Question 1

A downward sloping marginal product of labor curve demonstrates the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 2

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.Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?

Accepted Answer

A) $100 
B) $124.40 
C) $220 
D) $340 
A) $100 
B) $124.40 
C) $220 
D) $340

Question 3

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Who was the economist who first analyzed the advantages of specialization and the division of labor?

Accepted Answer

A) David Ricardo 
B) Arthur C. Pigou 
C) Ronald Coase 
D) Adam Smith 
A) David Ricardo 
B) Arthur C. Pigou 
C) Ronald Coase 
D) Adam Smith

Question 6

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Accepted Answer

A) a long-run production function. 
B) a long-run marginal cost curve. 
C) a minimum efficient scale curve. 
D) a long-run average total cost curve. 
A) a long-run production function. 
B) a long-run marginal cost curve. 
C) a minimum efficient scale curve. 
D) a long-run average total cost curve.

Question 7

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 8

To improve package delivery, one change UPS made involved improvements in how packages were routed.The firm started using more detailed maps to plan the routes for packages.As a result, the typical delivery driver could travel several miles less per day while delivering more packages.Which of the following statements best describes this change at UPS?

Accepted Answer

A) The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B) Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change. 
C) The firm is able to produce more output (deliver more packages)using the same number of inputs (trucks and drivers). Therefore, UPS has implemented a positive technological change. 
D) The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business. 
A) The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B) Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change. 
C) The firm is able to produce more output (deliver more packages)using the same number of inputs (trucks and drivers). Therefore, UPS has implemented a positive technological change. 
D) The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business.

Question 9

Figure 11-18
  
-Refer to Figure 11-18.Starting from point E, a movement along the isocost to point F

Accepted Answer

A) decreases the total cost of production but not output. 
B) increases the total cost of production and decreases output. 
C) decreases both the total cost of production and output. 
D) decreases output but not the total cost of production. 
A) decreases the total cost of production but not output. 
B) increases the total cost of production and decreases output. 
C) decreases both the total cost of production and output. 
D) decreases output but not the total cost of production.

Question 10

What is the difference between total cost and variable cost in the long run?

Accepted Answer

In the short run, total cost =

Question 11

Figure 11-17
  
-Refer to Figure 11-17.Assume that production isoquants are convex.Total cost and output produced must increase for each of the following movements except one.Which movement is the exception?

Accepted Answer

A) point a to point b 
B) point a to point c 
C) point b to point c 
D) point b to point d 
A) point a to point b 
B) point a to point c 
C) point b to point c 
D) point b to point d

Question 12

Figure 11-13
  
-Refer to Figure 11-13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the price of labor while the price of capital remains unchanged?

Accepted Answer

A) the movement from AF to BD 
B) the movement from AF to CE 
C) the movement from BF to BD 
D) the movement from BF to CE 
A) the movement from AF to BD 
B) the movement from AF to CE 
C) the movement from BF to BD 
D) the movement from BF to CE

Question 13

As a firm hires more labor in the short run, the

Accepted Answer

A) level of total product stays constant. 
B) output per worker rises. 
C) extra output of another worker may rise at first, but eventually must fall. 
D) costs of production are increasing at a fixed rate per unit of output. 
A) level of total product stays constant. 
B) output per worker rises. 
C) extra output of another worker may rise at first, but eventually must fall. 
D) costs of production are increasing at a fixed rate per unit of output.

Question 14

Joan Jillson owns a coffee shop.Assume that the marginal product of the labor Joan employs (MPL)equals 500 cups per week and the marginal product of her shop's capital (MPK)equals 1,000.Assume also that the wage (w)Joan pays her workers equals $250 per week and the rental price (r)of her capital - her coffee machines - equals $500 per week.Which of the following correctly analyzes whether Joan is minimizing her costs?

Accepted Answer

A) No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w. 
B) Yes, Joan is minimizing her costs because MPK/r equals MPL/w. 
C) No, Joan is not minimizing her costs because MPL × w is less than MPK × r. 
D) Yes, Joan is minimizing her costs because she is a price-taker in the markets for labor and capital. 
A) No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w. 
B) Yes, Joan is minimizing her costs because MPK/r equals MPL/w. 
C) No, Joan is not minimizing her costs because MPL × w is less than MPK × r. 
D) Yes, Joan is minimizing her costs because she is a price-taker in the markets for labor and capital.

