Question 1

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

Accepted Answer

A)  the cost of labor 
B)  the opportunity cost of capital owned and used by the firm 
C)  the cost of energy used in production 
D)  a business licensing fee 
A)  the cost of labor 
B)  the opportunity cost of capital owned and used by the firm 
C)  the cost of energy used in production 
D)  a business licensing fee

Question 2

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the 7th carpenter is

Accepted Answer

A)  negative. 
B)  less than 8 chairs. 
C)  more than 8 chairs. 
D)  zero. 
A)  negative. 
B)  less than 8 chairs. 
C)  more than 8 chairs. 
D)  zero.

Question 3

Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move

Accepted Answer

A)  her explicit cost falls and her implicit cost rises. 
B)  her implicit cost falls and her explicit cost rises. 
C)  her economic cost rises. 
D)  her opportunity cost rises. 
A)  her explicit cost falls and her implicit cost rises. 
B)  her implicit cost falls and her explicit cost rises. 
C)  her economic cost rises. 
D)  her opportunity cost rises.

Question 4

Consider a manufacturing operation that uses specialized machinery and labor to produce its output. In this case, the input that is not fixed in the short run is labor.

Accepted Answer

A) True 
 B)False

Question 5

Firms in different countries that face different input prices may produce the same good using different combinations of inputs, even though they have access to the same technology.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would be categorized as an implicit cost? 
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business

Accepted Answer

A)  a only 
B)  a and c only 
C)  b and c only 
D)  all of the above 
A)  a only 
B)  a and c only 
C)  b and c only 
D)  all of the above

Question 7

Figure 11-2  
-Refer to Figure 11-2. Short run output is maximized at

Accepted Answer

A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine 
A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine

Question 8

Which of the following costs will not change as output changes?

Accepted Answer

A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  average fixed cost 
E)  total fixed cost 
A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  average fixed cost 
E)  total fixed cost

Question 9

Figure 11-2  
-Refer to Figure 11-2. Diminishing returns to labor set in

Accepted Answer

A)  after L1. 
B)  after L2. 
C)  after L3. 
D)  immediately. 
A)  after L1. 
B)  after L2. 
C)  after L3. 
D)  immediately.

Question 10

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

Accepted Answer

A)  Diminishing returns are the result of changes in explicit costs. Diseconomies of scale are the result of changes in explicit costs and implicit costs. 
B)  Diminishing returns refer to production while diseconomies of scale refer to costs. 
C)  Diminishing returns cause a firm's marginal cost curve to rise; diseconomies of scale cause a firm's marginal cost curve to fall. 
D)  Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run. 
A)  Diminishing returns are the result of changes in explicit costs. Diseconomies of scale are the result of changes in explicit costs and implicit costs. 
B)  Diminishing returns refer to production while diseconomies of scale refer to costs. 
C)  Diminishing returns cause a firm's marginal cost curve to rise; diseconomies of scale cause a firm's marginal cost curve to fall. 
D)  Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run.

Question 11

Explain whether each of the following is a fixed cost or a variable cost for Damian Dandridge's tattoo parlor.
a. The payment he makes to buy tattoo ink.
b. The wages he pays his employees.
c. The $500-per-month payment he makes to advertise his shop on highway billboards.
d. The lease payment he makes to the landlord who owns the building where his shop is located.
e. The payment he makes on his liability insurance policy.

Accepted Answer

c, d, and e are fixed costs because they

Question 12

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

Accepted Answer

A) True 
 B)False

Question 13

When Segment.com implemented changes which allowed it to increase productivity with the same number of workers, this represented a positive technological change.

Accepted Answer

A) True 
 B)False

Question 14

To improve the work environment for its engineers, Segment.com rearranged its work areas to move the engineers to the quietest area of its building, and moved its sales and marketing force to to the loudest area. The result was an increase in output equivalent to hiring 10 to 15 additional workers. Which of the following statements best describes this change at Segment.com?

