Question 1

As a fishing firm hires its first, second, and third workers, it could find that marginal product actually rises. The reason for this is:

Accepted Answer

A)  diminishing returns have set in. 
B)  the division of labor creates greater productivity. 
C)  the firm has hired another boat. 
D)  all tasks are shared by all workers. 
E)  less qualified workers are becoming available. 
A)  diminishing returns have set in. 
B)  the division of labor creates greater productivity. 
C)  the firm has hired another boat. 
D)  all tasks are shared by all workers. 
E)  less qualified workers are becoming available. B

Question 2

Exhibit 7-5 Workers and output data $$\begin{array} { | c | c | } 
\hline \text { Laborers } & \begin{array} { c } 
\text { Total } \
\text { Product }
\end{array} \
\hline 0 & 0 \
1 & 8 \
2 & 20 \
3 & 25 \
4 & 28 \
5 & 29 \
\hline
\end{array}$$
-In Exhibit 7-5, diminishing returns set in when the ____ worker is hired.

Accepted Answer

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

Question 3

In the long run, firms in many industries often experience a falling average total cost curve as a result of:

Accepted Answer

A)  gains through trade. 
B)  increasing marginal returns. 
C)  economies of scale. 
D)  lower fixed costs. 
A)  gains through trade. 
B)  increasing marginal returns. 
C)  economies of scale. 
D)  lower fixed costs. C

Question 4

Exhibit 7-5 Workers and output data $$\begin{array} { | c | c | } 
\hline \text { Laborers } & \begin{array} { c } 
\text { Total } \
\text { Product }
\end{array} \
\hline 0 & 0 \
1 & 8 \
2 & 20 \
3 & 25 \
4 & 28 \
5 & 29 \
\hline
\end{array}$$
-In Exhibit 7-5, the marginal product of the second worker is:

Accepted Answer

A)  0. 
B)  8. 
C)  10. 
D)  12. 
E)  20. 
A)  0. 
B)  8. 
C)  10. 
D)  12. 
E)  20.

Question 5

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 7-9 Cost schedule for firm X $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { Quantity }
\end{array} & \begin{array} { c } 
\text { Total Fixed } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Total Variable } \
\text { Cost }
\end{array} \
\hline 0 & \$ 100 & \$ 0 \
1 & 100 & 50 \
2 & 100 & 84 \
3 & 100 & 108 \
4 & 100 & 127 \
5 & 100 & 150 \
\hline
\end{array}$$
-As shown in Exhibit 7-9, the total cost of producing 5 units is:

Accepted Answer

A)  zero. 
B)  $227. 
C)  $250. 
D)  $100. 
A)  zero. 
B)  $227. 
C)  $250. 
D)  $100.

Question 7

Exhibit 7-1 Production of pizza data $$\begin{array} { | c | c | } 
\hline \text { Workers } & \text { Pizzas } \
\hline 0 & 0 \
1 & 4 \
2 & 10 \
3 & 15 \
4 & 18 \
5 & 19 \
\hline
\end{array}$$
-Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the fifth employee equals:

Accepted Answer

A)  4. 
B)  18. 
C)  19. 
D)  3. 
E)  1. 
A)  4. 
B)  18. 
C)  19. 
D)  3. 
E)  1.

Question 8

Exhibit 7-8 Costs schedules for producing pizza $\begin{array}{|c|c|c|c|c|}
\hline\text { Pizzas } & \begin{array}{c}
\text { Fixed } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ & \$ & \$ & \$ \
1 & & 5 & & \
2 & & 13 & & \
3 & & && 10 \
4 & 100 & &140 & \
5 & & &&20 \
6 & &85 & & \
7 & & & 215 \
\hline
\end{array}$
-By filling in the blanks in Exhibit 7-8, the marginal cost of the sixth pizza is shown to be equal to:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
E)  $85. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
E)  $85.

Question 9

In the long run, total fixed cost will:

Accepted Answer

A)  remain constant. 
B)  increase. 
C)  decrease. 
D)  not exist by definition. 
A)  remain constant. 
B)  increase. 
C)  decrease. 
D)  not exist by definition.

Question 10

Economic profit equals accounting profit minus:

Accepted Answer

A)  explicit costs. 
B)  implicit costs. 
C)  fixed costs. 
D)  variable costs. 
A)  explicit costs. 
B)  implicit costs. 
C)  fixed costs. 
D)  variable costs.

