Question 1

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.

Question 2

Figure 11-3
   
Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run.
-Refer to Figure 11-3.Which of the following statements correctly describes the curves in the figure?

Accepted Answer

A) The marginal product of labor curve is represented by curve A and the average product of labor curve is represented by curve B. 
B) The marginal product of labor curve is represented by curve B and the average product of labor curve is represented by curve A. 
C) Curve A could represent either the average product curve or the marginal product curve. Curve B represents the total product curve. 
D) Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve. 
A) The marginal product of labor curve is represented by curve A and the average product of labor curve is represented by curve B. 
B) The marginal product of labor curve is represented by curve B and the average product of labor curve is represented by curve A. 
C) Curve A could represent either the average product curve or the marginal product curve. Curve B represents the total product curve. 
D) Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve.

Question 3

If the average variable cost curve is above the marginal cost curve, then

Accepted Answer

A) marginal costs must be decreasing. 
B) average variable costs must be increasing. 
C) marginal costs must be increasing. 
D) marginal costs can be either increasing or decreasing. 
A) marginal costs must be decreasing. 
B) average variable costs must be increasing. 
C) marginal costs must be increasing. 
D) marginal costs can be either increasing or decreasing.

Question 4

If fixed costs do not change, then marginal cost

Accepted Answer

A) also remains constant. 
B) equals the change in variable cost divided by the change in output. 
C) equals the change in average variable cost divided by the change in output. 
D) equals the change in average fixed cost divided by the change in output. 
A) also remains constant. 
B) equals the change in variable cost divided by the change in output. 
C) equals the change in average variable cost divided by the change in output. 
D) equals the change in average fixed cost divided by the change in output.

Question 5

Figure 11-13
  
-Refer to Figure 11-13.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

Accepted Answer

A) the price of capital increases while the price of labor remains unchanged. 
B) the price of labor decreases while the price of capital remains unchanged. 
C) the price of capital increases while the price of labor decreases. 
D) the price of capital decreases while the price of labor increases. 
A) the price of capital increases while the price of labor remains unchanged. 
B) the price of labor decreases while the price of capital remains unchanged. 
C) the price of capital increases while the price of labor decreases. 
D) the price of capital decreases while the price of labor increases.

Question 6

If the marginal cost curve is below the average variable cost curve, then

Accepted Answer

A) average variable cost is increasing. 
B) average variable cost is decreasing. 
C) marginal cost must be decreasing. 
D) average variable cost could either be increasing or decreasing. 
A) average variable cost is increasing. 
B) average variable cost is decreasing. 
C) marginal cost must be decreasing. 
D) average variable cost could either be increasing or decreasing.

Question 7

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

Accepted Answer

A) $41.43. 
B)  $134.29. 
C) $135. 
D) $145. 
A) $41.43. 
B)  $134.29. 
C) $135. 
D) $145.

Question 8

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.

Accepted Answer

A) economies of scale 
B) diseconomies of scale 
C) higher average costs but lower total costs 
D) higher marginal costs but lower total costs 
A) economies of scale 
B) diseconomies of scale 
C) higher average costs but lower total costs 
D) higher marginal costs but lower total costs

Question 9

The long run refers to a time period

Accepted Answer

A) during which a firm is able to purchase all of its inputs, including its plant and equipment. 
B) long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. 
C) long enough for a firm to pay all of its creditors in full. 
D) long enough for a firm to change the use of its variable inputs. 
A) during which a firm is able to purchase all of its inputs, including its plant and equipment. 
B) long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. 
C) long enough for a firm to pay all of its creditors in full. 
D) long enough for a firm to change the use of its variable inputs.

Question 10

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 11

Sally quit her job as an auto mechanic earning $50,000 per year to start her own business.To save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year.She also invested her $20,000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.
Total revenue    $120,000
Cost of labor    40,000
Cost of materials   15,000
Equipment rental    5,000
a.Calculate her economic costs for the first year.
b.Calculate her accounting costs for the first year.
c.Calculate her implicit costs for the first year.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because "right now I don't pay any rent and it will cost me $10,000 a year to rent near town." Do you agree with her reasoning?

