Question 1

If marginal product is greater than average product, then

Accepted Answer

A) average product must be decreasing. 
B) marginal product must be decreasing. 
C) marginal product must be increasing. 
D) marginal product could either be increasing or decreasing. 
A) average product must be decreasing. 
B) marginal product must be decreasing. 
C) marginal product must be increasing. 
D) marginal product could either be increasing or decreasing.

Question 2

The shape of the average total cost curve is determined by the shape of

Accepted Answer

A) the marginal cost curve. 
B) the average fixed cost curve. 
C) the average product curve. 
D) the firm's production function. 
A) the marginal cost curve. 
B) the average fixed cost curve. 
C) the average product curve. 
D) the firm's production function.

Question 3

Figure 11-9
  
-Refer to Figure 11-9 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 4

Figure 11-10
  
-Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Qc units.What will happen to its average cost of production?

Accepted Answer

A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37. 
A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question 5

An isocost line shows

Accepted Answer

A) all the possible combinations of two inputs that a firm can use to produce its output. 
B) all the possible combinations of two inputs a firm can use that have the same total cost. 
C) all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D) all the possible combinations of two inputs with constant returns to scale. 
A) all the possible combinations of two inputs that a firm can use to produce its output. 
B) all the possible combinations of two inputs a firm can use that have the same total cost. 
C) all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D) all the possible combinations of two inputs with constant returns to scale.

Question 6

Figure 11-2
  
-Refer to Figure 11-2.The curve labeled "E" is

Accepted Answer

A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve. 
A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve.

Question 7

The total cost schedule shows the relationship between different amounts of inputs and the resulting level of output.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true at the output level where average total cost is at its minimum?

Accepted Answer

A) Marginal cost equals average total cost. 
B) Average variable cost equals fixed cost. 
C) Marginal cost equals average variable cost. 
D) Average total cost equals average fixed cost. 
A) Marginal cost equals average total cost. 
B) Average variable cost equals fixed cost. 
C) Marginal cost equals average variable cost. 
D) Average total cost equals average fixed cost.

Question 9

If production displays diseconomies of scale, the long-run average cost curve is

Accepted Answer

A) above the short-run average total cost curve. 
B) above the long-run marginal cost curve. 
C) upward sloping. 
D) downward sloping. 
A) above the short-run average total cost curve. 
B) above the long-run marginal cost curve. 
C) upward sloping. 
D) downward sloping.

Question 10

The slope of an isoquant measures

Accepted Answer

A) the price ratio of the two inputs. 
B) the average product of labor. 
C) the ratio of the marginal utility of the two inputs. 
D) the rate at which inputs can be substituted for each other keeping total output constant. 
A) the price ratio of the two inputs. 
B) the average product of labor. 
C) the ratio of the marginal utility of the two inputs. 
D) the rate at which inputs can be substituted for each other keeping total output constant.

Question 11

Figure 11-2
  
-Refer to Figure 11-2.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 12

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Accepted Answer

A) The fixed cost of running the studio is $22,000. 
B) The variable cost of running the studio is $22,000. 
C) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. 
A) The fixed cost of running the studio is $22,000. 
B) The variable cost of running the studio is $22,000. 
C) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.

Question 13

Figure 11-11
   
Figure 11-11 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 11-11.Constant returns to scale

Accepted Answer

A) occur for output rates greater than 5,000 picture frames. 
B) occur between 5,000 and 20,000 picture frames per month. 
C) occur between 10,000 and 20,000 pictures frames per month. 
D) will shift the long-run average cost curve downward. 
A) occur for output rates greater than 5,000 picture frames. 
B) occur between 5,000 and 20,000 picture frames per month. 
C) occur between 10,000 and 20,000 pictures frames per month. 
D) will shift the long-run average cost curve downward.

Question 14

If a firm experiences diminishing returns its marginal product must be negative.

Accepted Answer

A) True 
 B)False

Question 15

Table 11-6
  
-Refer to Table 11-6.Alicia Gregory owns a foot massage business.She leases 4 computer-controlled massage booths, for which she pays $125 per day.She cannot increase the number machines she leases without giving the manufacturer 3 months' notice.She can hire as many workers as she wants at a cost of $75 per day per worker.These are the only two inputs she uses in her business.Use this information to fill in the columns in the above table.