Question 11

Exhibit 7-1 Production of pizza data $$\begin{array} { | c | c | } 
\hline \text { Workers } & \text { Pizzas } \
\hline 0 & 0 \
1 & 4 \
2 & 10 \
3 & 15 \
4 & 18 \
5 & 19 \
\hline
\end{array}$$
-Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The total output of pizzas after hiring 4 workers is:

Accepted Answer

A)  4. 
B)  15. 
C)  18. 
D)  3. 
E)  1. 
A)  4. 
B)  15. 
C)  18. 
D)  3. 
E)  1.

Question 12

Which of the following best describes a production function?

Accepted Answer

A)  The relationship between consumer preferences and market demand. 
B)  The relationship between the quantity of labor employed and total cost. 
C)  The relationship between the maximum amounts of output a firm can produce and various quantities of inputs. 
D)  The relationship between price and quantity supplied by sellers in a market. 
A)  The relationship between consumer preferences and market demand. 
B)  The relationship between the quantity of labor employed and total cost. 
C)  The relationship between the maximum amounts of output a firm can produce and various quantities of inputs. 
D)  The relationship between price and quantity supplied by sellers in a market.

Question 13

When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  diminishing returns. 
E)  some fixed factors of production. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  constant returns to scale. 
D)  diminishing returns. 
E)  some fixed factors of production.

Question 14

Exhibit 7-1 Production of pizza data $$\begin{array} { | c | c | } 
\hline \text { Workers } & \text { Pizzas } \
\hline 0 & 0 \
1 & 4 \
2 & 10 \
3 & 15 \
4 & 18 \
5 & 19 \
\hline
\end{array}$$
-Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. The table shows marginal product increasing between the 0 to 2 hired workers. A possible reason for this increased marginal product is:

Accepted Answer

A)  increased wages. 
B)  increases in plant size. 
C)  decreases in fixed cost. 
D)  increased division of labor as additional workers are hired. 
E)  increased product price. 
A)  increased wages. 
B)  increases in plant size. 
C)  decreases in fixed cost. 
D)  increased division of labor as additional workers are hired. 
E)  increased product price.

Question 15

Diseconomies of scale cause the short-run marginal cost curve to slope upwards.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 7-3 A marginal product curve  
-As shown in Exhibit 7-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is:

Accepted Answer

A)  50. 
B)  100. 
C)  150. 
D)  175. 
A)  50. 
B)  100. 
C)  150. 
D)  175.

Question 17

Marginal cost is defined as the increase in total cost resulting from an increase in:

Accepted Answer

A)  one unit of output. 
B)  output of 100 units. 
C)  a firm's plant size. 
D)  one unit of labor. 
A)  one unit of output. 
B)  output of 100 units. 
C)  a firm's plant size. 
D)  one unit of labor.

Question 18

Exhibit 7-1 Production of pizza data $$\begin{array} { | c | c | } 
\hline \text { Workers } & \text { Pizzas } \
\hline 0 & 0 \
1 & 4 \
2 & 10 \
3 & 15 \
4 & 18 \
5 & 19 \
\hline
\end{array}$$
-Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the labor input begins to fall with the employment of the ____ worker.

Accepted Answer

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

Question 19

Applying a price of labor to the law of diminishing returns generates:

Accepted Answer

A)  the law of increasing costs. 
B)  less output as more labor is hired. 
C)  differences in the quality of labor. 
D)  a negatively-sloped labor supply curve. 
E)  specialization and the division of labor. 
A)  the law of increasing costs. 
B)  less output as more labor is hired. 
C)  differences in the quality of labor. 
D)  a negatively-sloped labor supply curve. 
E)  specialization and the division of labor.

Question 20

Exhibit 7-2 Cost schedule for pizza production $$\begin{array} { | c | c | c | c | } 
\hline \text { Pizzas } & \begin{array} { c } 
\text { Labor } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Energy } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Materials } \
\text { Cost }
\end{array} \
\hline 0 & \$ 10 & \$ 0 & \$ 0 \
1 & 10 & 12 & 4 \
2 & 24 & 22 & 8 \
3 & 40 & 30 & 12 \
4 & 60 & 36 & 16 \
5 & 90 & 40 & 20 \
\hline
\end{array}$$
-Exhibit 7-2 shows the labor, energy, and materials cost of making various quantities of pizzas. The table shows that the labor cost of making pizzas will:

Accepted Answer

A)  increase at a decreasing rate. 
B)  decrease at a decreasing rate. 
C)  decrease at an increasing rate. 
D)  increase at an increasing rate. 
E)  increase at a constant rate. 
A)  increase at a decreasing rate. 
B)  decrease at a decreasing rate. 
C)  decrease at an increasing rate. 
D)  increase at an increasing rate. 
E)  increase at a constant rate.

