) A downward shift of the long-run average total cost curve. 
D) The upward-sloping segment of the long-run average total cost curve.

Question 7

Table 21.4 $\begin{array}{|c|r|}
\hline \text { Output (Units per Day) } & \text { Total Cost (Dollars per Day) } \
\hline 0 & 16 \
\hline 1 & 30 \
\hline 2 & 42 \
\hline 3 & 58 \
\hline 4 & 78 \
\hline
\end{array}$
 For the output levels in Table 21.4,the minimum of the average total cost curve occurs at a production rate of

Accepted Answer

A) 2 units per day. 
B) 3 units per day. 
C) 4 units per day. 
D) Zero units per day. 
A) 2 units per day. 
B) 3 units per day. 
C) 4 units per day. 
D) Zero units per day.

Question 8

Refer to Table 21.5: Table 21.5
$\begin{array} { | c | c | c | c | c | c | } 
\hline \mathrm { Q } & \mathrm { TFC } & \mathrm { TVC } & \mathrm { TC } & \text { AVC } & \text { MC } \
\hline 0 & & & 15 & - & - \
\hline 1 & & & 23 & & \
\hline 2 & & & & & 4 \
\hline 3 & & 15 & & & \
\hline
\end{array}$ The total cost of 3 units of output in Table 21.5 is

Accepted Answer

A) $30. 
B) $15. 
C) $23. 
D) $38. 
A) $30. 
B) $15. 
C) $23. 
D) $38.

Question 9

In the short run,which of the following is most likely a variable cost?

Accepted Answer

A) Contractual lease payments. 
B) Labor and raw materials costs. 
C) Property taxes. 
D) Interest payments on borrowed funds. 
A) Contractual lease payments. 
B) Labor and raw materials costs. 
C) Property taxes. 
D) Interest payments on borrowed funds.

Question 10

In Figure 21.4,the long-run average total cost curve is given by the curved line segment

Accepted Answer

A) ACE. 
B) ABFDGE. 
C) ABF only. 
D) BFD. 
A) ACE. 
B) ABFDGE. 
C) ABF only. 
D) BFD.

Question 11

The productivity of workers will increase in response to

Accepted Answer

A) Lower wages. 
B) An increase in the amount of physical capital per worker. 
C) Higher resource costs. 
D) An increase in diminishing returns. 
A) Lower wages. 
B) An increase in the amount of physical capital per worker. 
C) Higher resource costs. 
D) An increase in diminishing returns.

Question 12

What is the marginal cost of the 120th unit of output in Figure 21.2?

Accepted Answer

A) $1.20. 
B) $200.00. 
C) $208.00. 
D) $288.00. 
A) $1.20. 
B) $200.00. 
C) $208.00. 
D) $288.00.

Question 13

The marginal cost curve intersects the minimum of which of the following cost curves?

Accepted Answer

A) TC. 
B) ATC. 
C) AFC. 
D) MPP. 
A) TC. 
B) ATC. 
C) AFC. 
D) MPP.

Question 14

Higher education levels and better management

Accepted Answer

A) Cause MPP to slope downward. 
B) Shift the long-run ATC curve downward. 
C) Lead to greater diseconomies of scale. 
D) Shift the MC curve upward. 
A) Cause MPP to slope downward. 
B) Shift the long-run ATC curve downward. 
C) Lead to greater diseconomies of scale. 
D) Shift the MC curve upward.

Question 15

Assuming labor is a variable input,an increase in labor productivity will result in

Accepted Answer

A) A downward shift in the MPP curve. 
B) A downward shift in the MC curve. 
C) An upward shift in the ATC curve. 
D) A downward shift in the production function. 
A) A downward shift in the MPP curve. 
B) A downward shift in the MC curve. 
C) An upward shift in the ATC curve. 
D) A downward shift in the production function.

Question 16

What is the average fixed cost when output is 120 units in Figure 21.2?

Accepted Answer

A) $0.67. 
B) $80.00. 
C) $96.00. 
D) $208.00. 
A) $0.67. 
B) $80.00. 
C) $96.00. 
D) $208.00.

Question 17

Total revenue plus total cost equals profit.

Accepted Answer

A) True 
 B)False

Question 18

In economics,the long run is considered to be

Accepted Answer

A) The time period when all costs are variable. 
B) The time period when all costs are explicit. 
C) One year. 
D) More than two years. 
A) The time period when all costs are variable. 
B) The time period when all costs are explicit. 
C) One year. 
D) More than two years.

Question 19

If choosing a larger plant will reduce minimum average costs,there are economies of scale.

Accepted Answer

A) True 
 B)False

Question 20

In the short run,the law of diminishing returns

Accepted Answer

A) Occurs for only a few economies. 
B) Can be observed in every production process. 
C) Does not occur in command economies. 
D) Can be overcome by using more variable inputs. 
A) Occurs for only a few economies. 
B) Can be observed in every production process. 
C) Does not occur in command economies. 
D) Can be overcome by using more variable inputs.

Exam 21: The Costs of Production

Ceteris paribus,the law of diminishing returns states that beyond some point,the

Refer to Table 21.5: Table 21.5 AVC MC 0 15 - - 1 23 2 4 3 15 Total fixed costs in Table 21.5 are equal to

Table 21.4 Output (Units per Day) Total Cost (Dollars per Day) 0 16 1 30 2 42 3 58 4 78 At 4 units of output in Table 21.4,the total variable cost is

Table 21.1 Units of Labor Units of Output 0 0 1 15 2 35 3 45 4 52 If a fifth unit of labor was added to Table 21.1,its MPP would most likely be

Table 21.2 Output (units per day) 0 10 20 30 Total cost (dollars per day) \ 40 \ 54 \ 62 \ 80 Average fixed cost at 20 units of output in Table 21.2 is

Diseconomies of scale are reflected in

Table 21.4 Output (Units per Day) Total Cost (Dollars per Day) 0 16 1 30 2 42 3 58 4 78 For the output levels in Table 21.4,the minimum of the average total cost curve occurs at a production rate of

Refer to Table 21.5: Table 21.5 AVC MC 0 15 - - 1 23 2 4 3 15 The total cost of 3 units of output in Table 21.5 is

In the short run,which of the following is most likely a variable cost?

In Figure 21.4,the long-run average total cost curve is given by the curved line segment

The productivity of workers will increase in response to

What is the marginal cost of the 120th unit of output in Figure 21.2?

The marginal cost curve intersects the minimum of which of the following cost curves?

Higher education levels and better management

Assuming labor is a variable input,an increase in labor productivity will result in

What is the average fixed cost when output is 120 units in Figure 21.2?

Total revenue plus total cost equals profit.

In economics,the long run is considered to be

If choosing a larger plant will reduce minimum average costs,there are economies of scale.

In the short run,the law of diminishing returns

Economics: the Core Issues

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