Accepted Answer

The answer of Table 11-6
  
-Refer to Table 11-6.Alicia...

Question 16

To improve delivery, Joe's Pizza Emporium made a change that involved taking better account of traffic to avoid delays in delivering pizzas.This is an example of

Accepted Answer

A) positive technological change. 
B) increasing marginal returns. 
C) a reduction in fixed costs. 
D) diseconomies of scale. 
A) positive technological change. 
B) increasing marginal returns. 
C) a reduction in fixed costs. 
D) diseconomies of scale.

Question 17

The basic activity of a firm is

Accepted Answer

A) to set the prices of its products as high as possible. 
B) to compete with other firms that produce similar products. 
C) to provide jobs for its employees. 
D) to use inputs to produce outputs of goods and services. 
A) to set the prices of its products as high as possible. 
B) to compete with other firms that produce similar products. 
C) to provide jobs for its employees. 
D) to use inputs to produce outputs of goods and services.

Question 18

Figure 11-1
  
-Refer to Figure 11-1.Diminishing marginal productivity sets in after

Accepted Answer

A) the 2nd worker is hired. 
B) the 3rd worker is hired. 
C) the 4th worker is hired. 
D) the 5th worker is hired. 
A) the 2nd worker is hired. 
B) the 3rd worker is hired. 
C) the 4th worker is hired. 
D) the 5th worker is hired.

Question 19

Figure 11-15
  
-Refer to Figure 11-15.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Accepted Answer

A) 1 unit of capital per worker 
B) 10 units of capital per worker 
C) 14 units of capital per worker 
D) 24 units of capital per worker 
A) 1 unit of capital per worker 
B) 10 units of capital per worker 
C) 14 units of capital per worker 
D) 24 units of capital per worker

Question 20

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

Accepted Answer

Consider a variable input such as labor.

If marginal product is greater than average product, then

The shape of the average total cost curve is determined by the shape of

Figure 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Qc units.What will happen to its average cost of production?

An isocost line shows

Figure 11-2 -Refer to Figure 11-2.The curve labeled "E" is

The total cost schedule shows the relationship between different amounts of inputs and the resulting level of output.

Which of the following is true at the output level where average total cost is at its minimum?

If production displays diseconomies of scale, the long-run average cost curve is

The slope of an isoquant measures

Figure 11-2 -Refer to Figure 11-2.The average product of labor declines after L₂ because

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Figure 11-11 Figure 11-11 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 11-11.Constant returns to scale

If a firm experiences diminishing returns its marginal product must be negative.

To improve delivery, Joe's Pizza Emporium made a change that involved taking better account of traffic to avoid delays in delivering pizzas.This is an example of

The basic activity of a firm is

Figure 11-1 -Refer to Figure 11-1.Diminishing marginal productivity sets in after

Figure 11-15 -Refer to Figure 11-15.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

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 marginal product is greater than average product, then

The shape of the average total cost curve is determined by the shape of

Figure 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Qc units.What will happen to its average cost of production?

An isocost line shows

Figure 11-2 -Refer to Figure 11-2.The curve labeled "E" is

The total cost schedule shows the relationship between different amounts of inputs and the resulting level of output.

Which of the following is true at the output level where average total cost is at its minimum?

If production displays diseconomies of scale, the long-run average cost curve is

The slope of an isoquant measures

Figure 11-2 -Refer to Figure 11-2.The average product of labor declines after L₂ because

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Figure 11-11 Figure 11-11 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 11-11.Constant returns to scale

If a firm experiences diminishing returns its marginal product must be negative.

To improve delivery, Joe's Pizza Emporium made a change that involved taking better account of traffic to avoid delays in delivering pizzas.This is an example of

The basic activity of a firm is

Figure 11-1 -Refer to Figure 11-1.Diminishing marginal productivity sets in after

Figure 11-15 -Refer to Figure 11-15.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

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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