Question 1

If the MPP of a worker is 12 units per hour and the wage rate is $10 per hour,the unit labor cost is equal to $1.20 per unit of output.

Accepted Answer

A) True 
 B)False

Question 2

Average total cost is important to a business because

Accepted Answer

A) It tells the firm what the profit per unit produced is. 
B) It always declines as more output is produced. 
C) It tells the firm what its fixed costs are. 
D) It is an indicator of the production function. 
A) It tells the firm what the profit per unit produced is. 
B) It always declines as more output is produced. 
C) It tells the firm what its fixed costs are. 
D) It is an indicator of the production function.

Question 3

The period in which at least one input is fixed in quantity is the

Accepted Answer

A) Long run. 
B) Production run. 
C) Short run. 
D) Investment decision. 
A) Long run. 
B) Production run. 
C) Short run. 
D) Investment decision.

Question 4

What is the total fixed cost in Figure 21.2?

Accepted Answer

A) $80. 
B) $10,000. 
C) $9,600. 
D) $29,600. 
A) $80. 
B) $10,000. 
C) $9,600. 
D) $29,600.

Question 5

Diseconomies of scale imply that the average total cost curve is downward-sloping in the long run.

Accepted Answer

A) True 
 B)False

Question 6

The vertical distance between a firm's ATC and AVC curves grows smaller as output increases.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would cause a firm's production function to shift upward?

Accepted Answer

A) An increase in production by the firm. 
B) Hiring more workers. 
C) Increased training for the firm's workers. 
D) An increase in factor costs. 
A) An increase in production by the firm. 
B) Hiring more workers. 
C) Increased training for the firm's workers. 
D) An increase in factor costs.

Question 8

Total cost refers to the market value of all resources used in producing a good or service.

Accepted Answer

A) True 
 B)False

Question 9

Implicit costs

Accepted Answer

A) Include only payments to labor. 
B) Are the sum of actual monetary payments made for resources used to produce a good. 
C) Include the value of all resources used to produce a good. 
D) Are the value of resources used,for which no monetary payment is made. 
A) Include only payments to labor. 
B) Are the sum of actual monetary payments made for resources used to produce a good. 
C) Include the value of all resources used to produce a good. 
D) Are the value of resources used,for which no monetary payment is made.

Question 10

When a firm is able to achieve the output indicated by a production function,it is producing with technical efficiency.

Accepted Answer

A) True 
 B)False

Question 11

Marginal cost always reflects the cost of variable factors.

Accepted Answer

A) True 
 B)False

Question 12

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 variable cost of the first unit of output in Table 21.5 is

Accepted Answer

A) $15.00. 
B) $12.00. 
C) $8.00. 
D) $6.00. 
A) $15.00. 
B) $12.00. 
C) $8.00. 
D) $6.00.

Question 13

Total output may continue to rise even though marginal physical product is declining.

Accepted Answer

A) True 
 B)False

Question 14

Refer to Table 21.3 below: Table 21.3
$$\begin{array} { | c | r | r | } 
\hline \text { Units of Lubor } & \text { Units of Output } & \text { MPP } \
\hline 0 &0& \
\hline 1 & &30 \
\hline 2 & 66& \
\hline 3 &&30 \
\hline 4 & 116 \
\hline
\end{array}$$
 How many units of output can be produced when three units of labor are employed in Table 21.3?

Accepted Answer

A) 30. 
B) 31. 
C) 66. 
D) 96. 
A) 30. 
B) 31. 
C) 66. 
D) 96.

Question 15

Which of the following statements is not true regarding the production function and the production possibilities curve?

Accepted Answer

A) Both the production function and the production possibilities curve maximize the amount of output attainable. 
B) The production function describes the capacity of a single firm,whereas the production possibilities summarizes the output capacity of the entire economy. 
C) A production function tells us the maximum amount of output attainable from the use of all resources. 
D) The production possibilities curve expresses the ability to produce various combinations of goods given the use of all resources. 
A) Both the production function and the production possibilities curve maximize the amount of output attainable. 
B) The production function describes the capacity of a single firm,whereas the production possibilities summarizes the output capacity of the entire economy. 
C) A production function tells us the maximum amount of output attainable from the use of all resources. 
D) The production possibilities curve expresses the ability to produce various combinations of goods given the use of all resources.

Question 16

The In The News article "Tesla Banks on Gigafactory" says that

Accepted Answer

A) Teslas plan is a long-run production decision,and the company plans to enjoy economies of scale. 
B) The plan to build a gigafactory is a short-run production decision. 
C) The investment will be a variable expense. 
D) The new plant will likely result in diseconomies of scale. 
A) Teslas plan is a long-run production decision,and the company plans to enjoy economies of scale. 
B) The plan to build a gigafactory is a short-run production decision. 
C) The investment will be a variable expense. 
D) The new plant will likely result in diseconomies of scale.

Question 17

Which of the following costs do not change when output changes in the short run?

Accepted Answer

A) Average variable costs. 
B) Variable costs. 
C) Average fixed costs. 
D) Fixed costs. 
A) Average variable costs. 
B) Variable costs. 
C) Average fixed costs. 
D) Fixed costs.

Question 18

The period in which there are no fixed costs is the

Accepted Answer

A) Production run. 
B) Long run. 
C) Short run. 
D) Implicit run. 
A) Production run. 
B) Long run. 
C) Short run. 
D) Implicit run.

Question 19

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 variable cost of 2 units of output in Table 21.5 is

Accepted Answer

A) $15. 
B) $27. 
C) $8. 
D) $12. 
A) $15. 
B) $27. 
C) $8. 
D) $12.

Question 20

Marginal cost is equal to

Accepted Answer

A) The change in total costs divided by the change in quantity produced. 
B) The change in fixed costs as more units are produced. 
C) Total cost divided by quantity produced. 
D) Average total cost multiplied by quantity produced. 
A) The change in total costs divided by the change in quantity produced. 
B) The change in fixed costs as more units are produced. 
C) Total cost divided by quantity produced. 
D) Average total cost multiplied by quantity produced.

Exam 21: The Costs of Production

If the MPP of a worker is 12 units per hour and the wage rate is $10 per hour,the unit labor cost is equal to $1.20 per unit of output.

Average total cost is important to a business because

The period in which at least one input is fixed in quantity is the

What is the total fixed cost in Figure 21.2?

Diseconomies of scale imply that the average total cost curve is downward-sloping in the long run.

The vertical distance between a firm's ATC and AVC curves grows smaller as output increases.

Which of the following would cause a firm's production function to shift upward?

Total cost refers to the market value of all resources used in producing a good or service.

Implicit costs

When a firm is able to achieve the output indicated by a production function,it is producing with technical efficiency.

Marginal cost always reflects the cost of variable factors.

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

Total output may continue to rise even though marginal physical product is declining.

Refer to Table 21.3 below: Table 21.3 Units of Lubor Units of Output MPP 0 0 1 30 2 66 3 30 4 116 How many units of output can be produced when three units of labor are employed in Table 21.3?

Which of the following statements is not true regarding the production function and the production possibilities curve?

The In The News article "Tesla Banks on Gigafactory" says that

Which of the following costs do not change when output changes in the short run?

The period in which there are no fixed costs is the

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

Marginal cost is equal to

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