Question 1

The long-run average cost curve shows

Accepted Answer

A)  the lowest average cost of producing every level of output in the long run. 
B)  where the most profitable level of output occurs. 
C)  the average cost of producing where diminishing returns are not present. 
D)  the plant size or scale that the firm should build. 
A)  the lowest average cost of producing every level of output in the long run. 
B)  where the most profitable level of output occurs. 
C)  the average cost of producing where diminishing returns are not present. 
D)  the plant size or scale that the firm should build.

Question 2

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

Accepted Answer

A)  TVC/Q. 
B)  (TC - F
C) /Q. 
C)  Δ(TC - F
C) /ΔQ. 
D)  (TC/Q) - AFC. 
A)  TVC/Q. 
B)  (TC - F
C) /Q. 
C)  Δ(TC - F
C) /ΔQ. 
D)  (TC/Q) - AFC.

Question 3

The total cost schedule shows the relationship between different amounts of inputs and the resulting level of output.

Accepted Answer

A) True 
 B)False

Question 4

Table 11-8
   Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data.
-Refer to Table 11-8. What is the minimum efficient scale of production?

Accepted Answer

A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units 
A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units

Question 5

Figure 11-5  
-Refer to Figure 11-5. The vertical difference between curves F and G measures

Accepted Answer

A)  average fixed costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  sunk costs. 
A)  average fixed costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  sunk costs.

Question 6

Long-run cost curves are U-shaped because

Accepted Answer

A)  of the law of demand. 
B)  of the law of diminishing returns. 
C)  of economies and diseconomies of scale. 
D)  of the law of supply. 
A)  of the law of demand. 
B)  of the law of diminishing returns. 
C)  of economies and diseconomies of scale. 
D)  of the law of supply.

Question 7

Figure 11-2  
-Refer to Figure 11-2. The curve labeled "E" is

Accepted Answer

A)  the total product curve. 
B)  the average product curve. 
C)  the marginal product curve. 
D)  the output supply curve. 
A)  the total product curve. 
B)  the average product curve. 
C)  the marginal product curve. 
D)  the output supply curve.

Question 8

Stan owns a software design business. He does not have time to expand his office space or redesign the layout of his office. He can increase the amount of work he does by working more hours, asking his current employees to work more hours, or hiring more employees. The relationship between Stan's inputs and the maximum output his firm can produce is called his

Accepted Answer

A)  long-run production function. 
B)  production possibilities frontier. 
C)  short-run production function. 
D)  cost function. 
A)  long-run production function. 
B)  production possibilities frontier. 
C)  short-run production function. 
D)  cost function.

Question 9

If the marginal product of labor is decreasing, then marginal cost of production must be rising.

Accepted Answer

A) True 
 B)False

Question 10

Average fixed costs of production

Accepted Answer

A)  remain constant. 
B)  will rise at a fixed rate as more is produced. 
C)  graph as a U-shaped curve. 
D)  fall as long as output is increased. 
A)  remain constant. 
B)  will rise at a fixed rate as more is produced. 
C)  graph as a U-shaped curve. 
D)  fall as long as output is increased.

Question 11

Average total cost is equal to

Accepted Answer

A)  average fixed cost minus average variable cost. 
B)  total cost divided by the level of output. 
C)  marginal cost plus variable cost. 
D)  total cost divided by the number of workers. 
A)  average fixed cost minus average variable cost. 
B)  total cost divided by the level of output. 
C)  marginal cost plus variable cost. 
D)  total cost divided by the number of workers.

Question 12

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car. Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Accepted Answer

A)  Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B)  Model A cars made at the River Rouge plant failed to earn Ford a profit. Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C)  Model A cars made at the River Rouge plant failed to earn a profit. Ford reduced the average cost of the Model A by cutting its employees' wages. 
D)  Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike. 
A)  Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B)  Model A cars made at the River Rouge plant failed to earn Ford a profit. Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C)  Model A cars made at the River Rouge plant failed to earn a profit. Ford reduced the average cost of the Model A by cutting its employees' wages. 
D)  Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.

Question 13

State the law of diminishing marginal returns.

Accepted Answer

As more units of a variable in

Question 14

Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true?

