Question 1

If marginal cost is above the average variable cost, then average variable cost is decreasing.

Accepted Answer

A) True 
 B)False

Question 2

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 3

The marginal rate of technical substitution is measured by

Accepted Answer

A)  the slope of the isoquant. 
B)  the relative input prices. 
C)  the slope of the isocost line. 
D)  the ratio of the product's price to the product's cost of production. 
A)  the slope of the isoquant. 
B)  the relative input prices. 
C)  the slope of the isocost line. 
D)  the ratio of the product's price to the product's cost of production.

Question 4

Suppose the price of capital and labor remain constant. As a firm's expenditures for capital and labor increase, its isocost line

Accepted Answer

A)  shifts out parallel to the original isocost line. 
B)  shifts in parallel to the original isocost line. 
C)  rotates outward on the Y-intercept. 
D)  rotates outward on the X-intercept. 
A)  shifts out parallel to the original isocost line. 
B)  shifts in parallel to the original isocost line. 
C)  rotates outward on the Y-intercept. 
D)  rotates outward on the X-intercept.

Question 5

Implicit costs can be defined as

Accepted Answer

A)  accounting profit minus explicit cost. 
B)  the non-monetary opportunity cost of using the firm's own resources. 
C)  the deferred cost of production. 
D)  total cost minus fixed costs. 
A)  accounting profit minus explicit cost. 
B)  the non-monetary opportunity cost of using the firm's own resources. 
C)  the deferred cost of production. 
D)  total cost minus fixed costs.

Question 6

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

Accepted Answer

A)  60 units. 
B)  54 units. 
C)  48 units. 
D)  5 units. 
A)  60 units. 
B)  54 units. 
C)  48 units. 
D)  5 units.

Question 7

Figure 11-14   Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14. Consider the following statements: 
a. For each country, the marginal product per dollar spent on labor equals to the marginal product per dollar spent on capital.
b. The price of labor is relatively higher in the United States than in China and the price of capital is relatively lower in the United States than in China.
c. The price of labor and the price of capital are relatively higher in the United States than in China.
Based on the figure, which of the statements above is true?

Accepted Answer

A)  All of the statements are true. 
B)  statements a and c only 
C)  statements a and b only 
D)  statements b and c only 
A)  All of the statements are true. 
B)  statements a and c only 
C)  statements a and b only 
D)  statements b and c only

Question 8

Which of the following is not a reason why firms experience economies of scale?

Accepted Answer

A)  Technology can make it possible to increase production with a smaller increase in at least one input. 
B)  Workers and managers can become more specialized, enabling them to be more productive. 
C)  Larger firms may be able to purchase inputs at lower costs than smaller competitors. 
D)  As output increases, the managers can begin to have difficulty coordinating the operations of their firms. 
A)  Technology can make it possible to increase production with a smaller increase in at least one input. 
B)  Workers and managers can become more specialized, enabling them to be more productive. 
C)  Larger firms may be able to purchase inputs at lower costs than smaller competitors. 
D)  As output increases, the managers can begin to have difficulty coordinating the operations of their firms.

Question 9

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

Accepted Answer

A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs. 
A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs.

Question 10

An isoquant shows

Accepted Answer

A)  the combinations of two goods that yield the same total satisfaction. 
B)  the combinations of two inputs that yield the same total product. 
C)  the combinations of two inputs that cost the same total quantity of money. 
D)  the combination of two goods that cost the same amount of money. 
A)  the combinations of two goods that yield the same total satisfaction. 
B)  the combinations of two inputs that yield the same total product. 
C)  the combinations of two inputs that cost the same total quantity of money. 
D)  the combination of two goods that cost the same amount of money.

Question 11

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true at the output level where average total cost is at its minimum?

Accepted Answer

A)  Marginal cost equals average total cost. 
B)  Average variable cost equals fixed cost. 
C)  Marginal cost equals average variable cost. 
D)  Average total cost equals average fixed cost. 
A)  Marginal cost equals average total cost. 
B)  Average variable cost equals fixed cost. 
C)  Marginal cost equals average variable cost. 
D)  Average total cost equals average fixed cost.

Question 13

Figure 11-3   Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run.
-Refer to Figure 11-3. For what quantity of labor does production start to display diminishing returns?

Accepted Answer

A)  for more than 1 units of labor 
B)  for more than 4 units of labor 
C)  for more than 5 units of labor 
D)  for more than 8 units of labor 
A)  for more than 1 units of labor 
B)  for more than 4 units of labor 
C)  for more than 5 units of labor 
D)  for more than 8 units of labor

Question 14

If marginal product is equal to average product, then total product is at a maximum.

Accepted Answer

A) True 
 B)False

Question 15

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

A) True 
 B)False

Question 16

Marginal cost is equal to the

Accepted Answer

A)  change in total cost divided by the change in output. 
B)  change in average total costs divided by the change in output. 
C)  change in total product divided by the change in output. 
D)  change in average product divided by the change in output. 
A)  change in total cost divided by the change in output. 
B)  change in average total costs divided by the change in output. 
C)  change in total product divided by the change in output. 
D)  change in average product divided by the change in output.

Question 17

Figure 11-6   Figure 11-6 contains information about the short run cost structure of a firm.
-Refer to Figure 11-6. In the figure above, which letter represents the marginal cost curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 18

Which of the following describes how output changes in the short run? Because of specialization and the division of labor, as more workers are hired

Accepted Answer

A)  output will first increase at an increasing rate, then output will increase at a decreasing rate. 
B)  output will first decrease at an increasing rate, then increase at a decreasing rate. 
C)  the marginal product of labor will first decrease, then increase at a decreasing rate. 
D)  the marginal product of labor will first be negative and then will be positive. 
A)  output will first increase at an increasing rate, then output will increase at a decreasing rate. 
B)  output will first decrease at an increasing rate, then increase at a decreasing rate. 
C)  the marginal product of labor will first decrease, then increase at a decreasing rate. 
D)  the marginal product of labor will first be negative and then will be positive.

Question 19

Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies any one of the following except that

Accepted Answer

A)  the two countries use different technologies to produce the product. 
B)  the inputs are not equally productive in the two countries. 
C)  the prices of the inputs are not the same in the countries. 
D)  one country is more efficient in the production of the good than the other. 
A)  the two countries use different technologies to produce the product. 
B)  the inputs are not equally productive in the two countries. 
C)  the prices of the inputs are not the same in the countries. 
D)  one country is more efficient in the production of the good than the other.

Question 20

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books?

Accepted Answer

A)  postage and supplies 
B)  travel 
C)  rent 
D)  wages and salaries 
A)  postage and supplies 
B)  travel 
C)  rent 
D)  wages and salaries

Exam 11: Technology, Production, and Costs

If marginal cost is above the average variable cost, then average variable cost is decreasing.

The short run is the time period during which a firm has at least one input constraint.

The marginal rate of technical substitution is measured by

Suppose the price of capital and labor remain constant. As a firm's expenditures for capital and labor increase, its isocost line

Implicit costs can be defined as

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

Which of the following is not a reason why firms experience economies of scale?

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

An isoquant shows

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Which of the following is true at the output level where average total cost is at its minimum?

Figure 11-3 Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 11-3. For what quantity of labor does production start to display diminishing returns?

If marginal product is equal to average product, then total product is at a maximum.

Average total cost is equal to average variable cost minus average fixed cost.

Marginal cost is equal to the

Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6. In the figure above, which letter represents the marginal cost curve?

Which of the following describes how output changes in the short run? Because of specialization and the division of labor, as more workers are hired

Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies any one of the following except that

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books?

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