As a fishing firm hires its first, second, and third workers, it could find that marginal product actually rises. The reason for this is:

Exhibit 7-5 Workers and output data Laborers Total Product 0 0 1 8 2 20 3 25 4 28 5 29 -In Exhibit 7-5, diminishing returns set in when the ____ worker is hired.

In the long run, firms in many industries often experience a falling average total cost curve as a result of:

Exhibit 7-5 Workers and output data Laborers Total Product 0 0 1 8 2 20 3 25 4 28 5 29 -In Exhibit 7-5, the marginal product of the second worker is:

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Exhibit 7-9 Cost schedule for firm X Output Quantity Total Fixed Cost Total Variable Cost 0 \ 100 \ 0 1 100 50 2 100 84 3 100 108 4 100 127 5 100 150 -As shown in Exhibit 7-9, the total cost of producing 5 units is:

Exhibit 7-1 Production of pizza data Workers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the fifth employee equals:

Exhibit 7-8 Costs schedules for producing pizza Pizzas Fixed Cost Variable Cost Total Cost Marginal Cost 0 \ \ \ \ 1 5 2 13 3 10 4 100 140 5 20 6 85 7 215 -By filling in the blanks in Exhibit 7-8, the marginal cost of the sixth pizza is shown to be equal to:

In the long run, total fixed cost will:

Economic profit equals accounting profit minus:

Exhibit 7-1 Production of pizza data Workers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The total output of pizzas after hiring 4 workers is:

Which of the following best describes a production function?

When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:

Diseconomies of scale cause the short-run marginal cost curve to slope upwards.

Exhibit 7-3 A marginal product curve -As shown in Exhibit 7-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is:

Marginal cost is defined as the increase in total cost resulting from an increase in:

Exhibit 7-1 Production of pizza data Workers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the labor input begins to fall with the employment of the ____ worker.

Applying a price of labor to the law of diminishing returns generates:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

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Exam 7: Production Costs

As a fishing firm hires its first, second, and third workers, it could find that marginal product actually rises. The reason for this is:

Exhibit 7-5 Workers and output data Laborers Total Product 0 0 1 8 2 20 3 25 4 28 5 29 -In Exhibit 7-5, diminishing returns set in when the ____ worker is hired.

In the long run, firms in many industries often experience a falling average total cost curve as a result of:

Exhibit 7-5 Workers and output data Laborers Total Product 0 0 1 8 2 20 3 25 4 28 5 29 -In Exhibit 7-5, the marginal product of the second worker is:

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Exhibit 7-9 Cost schedule for firm X Output Quantity Total Fixed Cost Total Variable Cost 0 \ 100 \ 0 1 100 50 2 100 84 3 100 108 4 100 127 5 100 150 -As shown in Exhibit 7-9, the total cost of producing 5 units is:

Exhibit 7-1 Production of pizza data Workers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the fifth employee equals:

Exhibit 7-8 Costs schedules for producing pizza Pizzas Fixed Cost Variable Cost Total Cost Marginal Cost 0 \ \ \ \ 1 5 2 13 3 10 4 100 140 5 20 6 85 7 215 -By filling in the blanks in Exhibit 7-8, the marginal cost of the sixth pizza is shown to be equal to:

In the long run, total fixed cost will:

Economic profit equals accounting profit minus:

Exhibit 7-1 Production of pizza data Workers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The total output of pizzas after hiring 4 workers is:

Which of the following best describes a production function?

When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:

Diseconomies of scale cause the short-run marginal cost curve to slope upwards.

Exhibit 7-3 A marginal product curve -As shown in Exhibit 7-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is:

Marginal cost is defined as the increase in total cost resulting from an increase in:

Exhibit 7-1 Production of pizza data Workers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the labor input begins to fall with the employment of the ____ worker.

Applying a price of labor to the law of diminishing returns generates:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

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