Question 1

The formula for total fixed cost is

Accepted Answer

A)  TFC = TC + TVC. 
B)  TFC = TVC - TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC - TVC. 
A)  TFC = TC + TVC. 
B)  TFC = TVC - TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC - TVC.

Question 2

Which of the following statements correctly describes the distinction between technology and technological change?

Accepted Answer

A)  Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B)  Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain. 
C)  Technology is product-centered; its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D)  Technology involves research and development while technological change involves the use of more efficient machinery. 
A)  Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B)  Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain. 
C)  Technology is product-centered; its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D)  Technology involves research and development while technological change involves the use of more efficient machinery.

Question 3

Average fixed cost can be calculated using any of the formulas below except

Accepted Answer

A)  TFC/Q. 
B)  (TC - V
C) /Q. 
C)  Δ(TC - V
C) /ΔQ. 
D)  (TC/Q) - AVC. 
A)  TFC/Q. 
B)  (TC - V
C) /Q. 
C)  Δ(TC - V
C) /ΔQ. 
D)  (TC/Q) - AVC.

Question 4

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Accepted Answer

A)  at the same level of output as the minimum point of the average variable cost. 
B)  at a larger level of output than the minimum point of the average variable cost. 
C)  at a lower level of output than the minimum point of the average variable cost. 
D)  at the same level of output as the maximum of the total product curve. 
A)  at the same level of output as the minimum point of the average variable cost. 
B)  at a larger level of output than the minimum point of the average variable cost. 
C)  at a lower level of output than the minimum point of the average variable cost. 
D)  at the same level of output as the maximum of the total product curve.

Question 5

Which of the following explains why the marginal cost curve has a U shape?

Accepted Answer

A)  Initially, the marginal product of labor falls, then rises. 
B)  Initially, the average product of labor rises, then falls. 
C)  Initially, the marginal product of labor rises, then falls. 
D)  Initially, the average cost of production rises, then falls. 
A)  Initially, the marginal product of labor falls, then rises. 
B)  Initially, the average product of labor rises, then falls. 
C)  Initially, the marginal product of labor rises, then falls. 
D)  Initially, the average cost of production rises, then falls.

Question 6

What are economies of scale? What are diseconomies of scale?

Accepted Answer

Economies of scale occur when

Question 7

Consider a firm that uses two inputs, labor and capital, to produce its output. Assume labor is measured on the horizontal axis and capital on the vertical axis. Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Accepted Answer

A)  The law of diminishing returns: for a given decline in capital, decreasing amounts of labor are required to produce the same level of output. 
B)  The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor, which drives up the cost of labor. 
C)  The law of diminishing returns: for a given decline in capital, increasing amounts of labor are required to produce the same level of output. 
D)  The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labor. 
A)  The law of diminishing returns: for a given decline in capital, decreasing amounts of labor are required to produce the same level of output. 
B)  The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor, which drives up the cost of labor. 
C)  The law of diminishing returns: for a given decline in capital, increasing amounts of labor are required to produce the same level of output. 
D)  The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labor.

Question 8

Which of the following statements is false?

Accepted Answer

A)  When marginal cost equals average total cost, average total cost is at its highest value. 
B)  The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points. 
C)  The difference between average total cost and average fixed cost is average variable cost. 
D)  Firms often refer to the process of lowering average fixed cost as "spreading the overhead." 
A)  When marginal cost equals average total cost, average total cost is at its highest value. 
B)  The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points. 
C)  The difference between average total cost and average fixed cost is average variable cost. 
D)  Firms often refer to the process of lowering average fixed cost as "spreading the overhead."

Question 9

Fill in the missing values in the following table. Draw one graph showing how total output increases with the quantity of workers hired, and another graph showing the marginal product of labor and the average product of labor.

Accepted Answer

The answer of Fill in the missing values in the...

Question 10

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

Accepted Answer

As the level of output increases, the va

Question 11

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 firm's total cost while the price of labor and capital remain unchanged?

Accepted Answer

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

Question 12

Which of the following statements is true?

Accepted Answer

A)  The average product of labor is at its maximum when the average product of labor equals the marginal product of labor. 
B)  The average product of labor is at its minimum when the average product of labor equals the marginal product of labor. 
C)  The average product of labor tells us how much output changes as the quantity of workers hired changes. 
D)  Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing. 
A)  The average product of labor is at its maximum when the average product of labor equals the marginal product of labor. 
B)  The average product of labor is at its minimum when the average product of labor equals the marginal product of labor. 
C)  The average product of labor tells us how much output changes as the quantity of workers hired changes. 
D)  Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing.

Question 13

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Accepted Answer

A) True 
 B)False

Question 14

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

Accepted Answer

A)  Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B)  Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C)  Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D)  Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. 
A)  Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B)  Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C)  Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D)  Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.

Question 15

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?

Accepted Answer

A)  0.16 
B)  3 
C)  4.67 
D)  36 
A)  0.16 
B)  3 
C)  4.67 
D)  36

Question 16

An isocost line shows

Accepted Answer

A)  combinations of two inputs that result in the same total cost for a firm. 
B)  combinations of two inputs that result in the same total output for a firm. 
C)  combinations of the two inputs that result in the same profit for a firm. 
D)  the different levels of total cost that result from various combinations of two inputs. 
A)  combinations of two inputs that result in the same total cost for a firm. 
B)  combinations of two inputs that result in the same total output for a firm. 
C)  combinations of the two inputs that result in the same profit for a firm. 
D)  the different levels of total cost that result from various combinations of two inputs.

Question 17

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Accepted Answer

A) True 
 B)False

Question 18

Figure 11-13  
-Refer to Figure 11-13. The lines shown in the diagram are isocost lines. If the price of labor is $50 per unit, what is the price of capital along the isocost CE?

Accepted Answer

A)  $400 per unit 
B)  $100 per unit 
C)  $25 per unit 
D)  insufficient information to answer question 
A)  $400 per unit 
B)  $100 per unit 
C)  $25 per unit 
D)  insufficient information to answer question

Question 19

Is it possible for technological change to be negative? If so, give an example.

Accepted Answer

Technological change could be negative,

Question 20

If a producer is not able to expand its plant capacity immediately, it is

Accepted Answer

A)  bankrupt. 
B)  operating in the long run. 
C)  operating in the short run. 
D)  losing money. 
A)  bankrupt. 
B)  operating in the long run. 
C)  operating in the short run. 
D)  losing money.

Exam 11: Technology, Production, and Costs

The formula for total fixed cost is

Which of the following statements correctly describes the distinction between technology and technological change?

Average fixed cost can be calculated using any of the formulas below except

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Which of the following explains why the marginal cost curve has a U shape?

What are economies of scale? What are diseconomies of scale?

Which of the following statements is false?

Fill in the missing values in the following table. Draw one graph showing how total output increases with the quantity of workers hired, and another graph showing the marginal product of labor and the average product of labor.

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

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 firm's total cost while the price of labor and capital remain unchanged?

Which of the following statements is true?

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?

An isocost line shows

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Figure 11-13 -Refer to Figure 11-13. The lines shown in the diagram are isocost lines. If the price of labor is $50 per unit, what is the price of capital along the isocost CE?

Is it possible for technological change to be negative? If so, give an example.

If a producer is not able to expand its plant capacity immediately, it is

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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