Question 1

The marginal product of labor is defined as

Accepted Answer

A)  the change in total revenue that results when an additional unit of a labor is hired. 
B)  the additional labor required to produce one more unit of output. 
C)  the additional labor cost of producing one more unit of output. 
D)  the change in output that a firm produces as a result of hiring one more worker. 
A)  the change in total revenue that results when an additional unit of a labor is hired. 
B)  the additional labor required to produce one more unit of output. 
C)  the additional labor cost of producing one more unit of output. 
D)  the change in output that a firm produces as a result of hiring one more worker.

Question 2

Figure 11-15  
-Refer to Figure 11-15. Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit. What is the minimum cost of producing 200 gooseberry pies?

Accepted Answer

A)  $3,600 
B)  $1,120 
C)  $592 
D)  $560 
A)  $3,600 
B)  $1,120 
C)  $592 
D)  $560

Question 3

Which of the following are implicit costs for a typical firm?

Accepted Answer

A)  opportunity costs of capital owned and used by the firm 
B)  the cost of labor hired by the firm 
C)  utilities cost 
D)  a business licensing fee 
A)  opportunity costs of capital owned and used by the firm 
B)  the cost of labor hired by the firm 
C)  utilities cost 
D)  a business licensing fee

Question 4

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. 
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 5

Which of the following are examples of a firm experiencing a positive technological change?
a. A firm is able to reduce its inputs by 15 percent and still produce the same level of output.
b. A seminar attended by the firm's workers makes them more productive.
c. A firm adds 5 percent to its workforce and is able to maintain its initial level of output.
d. A firm restructures its distribution system and is able to save on its shipping times.
e. A firm rearranges its warehouse and finds that it can use fewer workers to maintain its productivity level.

Accepted Answer

Examples a, b, d, and e are examples of

Question 6

As output increases, the distance between average total cost and average variable cost increases.

Accepted Answer

A) True 
 B)False

Question 7

In the long run

Accepted Answer

A)  the firm's fixed costs are greater than its fixed costs in the short run. 
B)  all of the firm's costs are explicit costs; there are no implicit costs of production. 
C)  the firm is more profitable than it is in the short run. 
D)  all of the firm's costs are variable costs. 
A)  the firm's fixed costs are greater than its fixed costs in the short run. 
B)  all of the firm's costs are explicit costs; there are no implicit costs of production. 
C)  the firm is more profitable than it is in the short run. 
D)  all of the firm's costs are variable costs.

Question 8

Which of the following statements is true?

Accepted Answer

A)  Opportunity cost = explicit cost - implicit cost. 
B)  Total cost = fixed cost + implicit cost. 
C)  Total cost = fixed cost + variable cost. 
D)  Variable cost = wages + salaries + benefits. 
A)  Opportunity cost = explicit cost - implicit cost. 
B)  Total cost = fixed cost + implicit cost. 
C)  Total cost = fixed cost + variable cost. 
D)  Variable cost = wages + salaries + benefits.

Question 9

Stan owns a software design business. He obtained a bank loan to buy computer equipment for his business. He pays $1,000 per month for interest on the loan. He has 10 employees, each of whom is paid $4,000 per month. Because his business has been successful, next month he will increase employee wages to $5,000. If the revenue from his business remains at its current level, Stan is considering an addition to his office. Which of the following statements regarding Stan's business is false?

Accepted Answer

A)  The payments Stan makes to his employees are variable costs and explicit costs. 
B)  The monthly payment Stan makes for his bank loan is an implicit cost. 
C)  The monthly payment Stan makes for his bank loan is a fixed cost. 
D)  The addition Stan is considering to make to his office would be an implicit cost. 
A)  The payments Stan makes to his employees are variable costs and explicit costs. 
B)  The monthly payment Stan makes for his bank loan is an implicit cost. 
C)  The monthly payment Stan makes for his bank loan is a fixed cost. 
D)  The addition Stan is considering to make to his office would be an implicit cost.

Question 10

Which of the following statements is false?

Accepted Answer

A)  An implicit cost is a nonmonetary opportunity cost. 
B)  Economic costs include both accounting costs and implicit costs. 
C)  An explicit cost is a cost that involves spending money. 
D)  Economists consider all costs to be implicit costs. 
A)  An implicit cost is a nonmonetary opportunity cost. 
B)  Economic costs include both accounting costs and implicit costs. 
C)  An explicit cost is a cost that involves spending money. 
D)  Economists consider all costs to be implicit costs.

Question 11

Use the following graph to answer the following questions.   a. If the wage rate and the rental price of machines are both $50 and total cost is $800, is the cost-minimizing point A, B, or C?
b. If the wage rate is $40, the rental price of equipment is $120, and total cost is $1,200, is the cost-minimizing point A, B, or C?
c. If the wage rate is $60, the rental price of equipment is $90, and total cost is $1,800, is the cost-minimizing point A, B, or C?

Accepted Answer

a. If total cost is $800 and the wage ra

Question 12

A change in the slope of an isocost line is due to a change in

Accepted Answer

A)  the output price. 
B)  the price of one or both inputs. 
C)  total cost. 
D)  quantity of output. 
A)  the output price. 
B)  the price of one or both inputs. 
C)  total cost. 
D)  quantity of output.

Question 13

Marginal cost is the

Accepted Answer

A)  change in average cost when an additional unit of output is produced. 
B)  the additional output when total cost is increased by one dollar. 
C)  additional cost of producing an additional unit of output. 
D)  change in the price of inputs if a firm buys more inputs to produce an additional unit of output. 
A)  change in average cost when an additional unit of output is produced. 
B)  the additional output when total cost is increased by one dollar. 
C)  additional cost of producing an additional unit of output. 
D)  change in the price of inputs if a firm buys more inputs to produce an additional unit of output.

Question 14

Table 11-7
   Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns?

Accepted Answer

A)  $1,556 
B)  $1,157 
C)  $956 
D)  $10.05 
A)  $1,556 
B)  $1,157 
C)  $956 
D)  $10.05

Question 15

Figure 11-1  
-Refer to Figure 11-1. The marginal product of the 3rd worker is

Accepted Answer

A)  57. 
B)  19. 
C)  15. 
D)  11. 
A)  57. 
B)  19. 
C)  15. 
D)  11.

Question 16

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material. Based on this information, what is the amount of her explicit costs for the first year?

Accepted Answer

A)  $45,000 
B)  $45,500 
C)  $47,000 
D)  $87,000 
A)  $45,000 
B)  $45,500 
C)  $47,000 
D)  $87,000

Question 17

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

Question 18

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

Question 19

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

Accepted Answer

A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information. 
A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information.

Question 20

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

Accepted Answer

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

Exam 11: Technology, Production, and Costs

The marginal product of labor is defined as

Figure 11-15 -Refer to Figure 11-15. Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit. What is the minimum cost of producing 200 gooseberry pies?

Which of the following are implicit costs for a typical firm?

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

As output increases, the distance between average total cost and average variable cost increases.

In the long run

Which of the following statements is true?

Which of the following statements is false?

A change in the slope of an isocost line is due to a change in

Marginal cost is the

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns?

Figure 11-1 -Refer to Figure 11-1. The marginal product of the 3rd worker is

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

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

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

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

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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