Accepted Answer

A)  The marginal product of the sixth worker must be negative. 
B)  The average product of the sixth worker is negative. 
C)  The sixth worker is not as skilled as the fifth worker. 
D)  The total product becomes negative. 
A)  The marginal product of the sixth worker must be negative. 
B)  The average product of the sixth worker is negative. 
C)  The sixth worker is not as skilled as the fifth worker. 
D)  The total product becomes negative.

Question 15

Joan Jillson owns a coffee shop. Assume that the marginal product of the labor Joan employs (MPL) equals 500 cups per week and the marginal product of her shop's capital (MPK) equals 1,000. Assume also that the wage (w) Joan pays her workers equals $250 per week and the rental price (r) of her capital - her coffee machines - equals $500 per week. Which of the following correctly analyzes whether Joan is minimizing her costs?

Accepted Answer

A)  No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w. 
B)  Yes, Joan is minimizing her costs because MPK/r equals MPL/w. 
C)  No, Joan is not minimizing her costs because MPL × w is less than MPK × r. 
D)  Yes, Joan is minimizing her costs because she is a price-taker in the markets for labor and capital. 
A)  No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w. 
B)  Yes, Joan is minimizing her costs because MPK/r equals MPL/w. 
C)  No, Joan is not minimizing her costs because MPL × w is less than MPK × r. 
D)  Yes, Joan is minimizing her costs because she is a price-taker in the markets for labor and capital.

Question 16

Table 11-3
  
-Refer to Table 11-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. Diminishing returns to labor are first observed in this example after Manny hires the ________ worker.

Accepted Answer

A)  second 
B)  third 
C)  fourth 
D)  fifth 
A)  second 
B)  third 
C)  fourth 
D)  fifth

Question 17

Figure 11-1  
-Refer to Figure 11-1. If the marginal product of labor curve was plotted on this figure, with marginal product on the vertical axis, the marginal product of labor curve would

Accepted Answer

A)  never intersect the horizontal axis. 
B)  intersect the horizontal axis at a point between the 5th and 6th unit of labor. 
C)  intersect the horizontal axis at a point between the 6th and 7th unit of labor. 
D)  intersect the horizontal axis at a point somewhere beyond the 8th unit of labor. 
A)  never intersect the horizontal axis. 
B)  intersect the horizontal axis at a point between the 5th and 6th unit of labor. 
C)  intersect the horizontal axis at a point between the 6th and 7th unit of labor. 
D)  intersect the horizontal axis at a point somewhere beyond the 8th unit of labor.

Question 18

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. The minimum efficient scale of output is reached at what rate of output?

Accepted Answer

A)  10,000 workers 
B)  5,000 picture frames 
C)  20,000 picture frames 
D)  10,000 picture frames 
A)  10,000 workers 
B)  5,000 picture frames 
C)  20,000 picture frames 
D)  10,000 picture frames

Question 19

Which of the following is an example of market "production," as used by economists?

Accepted Answer

A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Art's College stages a play at the local theatre. 
A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Art's College stages a play at the local theatre.

Question 20

The change in a firm's total cost from producing one more unit of a good or service is the firm's

Accepted Answer

A)  explicit cost of production. 
B)  marginal cost of production. 
C)  average cost of production. 
D)  implicit cost of production. 
A)  explicit cost of production. 
B)  marginal cost of production. 
C)  average cost of production. 
D)  implicit cost of production.

Exam 11: Technology, Production, and Costs

The long-run average cost curve shows

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

The total cost schedule shows the relationship between different amounts of inputs and the resulting level of output.

Table 11-8 Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data. -Refer to Table 11-8. What is the minimum efficient scale of production?

Figure 11-5 -Refer to Figure 11-5. The vertical difference between curves F and G measures

Long-run cost curves are U-shaped because

Figure 11-2 -Refer to Figure 11-2. The curve labeled "E" is

If the marginal product of labor is decreasing, then marginal cost of production must be rising.

Average fixed costs of production

Average total cost is equal to

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car. Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

State the law of diminishing marginal returns.

Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true?

Figure 11-1 -Refer to Figure 11-1. If the marginal product of labor curve was plotted on this figure, with marginal product on the vertical axis, the marginal product of labor curve would

Which of the following is an example of market "production," as used by economists?

The change in a firm's total cost from producing one more unit of a good or service is the firm's

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