Question 1

Diminishing marginal product of labor occurs when adding another unit of labor

Accepted Answer

A) decreases output. 
B) changes output by an amount smaller than the output added by the previous unit of labor. 
C) increases output by an amount larger than the output added by the previous unit of labor. 
D) decreases output by an amount smaller than the output added by the previous unit of labor. 
A) decreases output. 
B) changes output by an amount smaller than the output added by the previous unit of labor. 
C) increases output by an amount larger than the output added by the previous unit of labor. 
D) decreases output by an amount smaller than the output added by the previous unit of labor.

Question 2

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

Accepted Answer

A) is a long-run implicit cost. 
B) is a fixed cost. 
C) is a short-run implicit cost. 
D) is a variable cost. 
A) is a long-run implicit cost. 
B) is a fixed cost. 
C) is a short-run implicit cost. 
D) is a variable cost.

Question 3

When a firm experiences negative technological change it can produce the same output with fewer inputs.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is true?

Accepted Answer

A) Opportunity cost = explicit cost - implicit cost. 
B) Total cost = fixed cost + implicit cost. 
C) Total cost = fixed cost + variable cost. 
D) Variable cost = wages + salaries + benefits. 
A) Opportunity cost = explicit cost - implicit cost. 
B) Total cost = fixed cost + implicit cost. 
C) Total cost = fixed cost + variable cost. 
D) Variable cost = wages + salaries + benefits.

Question 5

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 6

If a firm is producing no output in the short run, then its total costs are zero.

Accepted Answer

A) True 
 B)False

Question 7

An important reason why diseconomies of scale arise is because firms may have to hire lower-skilled workers as firms expand.

Accepted Answer

A) True 
 B)False

Question 8

Describe the relationship between marginal cost and average total cost.

Accepted Answer

If marginal cost for a given output is b

Question 9

Increases in the marginal product of labor result from

Accepted Answer

A) the use of new technology. 
B) hiring more efficient workers. 
C) the division of labor and specialization. 
D) increasing the usage of all inputs. 
A) the use of new technology. 
B) hiring more efficient workers. 
C) the division of labor and specialization. 
D) increasing the usage of all inputs.

Question 10

Which of the following is not a source of technological advancement for a producer?

Accepted Answer

A) better trained workers 
B) more efficient physical capital 
C) higher skill level of managers 
D) outsourcing some aspect of production 
A) better trained workers 
B) more efficient physical capital 
C) higher skill level of managers 
D) outsourcing some aspect of production

Question 11

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, it was previously operating at

Accepted Answer

A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity. 
A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity.

Question 12

Which of the following is a factor of production that generally is fixed in the short run?

Accepted Answer

A) raw materials 
B) labor 
C) a factory building 
D) water 
A) raw materials 
B) labor 
C) a factory building 
D) water

Question 13

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

Accepted Answer

As the level of output increases, the va

Question 14

Suppose the total cost of producing 40,000 flash drives is $120,000, and the fixed cost is $30,000.
a.What is the variable cost?
b.When output is 40,000, what are the average variable cost and the average fixed cost?
c.Assuming the cost curves have the usual shape, is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain.

Accepted Answer

a.Variable cost = total cost - fixed cos

Question 15

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

Accepted Answer

A) $0 
B) $2 
C) $60 
D) $120 
A) $0 
B) $2 
C) $60 
D) $120

Question 16

Consider a firm that uses two inputs, labor and capital, to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Accepted Answer

A) The law of diminishing returns: for a given decline in capital, decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor, which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital, increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labor. 
A) The law of diminishing returns: for a given decline in capital, decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor, which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital, increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labor.

Question 17

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 18

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Accepted Answer

A) at the same level of output as the minimum point of the average variable cost. 
B) at a larger level of output than the minimum point of the average variable cost. 
C) at a lower level of output than the minimum point of the average variable cost. 
D) at the same level of output as the maximum of the total product curve. 
A) at the same level of output as the minimum point of the average variable cost. 
B) at a larger level of output than the minimum point of the average variable cost. 
C) at a lower level of output than the minimum point of the average variable cost. 
D) at the same level of output as the maximum of the total product curve.

Question 19

Figure 11-14
   
Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14.Which of the following could explain why the United States and China use different input combinations to produce a given quantity of cotton and yet, each country produces that quantity at the lowest possible cost?

Accepted Answer

A) because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B) because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C) because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D) because the marginal product per dollar spent on capital yields a higher return in the United States than in China 
A) because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B) because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C) because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D) because the marginal product per dollar spent on capital yields a higher return in the United States than in China

Question 20

Figure 11-5
  
-Refer to Figure 11-5.Identify the curves in the diagram.

Accepted Answer

A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve 
B) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve 
C) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve, H = marginal cost curve 
D) E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve. 
A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve 
B) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve 
C) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve, H = marginal cost curve 
D) E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.

Diminishing marginal product of labor occurs when adding another unit of labor

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

When a firm experiences negative technological change it can produce the same output with fewer inputs.

Which of the following statements is true?

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

If a firm is producing no output in the short run, then its total costs are zero.

An important reason why diseconomies of scale arise is because firms may have to hire lower-skilled workers as firms expand.

Describe the relationship between marginal cost and average total cost.

Increases in the marginal product of labor result from

Which of the following is not a source of technological advancement for a producer?

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, it was previously operating at

Which of the following is a factor of production that generally is fixed in the short run?

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Figure 11-5 -Refer to Figure 11-5.Identify the curves in the diagram.

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

Diminishing marginal product of labor occurs when adding another unit of labor

Bill owns "Bill's Home of Blues" a store that specializes in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment

When a firm experiences negative technological change it can produce the same output with fewer inputs.

Which of the following statements is true?

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

If a firm is producing no output in the short run, then its total costs are zero.

An important reason why diseconomies of scale arise is because firms may have to hire lower-skilled workers as firms expand.

Describe the relationship between marginal cost and average total cost.

Increases in the marginal product of labor result from

Which of the following is not a source of technological advancement for a producer?

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, it was previously operating at

Which of the following is a factor of production that generally is fixed in the short run?

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Figure 11-5 -Refer to Figure 11-5.Identify the curves in the diagram.

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