Question 1

What is the marginal product of labor and what is the average product of labor.

Accepted Answer

The marginal product of labor is the add

Question 2

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. Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?

Accepted Answer

A)  $100 
B)  $124.40 
C)  $220 
D)  $240 
A)  $100 
B)  $124.40 
C)  $220 
D)  $240

Question 3

When firms analyze the relationship between their level of production and their costs, they separate the time period involved into

Accepted Answer

A)  morning and evening. 
B)  6 months or less; 6 months to 1 year; more than 1 year. 
C)  a fixed period and a variable period. 
D)  the short run and the long run. 
A)  morning and evening. 
B)  6 months or less; 6 months to 1 year; more than 1 year. 
C)  a fixed period and a variable period. 
D)  the short run and the long run.

Question 4

All of the following statements are true of the minimum efficient scale except one. Which one?

Accepted Answer

A)  All possible economies of scale have been exhausted. 
B)  The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C)  Any increase in the scale of operation will encounter either constant returns to scale or diseconomies of scale. 
D)  An increase in the output level will increase profit. 
A)  All possible economies of scale have been exhausted. 
B)  The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C)  Any increase in the scale of operation will encounter either constant returns to scale or diseconomies of scale. 
D)  An increase in the output level will increase profit.

Question 5

Who was the economist who first analyzed the advantages of specialization and the division of labor?

Accepted Answer

A)  David Ricardo 
B)  Arthur C. Pigou 
C)  Ronald Coase 
D)  Adam Smith 
A)  David Ricardo 
B)  Arthur C. Pigou 
C)  Ronald Coase 
D)  Adam Smith

Question 6

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory. In the following graph, the relationship between costs and output for the smaller factory is represented by the curve ATC1, and the relationship between costs and output for the larger factory is represented by the curve ATC2.   a. If Argyle expects to produce 3,600 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain?
b. If Argyle expects to produce 5,000 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain.
c. If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week, why isn't it also lower when Argyle produces 4,000 sweaters per week?

Accepted Answer

a. Argyle's costs will be lower with a s

Question 7

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. Constant returns to scale

Accepted Answer

A)  occur for output rates greater than 5,000 picture frames. 
B)  occur between 5,000 and 20,000 picture frames per month. 
C)  occur between 10,000 and 20,000 pictures frames per month. 
D)  will shift the long-run average cost curve downward. 
A)  occur for output rates greater than 5,000 picture frames. 
B)  occur between 5,000 and 20,000 picture frames per month. 
C)  occur between 10,000 and 20,000 pictures frames per month. 
D)  will shift the long-run average cost curve downward.

Question 8

Marginal cost is calculated for a particular increase in output by

Accepted Answer

A)  multiplying the total cost by the change in output. 
B)  multiplying the change in total cost by the change in output. 
C)  dividing the total cost by the change in output. 
D)  dividing the change in total cost by the change in output. 
A)  multiplying the total cost by the change in output. 
B)  multiplying the change in total cost by the change in output. 
C)  dividing the total cost by the change in output. 
D)  dividing the change in total cost by the change in output.

Question 9

Figure 11-18  
-Refer to Figure 11-18. Starting from point E, a movement along the isocost to point F

Accepted Answer

A)  decreases the total cost of production but not output. 
B)  increases the total cost of production and decreases output. 
C)  decreases both the total cost of production and output. 
D)  decreases output but not the total cost of production. 
A)  decreases the total cost of production but not output. 
B)  increases the total cost of production and decreases output. 
C)  decreases both the total cost of production and output. 
D)  decreases output but not the total cost of production.

Question 10

Figure 11-7   Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. When the output level is 100 units average fixed cost is

Accepted Answer

A)  $12. 
B)  $8. 
C)  $4. 
D)  This cannot be determined from the diagram. 
A)  $12. 
B)  $8. 
C)  $4. 
D)  This cannot be determined from the diagram.

Question 11

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." Based on this quote, what must be true of the plant's average cost of production curve?

Accepted Answer

A)  It is upward-sloping. 
B)  It is downward-sloping. 
C)  It is a ray from the origin. 
D)  It is U-shaped. 
A)  It is upward-sloping. 
B)  It is downward-sloping. 
C)  It is a ray from the origin. 
D)  It is U-shaped.