Accepted Answer

a.$121,000 = 40,000 (labor)+ 15,000 (mat

Question 12

The marginal product of labor is defined as

Accepted Answer

A) the additional sales revenue that results when one more worker is hired. 
B) the additional output that results when one more worker is hired, holding all other resources constant. 
C) the additional number of workers required to produce one more unit of output. 
D) the cost of hiring one more worker. 
A) the additional sales revenue that results when one more worker is hired. 
B) the additional output that results when one more worker is hired, holding all other resources constant. 
C) the additional number of workers required to produce one more unit of output. 
D) the cost of hiring one more worker.

Question 13

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

Accepted Answer

A) the result of economies of scale. 
B) the definition of marginal product 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants. 
A) the result of economies of scale. 
B) the definition of marginal product 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants.

Question 14

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks.She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest)and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year.In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material.Based on this information, what is the amount of her explicit costs for the first year?

Accepted Answer

A) $45,000 
B) $45,500 
C) $47,000 
D) $87,000 
A) $45,000 
B) $45,500 
C) $47,000 
D) $87,000

Question 15

The average total cost of production

Accepted Answer

A) is the extra cost required to produce one more unit. 
B) equals the explicit cost of production. 
C) equals total cost of production divided by the level of output. 
D) equals total cost of production multiplied by the level of output. 
A) is the extra cost required to produce one more unit. 
B) equals the explicit cost of production. 
C) equals total cost of production divided by the level of output. 
D) equals total cost of production multiplied by the level of output.

Question 16

A characteristic of the long run is

Accepted Answer

A) there are fixed inputs. 
B) all inputs can be varied. 
C) plant capacity cannot be increased or decreased. 
D) there are both fixed and variable inputs 
A) there are fixed inputs. 
B) all inputs can be varied. 
C) plant capacity cannot be increased or decreased. 
D) there are both fixed and variable inputs

Question 17

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory.In the following graph, the relationship between costs and output for the smaller factory is represented by the curve ATC₁, and the relationship between costs and output for the larger factory is represented by the curve ATC₂.
   
a.If Argyle expects to produce 3,600 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain?
b.If Argyle expects to produce 5,000 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain.
c.If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week, why isn't it also lower when Argyle produces 4,000 sweaters per week?

Accepted Answer

a.Argyle's costs will be lower with a sm

Question 18

When firms analyze the relationship between their level of production and their costs, they separate the time period involved into

Accepted Answer

A) morning and evening. 
B) 6 months or less; 6 months to 1 year; more than 1 year. 
C) a fixed period and a variable period. 
D) the short run and the long run. 
A) morning and evening. 
B) 6 months or less; 6 months to 1 year; more than 1 year. 
C) a fixed period and a variable period. 
D) the short run and the long run.

Question 19

The law of diminishing marginal returns states

Accepted Answer

A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. 
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases. 
A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. 
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases.

Question 20

When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm

Accepted Answer

A) experiences an increase in demand. 
B) experiences positive technological change. 
C) will hire more workers in order to produce more output. 
D) is operating in the short run. 
A) experiences an increase in demand. 
B) experiences positive technological change. 
C) will hire more workers in order to produce more output. 
D) is operating in the short run.

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

Figure 11-3 Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 11-3.Which of the following statements correctly describes the curves in the figure?

If the average variable cost curve is above the marginal cost curve, then

If fixed costs do not change, then marginal cost

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

If the marginal cost curve is below the average variable cost curve, then

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.

The long run refers to a time period

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

The marginal product of labor is defined as

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

The average total cost of production

A characteristic of the long run is

When firms analyze the relationship between their level of production and their costs, they separate the time period involved into

The law of diminishing marginal returns states

When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm

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

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

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Exam 11: Technology, Production, and Costs

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

Figure 11-3 Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 11-3.Which of the following statements correctly describes the curves in the figure?

If the average variable cost curve is above the marginal cost curve, then

If fixed costs do not change, then marginal cost

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

If the marginal cost curve is below the average variable cost curve, then

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.

The long run refers to a time period

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

The marginal product of labor is defined as

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

The average total cost of production

A characteristic of the long run is

When firms analyze the relationship between their level of production and their costs, they separate the time period involved into

The law of diminishing marginal returns states

When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm

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

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

Filters