Question 1

If another worker adds 9 units of output to a group of workers who had an average product of 7 units,then the average product of labor

Accepted Answer

A) will remain the same. 
B) will increase. 
C) will decrease. 
D) and what will happen to it cannot be determined. 
A) will remain the same. 
B) will increase. 
C) will decrease. 
D) and what will happen to it cannot be determined.

Question 2

Over the past twenty years,the number of small family farms has fallen significantly and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

Accepted Answer

A) diseconomies of scale in farming 
B) economies of scale in farming 
C) diminishing returns to labor in farming 
D) declining productivity 
A) diseconomies of scale in farming 
B) economies of scale in farming 
C) diminishing returns to labor in farming 
D) declining productivity

Question 3

A firm's cost of production is determined by all of the following except

Accepted Answer

A) the technology used to produce its output. 
B) the productivity of its workers. 
C) the cost of raw material used in production. 
D) the amount of corporate taxes it must pay on its profit. 
A) the technology used to produce its output. 
B) the productivity of its workers. 
C) the cost of raw material used in production. 
D) the amount of corporate taxes it must pay on its profit.

Question 4

Figure 8-2
  
-Refer to Figure 8-2.The average product of labor declines after L₂ because

Accepted Answer

A) the marginal product of labor is below the average product of labor. 
B) the marginal product of labor is falling. 
C) the marginal product of labor is negative. 
D) the marginal product of labor is positive. 
A) the marginal product of labor is below the average product of labor. 
B) the marginal product of labor is falling. 
C) the marginal product of labor is negative. 
D) the marginal product of labor is positive.

Question 5

The marginal product of labor is calculated using the formula

Accepted Answer

A) L/Q. 
B) ΔL/ΔQ. 
C) ΔQ/ΔL. 
D) Q/L. 
A) L/Q. 
B) ΔL/ΔQ. 
C) ΔQ/ΔL. 
D) Q/L.

Question 6

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 7

Table 8-2
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Apples per Day } \
\text { (bushels) }
\end{array} \
\hline 1 & 50 \
\hline 2 & 120 \
\hline 3 & 180 \
\hline 4 & 230 \
\hline 5 & 270 \
\hline 6 & 300 \
\hline
\end{array}$$ 
Table 8-2 summarizes production at the Crunchy Apple Orchard for the month of April 2005.
-Refer to Table 8-2.What is the average product of labor when the orchard employs 5 workers?

Accepted Answer

A) 270 bushels 
B) 54 bushels 
C) 40 bushels 
D) 8 bushels 
A) 270 bushels 
B) 54 bushels 
C) 40 bushels 
D) 8 bushels

Question 8

If marginal product is equal to average product,then total product is at a maximum.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

Economies of scale occur when

Question 11

Which of the following would be categorized as an opportunity cost?
a.not being able to spend your $10,000 savings if you sink the money in your business
b.the cost of purchasing supplies for your house-cleaning business
c.the cost of purchasing auto insurance for your dry-cleaning delivery business

Accepted Answer

A) a only 
B) a and c only 
C) b and c only 
D) all of the above 
A) a only 
B) a and c only 
C) b and c only 
D) all of the above

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The law of diminishing marginal returns

Accepted Answer

A) explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B) explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run. 
C) causes average total costs to rise at a decreasing rate as output increases. 
D) causes the difference between average total cost and average variable cost to get smaller as output increases. 
A) explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B) explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run. 
C) causes average total costs to rise at a decreasing rate as output increases. 
D) causes the difference between average total cost and average variable cost to get smaller as output increases.

Question 14

Technological change is a key reason why Wal-Mart has become one of the largest firms in the world.Which of the following is a change in technology implemented by Wal-Mart?

Accepted Answer

A) Wal-Mart developed a supply chain that allows it to manage inventories efficiently. 
B) Instead of buying goods it sells from other companies, Wal-Mart makes many of these goods in its own factories. 
C) Wal-Mart employs hundreds of scientists and engineers who develop new cost-saving techniques. 
D) Wal-Mart hires managers from many of the top business schools in the United States. 
A) Wal-Mart developed a supply chain that allows it to manage inventories efficiently. 
B) Instead of buying goods it sells from other companies, Wal-Mart makes many of these goods in its own factories. 
C) Wal-Mart employs hundreds of scientists and engineers who develop new cost-saving techniques. 
D) Wal-Mart hires managers from many of the top business schools in the United States.