Question 12

Which of the following statements is true?

Accepted Answer

A)  An explicit cost is an actual cost; an implicit cost is a theoretical cost. 
B)  Economic costs include both explicit costs and implicit costs. 
C)  An explicit cost is more important, dollar for dollar, than an implicit cost. 
D)  Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs. 
A)  An explicit cost is an actual cost; an implicit cost is a theoretical cost. 
B)  Economic costs include both explicit costs and implicit costs. 
C)  An explicit cost is more important, dollar for dollar, than an implicit cost. 
D)  Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs.

Question 13

Economists Cade Massey and Richard Thaler analyzed whether teams in the National Football League distributed salaries efficiently. Massey and Thaler found that

Accepted Answer

A)  the first few players selected in first round of the NFL draft are paid much higher salaries relative to their marginal products than players drafted later in the first round. 
B)  rookies are paid salaries greater than their marginal products; veteran players are paid salaries less than their marginal products. 
C)  veteran players who sign as free agents are paid more relative to their marginal products than rookie players selected in the first round of the draft. 
D)  both rookie players and veteran players are paid less than the value of their marginal products because of the lack of competition among teams. 
A)  the first few players selected in first round of the NFL draft are paid much higher salaries relative to their marginal products than players drafted later in the first round. 
B)  rookies are paid salaries greater than their marginal products; veteran players are paid salaries less than their marginal products. 
C)  veteran players who sign as free agents are paid more relative to their marginal products than rookie players selected in the first round of the draft. 
D)  both rookie players and veteran players are paid less than the value of their marginal products because of the lack of competition among teams.

Question 14

If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 15

Increases in the marginal product of labor result from

Accepted Answer

A)  the use of new technology. 
B)  hiring more efficient workers. 
C)  the division of labor and specialization. 
D)  increasing the usage of all inputs. 
A)  the use of new technology. 
B)  hiring more efficient workers. 
C)  the division of labor and specialization. 
D)  increasing the usage of all inputs.

Question 16

Economic costs include implicit costs but not explicit costs.

Accepted Answer

A) True 
 B)False

Question 17

Suppose a firm uses labor and capital to produce output. The last unit of labor hired has a marginal product of 12 units of output, and the last unit of capital employed has a marginal product of 20 units. Use the optimal combination of inputs rule to calculate the price of capital if the price of labor is $6 per unit. The price of capital is

Accepted Answer

A)  $2. 
B)  $10. 
C)  $20. 
D)  impossible to determine with the information given. 
A)  $2. 
B)  $10. 
C)  $20. 
D)  impossible to determine with the information given.

Question 18

Table 11-1
   Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 11-1. Diminishing marginal returns sets in when the ________ worker is hired.

Accepted Answer

A)  2nd 
B)  3rd 
C)  4th 
D)  None of the above; the production function displays increasing marginal returns. 
A)  2nd 
B)  3rd 
C)  4th 
D)  None of the above; the production function displays increasing marginal returns.

Question 19

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least-cost combination and what should be done if they are not?

Accepted Answer

The marginal product per dollar spent on

Question 20

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Accepted Answer

The relationship between marginal and av

Exam 11: Technology, Production, and Costs

What is the marginal product of labor and what is the average product of labor.

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. Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?

When firms analyze the relationship between their level of production and their costs, they separate the time period involved into

All of the following statements are true of the minimum efficient scale except one. Which one?

Who was the economist who first analyzed the advantages of specialization and the division of labor?

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. Constant returns to scale

Marginal cost is calculated for a particular increase in output by

Figure 11-18 -Refer to Figure 11-18. Starting from point E, a movement along the isocost to point F

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. When the output level is 100 units average fixed cost is

Which of the following statements is true?

Economists Cade Massey and Richard Thaler analyzed whether teams in the National Football League distributed salaries efficiently. Massey and Thaler found that

If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale.

Increases in the marginal product of labor result from

Economic costs include implicit costs but not explicit costs.

Table 11-1 Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 11-1. Diminishing marginal returns sets in when the ________ worker is hired.

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least-cost combination and what should be done if they are not?

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

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. Constant returns to scale