Question 15

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.For what quantity of labor does production start to display diminishing returns?

Accepted Answer

A) for more than 1 units of labor 
B) for more than 4 units of labor 
C) for more than 5 units of labor 
D) for more than 8 units of labor 
A) for more than 1 units of labor 
B) for more than 4 units of labor 
C) for more than 5 units of labor 
D) for more than 8 units of labor

Question 16

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

Accepted Answer

A) $300 
B) $15 
C) $12 
D) It is impossible to determine without additional information. 
A) $300 
B) $15 
C) $12 
D) It is impossible to determine without additional information.

Question 17

Which of the following is an implicit cost of production?

Accepted Answer

A) interest paid on a loan to a bank 
B) wages paid to labor plus the cost of carrying benefits for workers 
C) the utility bill paid to water, electricity, and natural gas companies 
D) rent that could have been earned on a building owned and used by the firm 
A) interest paid on a loan to a bank 
B) wages paid to labor plus the cost of carrying benefits for workers 
C) the utility bill paid to water, electricity, and natural gas companies 
D) rent that could have been earned on a building owned and used by the firm

Question 18

An isocost line shows

Accepted Answer

A) combinations of two inputs that result in the same total cost for a firm. 
B) combinations of two inputs that result in the same total output for a firm. 
C) combinations of the two inputs that result in the same profit for a firm. 
D) the different levels of total cost that result from various combinations of two inputs. 
A) combinations of two inputs that result in the same total cost for a firm. 
B) combinations of two inputs that result in the same total output for a firm. 
C) combinations of the two inputs that result in the same profit for a firm. 
D) the different levels of total cost that result from various combinations of two inputs.

Question 19

What is an isocost line? What is the slope of an isocost line?

Accepted Answer

The isocost line shows all the combinati

Question 20

All of the following cost curves are U-shaped except one.Which curve is not U-shaped?

Accepted Answer

A) the marginal cost curve 
B) the average fixed cost curve 
C) the average total cost curve 
D) the average variable cost curve 
A) the marginal cost curve 
B) the average fixed cost curve 
C) the average total cost curve 
D) the average variable cost curve

A downward sloping marginal product of labor curve demonstrates the law of diminishing marginal returns.

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.Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

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.

Who was the economist who first analyzed the advantages of specialization and the division of labor?

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Which of the following statements is false?

Figure 11-18 -Refer to Figure 11-18.Starting from point E, a movement along the isocost to point F

What is the difference between total cost and variable cost in the long run?

Figure 11-17 -Refer to Figure 11-17.Assume that production isoquants are convex.Total cost and output produced must increase for each of the following movements except one.Which movement is the exception?

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the price of labor while the price of capital remains unchanged?

As a firm hires more labor in the short run, the

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.For what quantity of labor does production start to display diminishing returns?

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

Which of the following is an implicit cost of production?

An isocost line shows

What is an isocost line? What is the slope of an isocost line?

All of the following cost curves are U-shaped except one.Which curve is not U-shaped?

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 More Realistic Setting

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

Exam 11: Technology, Production, and Costs

A downward sloping marginal product of labor curve demonstrates the law of diminishing marginal returns.

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.Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

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.

Who was the economist who first analyzed the advantages of specialization and the division of labor?

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Which of the following statements is false?

Figure 11-18 -Refer to Figure 11-18.Starting from point E, a movement along the isocost to point F

What is the difference between total cost and variable cost in the long run?

Figure 11-17 -Refer to Figure 11-17.Assume that production isoquants are convex.Total cost and output produced must increase for each of the following movements except one.Which movement is the exception?

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the price of labor while the price of capital remains unchanged?

As a firm hires more labor in the short run, the

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.For what quantity of labor does production start to display diminishing returns?

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

Which of the following is an implicit cost of production?

An isocost line shows

What is an isocost line? What is the slope of an isocost line?

All of the following cost curves are U-shaped except one.Which curve is not U-shaped?

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 More Realistic Setting

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