Accepted Answer

A)  The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B)  Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change. 
C)  The firm is able to produce more output using the same number of inputs. Therefore, Segment.com has implemented a positive technological change. 
D)  The scenario described is an example of management efficiency and not technological change. Essentially, the firm changed its way of operating its business. 
A)  The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B)  Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change. 
C)  The firm is able to produce more output using the same number of inputs. Therefore, Segment.com has implemented a positive technological change. 
D)  The scenario described is an example of management efficiency and not technological change. Essentially, the firm changed its way of operating its business.

Question 15

The marginal product of labor is calculated using the formula

Accepted Answer

A)  L/Q. 
B)  ΔL/ΔQ. 
C)  ΔQ/ΔL. 
D)  Q/L. 
A)  L/Q. 
B)  ΔL/ΔQ. 
C)  ΔQ/ΔL. 
D)  Q/L.

Question 16

Figure 11-15  
-Refer to Figure 11-15. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Accepted Answer

A)  1 unit of capital per worker 
B)  10 units of capital per worker 
C)  14 units of capital per worker 
D)  24 units of capital per worker 
A)  1 unit of capital per worker 
B)  10 units of capital per worker 
C)  14 units of capital per worker 
D)  24 units of capital per worker

Question 17

Figure 11-7   Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. If output is 100 units what is the fixed cost of production?

Accepted Answer

A)  $800 
B)  $1,200 
C)  $1,600 
D)  This cannot be determined from the diagram. 
A)  $800 
B)  $1,200 
C)  $1,600 
D)  This cannot be determined from the diagram.

Question 18

At the minimum efficient scale

Accepted Answer

A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum. 
A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum.

Question 19

Figure 11-15  
-Refer to Figure 11-15. What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

Accepted Answer

A)  combination e: 10 hours of labor and 48 units of capital 
B)  combination f: 40 hours of labor and 24 units of capital 
C)  combination g: 60 hours of labor and 14 units of capital 
D)  combination h: 60 hours of labor and 9 units of capital 
A)  combination e: 10 hours of labor and 48 units of capital 
B)  combination f: 40 hours of labor and 24 units of capital 
C)  combination g: 60 hours of labor and 14 units of capital 
D)  combination h: 60 hours of labor and 9 units of capital

Question 20

Figure 11-8  
-Refer to Figure 11-8 above to answer the following questions.
a. Identify the curves in the diagram.
A ________ B ________ C ________
b. What is the numerical value of fixed cost when the quantity of output=10?
c. What is the numerical value of variable cost when the quantity of output=10?
d. What is the numerical value of total cost when the quantity of output =10?
e. What is the numerical value of average fixed cost when the quantity of output =10?
f. What is the numerical value of average total cost when the quantity of output =10?
g. On the graph identify the area that represents the total variable cost of production when the quantity of output =10.
h. On the graph identify the area that represents the fixed cost of production when the quantity of output =10.

Accepted Answer

a. A=Marginal cost curve; B =

Exam 11: Technology, Production, and Costs

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

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the 7th carpenter is

Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move

Consider a manufacturing operation that uses specialized machinery and labor to produce its output. In this case, the input that is not fixed in the short run is labor.

Firms in different countries that face different input prices may produce the same good using different combinations of inputs, even though they have access to the same technology.

Figure 11-2 -Refer to Figure 11-2. Short run output is maximized at

Which of the following costs will not change as output changes?

Figure 11-2 -Refer to Figure 11-2. Diminishing returns to labor set in

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

When Segment.com implemented changes which allowed it to increase productivity with the same number of workers, this represented a positive technological change.

The marginal product of labor is calculated using the formula

Figure 11-15 -Refer to Figure 11-15. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. If output is 100 units what is the fixed cost of production?

At the minimum efficient scale

Figure 11-15 -Refer to Figure 11-15. What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

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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