Question 1

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor. This is an example of

Accepted Answer

A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management. 
A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management.

Question 2

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labor if the

Accepted Answer

A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of labor increases. 
D)  marginal product of labor increases. 
A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of labor increases. 
D)  marginal product of labor increases.

Question 3

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

Accepted Answer

A)  $65 
B)  $50 
C)  $15 
D)  It is impossible to determine without additional information. 
A)  $65 
B)  $50 
C)  $15 
D)  It is impossible to determine without additional information.

Question 4

Figure 11-5  
-Refer to Figure 11-5. Curve G approaches curve F because

Accepted Answer

A)  marginal cost is above average variable costs. 
B)  average fixed cost falls as output rises. 
C)  fixed cost falls as capacity rises. 
D)  total cost falls as more and more is produced. 
A)  marginal cost is above average variable costs. 
B)  average fixed cost falls as output rises. 
C)  fixed cost falls as capacity rises. 
D)  total cost falls as more and more is produced.

Question 5

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 average total cost of production when the firm produces 120 lanterns?

Accepted Answer

A)  $1,680 
B)  $72 
C)  $14 
D)  $12.3 
A)  $1,680 
B)  $72 
C)  $14 
D)  $12.3

Question 6

An avocado orchard employs five full-time workers. Currently, the average product of labor is 120 pounds of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados. The average product of the six workers will now be

Accepted Answer

A)  more than 120 pounds. 
B)  less than 120 pounds. 
C)  equal to 120 pounds. 
D)  greater than the marginal product of labor. 
A)  more than 120 pounds. 
B)  less than 120 pounds. 
C)  equal to 120 pounds. 
D)  greater than the marginal product of labor.

Question 7

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 8

The average total cost of production

Accepted Answer

A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied by the level of output. 
A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied by the level of output.

Question 9

If we have information about workers' marginal products, then total and average product can be found by

Accepted Answer

A)  dividing marginal costs by the number of workers. 
B)  multiplying the average marginal product times the number of workers. 
C)  summing the marginal values to find the total and multiplying it times the number of workers to get the average. 
D)  summing the marginal values to find the total and dividing it by the number of workers to get the average. 
A)  dividing marginal costs by the number of workers. 
B)  multiplying the average marginal product times the number of workers. 
C)  summing the marginal values to find the total and multiplying it times the number of workers to get the average. 
D)  summing the marginal values to find the total and dividing it by the number of workers to get the average.

Question 10

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

Accepted Answer

A)  $0 
B)  $2 
C)  $60 
D)  $120 
A)  $0 
B)  $2 
C)  $60 
D)  $120

Question 11

Figure 11-11   Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 11-11. For output rates greater than 20,000 picture frames per month

Accepted Answer

A)  the firm will not make a profit because the average cost of production will be too high. 
B)  the firm will experience diseconomies of scale. 
C)  the firm will experience diminishing returns. 
D)  the short-run average total cost will equal the long-run average total cost of production. 
A)  the firm will not make a profit because the average cost of production will be too high. 
B)  the firm will experience diseconomies of scale. 
C)  the firm will experience diminishing returns. 
D)  the short-run average total cost will equal the long-run average total cost of production.

Question 12

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.

Accepted Answer

A)  economies of scale 
B)  diseconomies of scale 
C)  higher average costs but lower total costs 
D)  higher marginal costs but lower total costs 
A)  economies of scale 
B)  diseconomies of scale 
C)  higher average costs but lower total costs 
D)  higher marginal costs but lower total costs

Question 13

What is the difference between total cost and variable cost in the long run?

Accepted Answer

In the short run, total cost =

Question 14

If production displays increasing marginal returns, then

Accepted Answer

A)  total product rises by a constant amount throughout. 
B)  each new worker hired adds more to output than previous hires. 
C)  the firm must be adding new capital to keep boosting productivity. 
D)  total product reaches a maximum sooner than if production displayed decreasing returns. 
A)  total product rises by a constant amount throughout. 
B)  each new worker hired adds more to output than previous hires. 
C)  the firm must be adding new capital to keep boosting productivity. 
D)  total product reaches a maximum sooner than if production displayed decreasing returns.

Question 15

One reason why, in the short run, the marginal product of labor might increase initially as more workers are hired is that

Accepted Answer

A)  the first workers hired get to use the best equipment. 
B)  specialization allows a worker to focus on one task, thereby increasing her proficiency at that task. 
C)  the best workers are hired first and later hires are not as skillful. 
D)  beyond some point, a firm has hired too many workers. 
A)  the first workers hired get to use the best equipment. 
B)  specialization allows a worker to focus on one task, thereby increasing her proficiency at that task. 
C)  the best workers are hired first and later hires are not as skillful. 
D)  beyond some point, a firm has hired too many workers.

Question 16

Describe the relationship between marginal cost and average total cost.

Accepted Answer

If marginal cost for a given output is b

Question 17

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 implicit costs for the first year?

Accepted Answer

A)  $80,000 
B)  $70,000 
C)  $42,000 
D)  $41,500 
A)  $80,000 
B)  $70,000 
C)  $42,000 
D)  $41,500

Question 18

Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.

Accepted Answer

A) True 
 B)False

Question 19

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Accepted Answer

Explicit costs are costs that involve sp

Question 20

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker, the Shoppe's total output decreased. Therefore

Accepted Answer

A)  the marginal product of the 5th worker is negative. 
B)  the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C)  the average product of the 5th worker is negative. 
D)  the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers. 
A)  the marginal product of the 5th worker is negative. 
B)  the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C)  the average product of the 5th worker is negative. 
D)  the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers.

Exam 11: Technology, Production, and Costs

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor. This is an example of

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labor if the

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

Figure 11-5 -Refer to Figure 11-5. Curve G approaches curve F because

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 average total cost of production when the firm produces 120 lanterns?

An avocado orchard employs five full-time workers. Currently, the average product of labor is 120 pounds of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados. The average product of the six workers will now be

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

The average total cost of production

If we have information about workers' marginal products, then total and average product can be found by

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 11-11. For output rates greater than 20,000 picture frames per month

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.

What is the difference between total cost and variable cost in the long run?

If production displays increasing marginal returns, then

One reason why, in the short run, the marginal product of labor might increase initially as more workers are hired is that

Describe the relationship between marginal cost and average total cost.

Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker, the Shoppe's total output decreased. Therefore

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

Filters

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATC_a, ATC_b and ATC_c. -Refer to Figure 11-11. For output rates greater than 20,000 picture frames per month