Question 1

Suppose an apple orchardist increases the number of fruit pickers hired for a season.The number of apple trees remains the same.As a result the orchardist's:

Accepted Answer

A) variable costs will fall 
B) variable costs will rise 
C) total costs will fall 
D) fixed costs and total costs will rise 
A) variable costs will fall 
B) variable costs will rise 
C) total costs will fall 
D) fixed costs and total costs will rise

Question 2

The marginal cost curve intersects the average variable cost curve at the minimum of the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 3

Even if a firm was to produce nothing, it still incurs some variable costs in the short-run.

Accepted Answer

A) True 
 B)False

Question 4

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Accepted Answer

The total cost curve will incr

Question 5

Which of the following describes the marginal product of labour?

Accepted Answer

A) the increase in labour necessary to generate a one-unit increase in output 
B) the increase in output obtained from a one-unit increase in labour 
C) the additional profit created with a one-unit increase in labour 
D) the additional cost created with a one-unit increase in labour 
A) the increase in labour necessary to generate a one-unit increase in output 
B) the increase in output obtained from a one-unit increase in labour 
C) the additional profit created with a one-unit increase in labour 
D) the additional cost created with a one-unit increase in labour

Question 6

Graph 13-3  
-Refer to Graph 13-3.If marginal cost is rising, then:

Accepted Answer

A) marginal product must be rising 
B) marginal product must be falling 
C) average variable cost must be falling 
D) average fixed cost must be rising 
A) marginal product must be rising 
B) marginal product must be falling 
C) average variable cost must be falling 
D) average fixed cost must be rising

Question 7

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

Accepted Answer

A) True 
 B)False

Question 8

Marginal cost tells us the:

Accepted Answer

A) amount total cost rises when price rises by one unit 
B) amount fixed cost rises when price rises by one unit 
C) amount total cost rises when output rises by one unit 
D) amount fixed cost rises when output rises by one unit 
A) amount total cost rises when price rises by one unit 
B) amount fixed cost rises when price rises by one unit 
C) amount total cost rises when output rises by one unit 
D) amount fixed cost rises when output rises by one unit

Question 9

The short run is defined as the period of time in which all factors of production are fixed.

Accepted Answer

A) True 
 B)False

Question 10

The marginal cost curve can rise even if the average total cost is falling.

Accepted Answer

A) True 
 B)False

Question 11

Graph 13-4  
-Refer to Graph 13-4.Which of the following can be inferred from the figure shown?
(i) marginal costs vary for different levels of output
(ii) diminishing marginal product does not occur directly after the first worker
(iii) marginal product of the second worker exceeds that of the first

Accepted Answer

A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (i), (ii) and (iii) 
A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (i), (ii) and (iii)

Question 12

The firm's total cost can be used to determine both the firm's average total cost and its marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

A second or third worker may have a higher marginal product than the first worker in certain circumstances.

Accepted Answer

A) True 
 B)False

Question 14

Dave is majoring in computer information development at University of Environmental Sustainability.While he has been attending university, Dave has started a computer consulting business to help local residents set up a local skill-sharing network.Dave charges $25 per hour for his consulting services.Dave also works five hours a week for the Arts Faculty to maintain its departmental web page.The Arts Faculty pays Dave $20 per hour.From this information we can conclude that:

Accepted Answer

A) Dave should increase the number of hours he works for the Arts Faculty to make his income from it comparable to his consulting business income 
B) Dave is obviously not maximising his wellbeing if he continues to work for the Arts Faculty 
C) if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $20 is considered a cost of the choice to go to the beach 
D) if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach 
A) Dave should increase the number of hours he works for the Arts Faculty to make his income from it comparable to his consulting business income 
B) Dave is obviously not maximising his wellbeing if he continues to work for the Arts Faculty 
C) if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $20 is considered a cost of the choice to go to the beach 
D) if Dave chooses one hour at the beach with his friends rather than spending one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach

Question 15

Table 13-3
Consider the following firm which makes high-performance racing bicycles.All costs are given in dollars.Output is shown on a monthly basis.The firm's fixed costs include a rent of $800 and a lease cost of $400 per month.  
-Refer to Table 13-3.What is the marginal cost of producing the tenth bicycle in a given month?

Accepted Answer

A) $300 
B) $304 
C) $321 
D) $340 
A) $300 
B) $304 
C) $321 
D) $340

Question 16

The amount of money that a firm pays to buy inputs is called:

Accepted Answer

A) variable cost 
B) marginal cost 
C) fixed cost 
D) total cost 
A) variable cost 
B) marginal cost 
C) fixed cost 
D) total cost

Question 17

Economists normally assume that a firm would?
(i) sell a higher output if this would increase revenue
(ii) sell a lower output and collect less revenue, if this would increase profit
(iii) sell a higher output and incur more costs, if this would increase profit

Accepted Answer

A) (i) and (ii) 
B) (i) and (iii) 
C) (ii) and (iii) 
D) none of the above 
A) (i) and (ii) 
B) (i) and (iii) 
C) (ii) and (iii) 
D) none of the above

Question 18

A firm's variable costs divided by the quantity produced is the:

Accepted Answer

A) marginal product 
B) marginal cost 
C) average variable cost 
D) marginal fixed cost 
A) marginal product 
B) marginal cost 
C) average variable cost 
D) marginal fixed cost

Question 19

Diminishing marginal product causes the average variable cost curve to:

Accepted Answer

A) rise 
B) fall 
C) rise until it equals the total cost curve 
D) level out 
A) rise 
B) fall 
C) rise until it equals the total cost curve 
D) level out

Question 20

Graph 13-2   This graph depicts a total cost function for a firm that produces cookies.Use the graph to answer the following question(s).
-Refer to Graph 13-2.Identify the true statements from the list below.(i) the marginal cost of cookie production is increasing
(ii) cookie production exhibits diminishing marginal product
(iii) the slope of the production function increases as quantity of inputs increase

Accepted Answer

A) (i) only 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (i), (ii) and (iii) 
A) (i) only 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (i), (ii) and (iii)

Exam 13: The Costs of Production

Suppose an apple orchardist increases the number of fruit pickers hired for a season.The number of apple trees remains the same.As a result the orchardist's:

The marginal cost curve intersects the average variable cost curve at the minimum of the average variable cost curve.

Even if a firm was to produce nothing, it still incurs some variable costs in the short-run.

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Which of the following describes the marginal product of labour?

Graph 13-3 -Refer to Graph 13-3.If marginal cost is rising, then:

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

Marginal cost tells us the:

The short run is defined as the period of time in which all factors of production are fixed.

The marginal cost curve can rise even if the average total cost is falling.

Graph 13-4 -Refer to Graph 13-4.Which of the following can be inferred from the figure shown? (i) marginal costs vary for different levels of output (ii) diminishing marginal product does not occur directly after the first worker (iii) marginal product of the second worker exceeds that of the first

The firm's total cost can be used to determine both the firm's average total cost and its marginal cost.

A second or third worker may have a higher marginal product than the first worker in certain circumstances.

The amount of money that a firm pays to buy inputs is called:

Economists normally assume that a firm would? (i) sell a higher output if this would increase revenue (ii) sell a lower output and collect less revenue, if this would increase profit (iii) sell a higher output and incur more costs, if this would increase profit

A firm's variable costs divided by the quantity produced is the:

Diminishing marginal product causes the average variable cost curve to:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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