Question 15

Figure 8-9
  
-Refer to Figure 8-9 above to solve the following problems.
a.Calculate the fixed cost of production.
b.Calculate the average total cost of production when the firm produces 20 units of output.
c.Calculate the average variable cost of production when the firm produces 20 units of output.
d.Calculate the average fixed cost of production when the firm produces 20 units of output.
e.Calculate the average fixed cost of production when the firm produces 15 units of output.
f.If the firm increases output from 15 to 20 units what is the marginal cost of output?

Accepted Answer

a. $100
b.

Question 16

If production displays constant returns to scale,then all economies of scale have been exhausted.

Accepted Answer

A) True 
 B)False

Question 17

Table 8-5
 $$\begin{array} { | c | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (boxes) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Product of } \
\text { Labor }
\end{array} & \begin{array} { c } 
\text { Office } \
\text { Rent } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Labor } \
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 0 & - - & & & \
\hline 1 & 220 & & 400 & 200 & \
\hline 2 & & 250 & & & 800 \
\hline 3 & 680 & & & & \
\hline 4 & & 160 & & & 1,200 \
\hline 5 & 940 & & & 1,000 & \
\hline 6 & 980 & & & & 1,600 \
\hline
\end{array}$$
-Refer to Table 8-5.Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette's mail order business.Suzette rents space for her factory for $400 a week in a nearby strip mall.She can hire temporary workers for $200 a week.Table 8-5 above shows her output and cost data.Use the table to answer questions a-e.
a.Complete the table.
b.In the last week of summer Suzette closes her business to go on a family vacation.What are her costs during that week?
c.In one week Suzette exactly breaks even.If her revenue for the week is $1,200,how many boxes of fruit and nuts did she produce?
d.Judging from the marginal product of labor data,would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer.
e.Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months.If she expects the trend in the marginal product of labor will continue in the same direction,what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.

Accepted Answer

a.
 \[\begin{array} { | c | c | c | c |

Question 18

Figure 8-11
   
Figure 8-11 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 8-11.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 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 20

An explicit cost is defined as

Accepted Answer

A) a cost that does not change as output changes. 
B) a nonmonetary opportunity cost. 
C) a cost that involves spending money. 
D) a nonmonetary accounting cost. 
A) a cost that does not change as output changes. 
B) a nonmonetary opportunity cost. 
C) a cost that involves spending money. 
D) a nonmonetary accounting cost.

If another worker adds 9 units of output to a group of workers who had an average product of 7 units,then the average product of labor

Over the past twenty years,the number of small family farms has fallen significantly and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

A firm's cost of production is determined by all of the following except

Figure 8-2 -Refer to Figure 8-2.The average product of labor declines after L₂ because

The marginal product of labor is calculated using the formula

Which of the following statements is false?

Table 8-2 Number of Workers Apples per Day (bushels) 1 50 2 120 3 180 4 230 5 270 6 300 Table 8-2 summarizes production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 8-2.What is the average product of labor when the orchard employs 5 workers?

If marginal product is equal to average product,then total product is at a maximum.

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

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

Which of the following would be categorized as an opportunity cost? a.not being able to spend your $10,000 savings if you sink the money in your business b.the cost of purchasing supplies for your house-cleaning business c.the cost of purchasing auto insurance for your dry-cleaning delivery business

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

The law of diminishing marginal returns

Technological change is a key reason why Wal-Mart has become one of the largest firms in the world.Which of the following is a change in technology implemented by Wal-Mart?

If production displays constant returns to scale,then all economies of scale have been exhausted.

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

An explicit cost is defined as

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 8: Technology, production, and Costs

If another worker adds 9 units of output to a group of workers who had an average product of 7 units,then the average product of labor

Over the past twenty years,the number of small family farms has fallen significantly and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

A firm's cost of production is determined by all of the following except

Figure 8-2 -Refer to Figure 8-2.The average product of labor declines after L₂ because

The marginal product of labor is calculated using the formula

Which of the following statements is false?

Table 8-2 Number of Workers Apples per Day (bushels) 1 50 2 120 3 180 4 230 5 270 6 300 Table 8-2 summarizes production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 8-2.What is the average product of labor when the orchard employs 5 workers?

If marginal product is equal to average product,then total product is at a maximum.

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

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

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

The law of diminishing marginal returns

Technological change is a key reason why Wal-Mart has become one of the largest firms in the world.Which of the following is a change in technology implemented by Wal-Mart?

If production displays constant returns to scale,then all economies of scale have been exhausted.

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

An explicit cost is defined as

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters