Question 1

Sam's surf shop has total costs of $2,000 when it is not producing any surfboards.This means that

Accepted Answer

A) Variable costs are $2000. 
B) Fixed costs are $2,000. 
C) The shop is very inefficient in its production. 
D) Fixed costs are zero. 
A) Variable costs are $2000. 
B) Fixed costs are $2,000. 
C) The shop is very inefficient in its production. 
D) Fixed costs are zero.

Question 2

Which of the following is the slope of the production function with respect to an input?

Accepted Answer

A) The marginal physical product of the input. 
B) The average product of the input. 
C) The unit cost of the input. 
D) The input price. 
A) The marginal physical product of the input. 
B) The average product of the input. 
C) The unit cost of the input. 
D) The input price.

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,total fixed costs are

Accepted Answer

A) $78.00. 
B) $19.50. 
C) $16.00. 
D) $20.00. 
A) $78.00. 
B) $19.50. 
C) $16.00. 
D) $20.00.

Question 4

A production function shows

Accepted Answer

A) How a firm's production changes as quantity of labor and other inputs changes. 
B) How a firm's costs of production increase as it produces more goods. 
C) How production changes as its unit costs go up. 
D) How total costs increase as labor is added. 
A) How a firm's production changes as quantity of labor and other inputs changes. 
B) How a firm's costs of production increase as it produces more goods. 
C) How production changes as its unit costs go up. 
D) How total costs increase as labor is added.

Question 5

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 one unit of labor is employed in Table 21.3?

Accepted Answer

A) 0. 
B) 30. 
C) 36. 
D) 66. 
A) 0. 
B) 30. 
C) 36. 
D) 66.

Question 6

Greater labor productivity means

Accepted Answer

A) Lower output per labor-hour. 
B) Higher labor cost per unit of output. 
C) Lower output per worker. 
D) Higher output per worker. 
A) Lower output per labor-hour. 
B) Higher labor cost per unit of output. 
C) Lower output per worker. 
D) Higher output per worker.

Question 7

The difference between the accountant's and the economist's measurement of cost is equal to implicit costs.

Accepted Answer

A) True 
 B)False

Question 8

The sum of fixed cost and variable cost at any rate of output is

Accepted Answer

A) Total variable cost. 
B) Total cost. 
C) Average total cost. 
D) Average marginal cost. 
A) Total variable cost. 
B) Total cost. 
C) Average total cost. 
D) Average marginal cost.

Question 9

Which of the following is always downward-sloping?

Accepted Answer

A) The marginal cost curve when it is below the average total cost curve. 
B) The marginal cost curve when it is above the average total cost curve. 
C) The average total cost curve when it is below the marginal cost curve. 
D) The average total cost curve when it is above the marginal cost curve. 
A) The marginal cost curve when it is below the average total cost curve. 
B) The marginal cost curve when it is above the average total cost curve. 
C) The average total cost curve when it is below the marginal cost curve. 
D) The average total cost curve when it is above the marginal cost curve.

Question 10

Assume a given amount of output can be produced by several small plants or one large plant with identical minimum per-unit costs.This long-run situation reflects the existence of

Accepted Answer

A) Economies of scale. 
B) Diseconomies of scale. 
C) Constant returns to scale. 
D) Diminishing returns. 
A) Economies of scale. 
B) Diseconomies of scale. 
C) Constant returns to scale. 
D) Diminishing returns.

Question 11

In the long run,a company should choose the plant size that yields the lowest average total cost for the desired rate of output.

Accepted Answer

A) True 
 B)False

Question 12

When the marginal cost curve is below the average total cost curve,the average total cost curve must be falling.

Accepted Answer

A) True 
 B)False

Question 13

Compare production costs in the short run with production costs in the long run.

Accepted Answer

The short run is characterized by fixed

Question 14

When a firm produces at a technically efficient output level,it is

Accepted Answer

A) Producing the output at the minimum MC curve. 
B) Using the fewest resources to produce a good or service. 
C) Producing the output where the AVC curve is at a minimum. 
D) Producing the best combination of goods and services. 
A) Producing the output at the minimum MC curve. 
B) Using the fewest resources to produce a good or service. 
C) Producing the output where the AVC curve is at a minimum. 
D) Producing the best combination of goods and services.

Question 15

Explain the concept of economies of scale.Identify two reasons why economies of scale exist.

Accepted Answer

Economies of scale exist when larger sca

Question 16

Technical efficiency is achieved when a firm produces

Accepted Answer

A) At an amount indicated by a point on the production function. 
B) Below the opportunity cost for the resources it uses. 
C) Enough output to cover the opportunity cost of resources. 
D) An amount less than or equal to the production function. 
A) At an amount indicated by a point on the production function. 
B) Below the opportunity cost for the resources it uses. 
C) Enough output to cover the opportunity cost of resources. 
D) An amount less than or equal to the production function.

Question 17

If an additional unit of labor costs $20 and has a MPP of 15 units of output,the marginal cost is

Accepted Answer

A) $0.75. 
B) $1.33. 
C) $30.00. 
D) $300.00. 
A) $0.75. 
B) $1.33. 
C) $30.00. 
D) $300.00.

Question 18

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 average variable cost of the second unit of output in Table 21.5 is

Accepted Answer

A) $6.00. 
B) $4.00. 
C) $8.00. 
D) $15.00. 
A) $6.00. 
B) $4.00. 
C) $8.00. 
D) $15.00.

Question 19

Economists point out that if it were not for diminishing returns,we could grow enough food to feed the world in a flowerpot.Explain what they mean.

Accepted Answer

If diminishing returns did not exist,we

Question 20

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

At 30 units of output in Table 21.2,the total variable cost is

Accepted Answer

A) $30. 
B) $40. 
C) $50. 
D) $80. 
A) $30. 
B) $40. 
C) $50. 
D) $80.

Exam 21: The Costs of Production

Sam's surf shop has total costs of $2,000 when it is not producing any surfboards.This means that

Which of the following is the slope of the production function with respect to an input?

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,total fixed costs are

A production function shows

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 one unit of labor is employed in Table 21.3?

Greater labor productivity means

The difference between the accountant's and the economist's measurement of cost is equal to implicit costs.

The sum of fixed cost and variable cost at any rate of output is

Which of the following is always downward-sloping?

Assume a given amount of output can be produced by several small plants or one large plant with identical minimum per-unit costs.This long-run situation reflects the existence of

In the long run,a company should choose the plant size that yields the lowest average total cost for the desired rate of output.

When the marginal cost curve is below the average total cost curve,the average total cost curve must be falling.

Compare production costs in the short run with production costs in the long run.

When a firm produces at a technically efficient output level,it is

Explain the concept of economies of scale.Identify two reasons why economies of scale exist.

Technical efficiency is achieved when a firm produces

If an additional unit of labor costs $20 and has a MPP of 15 units of output,the marginal cost is

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

Economists point out that if it were not for diminishing returns,we could grow enough food to feed the world in a flowerpot.Explain what they mean.

Table 21.2 Output (units per day) 0 10 20 30 Total cost (dollars per day) \ 40 \ 54 \ 62 \ 80 At 30 units of output in Table 21.2,the total variable cost is

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters