Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Average fixed cost is equal to

Accepted Answer

A) the amount of total cost that does not change as output changes in the short run. 
B) fixed cost divided by the quantity of output produced. 
C) fixed cost multiplied by the quantity of output produced. 
D) average total cost plus average variable cost. 
A) the amount of total cost that does not change as output changes in the short run. 
B) fixed cost divided by the quantity of output produced. 
C) fixed cost multiplied by the quantity of output produced. 
D) average total cost plus average variable cost.

Question 3

Table 11-1
   
Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 11-1.What is the marginal product of the 4th worker?

Accepted Answer

A) 137 pounds 
B) 50 pounds 
C) 12.5 pounds 
D) 5 pounds 
A) 137 pounds 
B) 50 pounds 
C) 12.5 pounds 
D) 5 pounds

Question 4

Economic costs of production differ from accounting costs in that

Accepted Answer

A) economic costs include expenditures for hired resources while accounting costs do not. 
B) economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C) accounting costs include expenditures for hired resources while economic costs do not. 
D) accounting costs are always larger than economic cost. 
A) economic costs include expenditures for hired resources while accounting costs do not. 
B) economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C) accounting costs include expenditures for hired resources while economic costs do not. 
D) accounting costs are always larger than economic cost.

Question 5

Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours, asking his current employees to work more hours, or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his

Accepted Answer

A) long-run production function. 
B) production possibilities frontier. 
C) short-run production function. 
D) cost function. 
A) long-run production function. 
B) production possibilities frontier. 
C) short-run production function. 
D) cost function.

Question 6

When a firm experiences a positive technological change

Accepted Answer

A) the price of a share of the firm's stock rises. 
B) the firm is able to produce more output using the same inputs, or the same output using fewer inputs. 
C) the value of the firm's assets rises. 
D) the firm will hire additional workers in order to increase production. 
A) the price of a share of the firm's stock rises. 
B) the firm is able to produce more output using the same inputs, or the same output using fewer inputs. 
C) the value of the firm's assets rises. 
D) the firm will hire additional workers in order to increase production.

Question 7

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.

Question 8

The explicit cost of production is also called

Accepted Answer

A) variable cost. 
B) accounting cost. 
C) direct cost. 
D) overhead cost. 
A) variable cost. 
B) accounting cost. 
C) direct cost. 
D) overhead cost.

Question 9

The marginal rate of technical substitution is measured by

Accepted Answer

A) the slope of the isoquant. 
B) the relative input prices. 
C) the slope of the isocost line. 
D) the ratio of the product's price to the product's cost of production. 
A) the slope of the isoquant. 
B) the relative input prices. 
C) the slope of the isocost line. 
D) the ratio of the product's price to the product's cost of production.

Question 10

Figure 11-13
  
-Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit, what is the price of capital along the isocost CE?

Accepted Answer

A) $400 per unit 
B) $100 per unit 
C) $25 per unit 
D) insufficient information to answer question 
A) $400 per unit 
B) $100 per unit 
C) $25 per unit 
D) insufficient information to answer question

Question 11

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Accepted Answer

A) True 
 B)False

Question 12

A change in the slope of an isocost line is due to a change in

Accepted Answer

A) the output price. 
B) the price of one or both inputs. 
C) total cost. 
D) quantity of output. 
A) the output price. 
B) the price of one or both inputs. 
C) total cost. 
D) quantity of output.

Question 13

Table 11-7
   
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 11-7.What is the marginal cost per unit of production when the firm produces 100 lanterns?

Accepted Answer

A) $420 
B) $32 
C) $11.1 
D) $8.1 
A) $420 
B) $32 
C) $11.1 
D) $8.1

Question 14

The law of diminishing marginal returns

Accepted Answer

A) sets in because not all workers are equally productive. 
B) applies only in the short run. 
C) holds even when there are no fixed factors. 
D) ultimately explains why production displays diseconomies of scale. 
A) sets in because not all workers are equally productive. 
B) applies only in the short run. 
C) holds even when there are no fixed factors. 
D) ultimately explains why production displays diseconomies of scale.

Question 15

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 16

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy.Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that

Accepted Answer

A) Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with. 
B) as Toyota expanded its capacity, it experienced diseconomies of scale. 
C) Toyota was focused on "churning" out cars for which it did not invest sufficiently in training its workers. 
D) high demand for Toyota's cars prevented the company from focusing on its strength: auto design. 
A) Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with. 
B) as Toyota expanded its capacity, it experienced diseconomies of scale. 
C) Toyota was focused on "churning" out cars for which it did not invest sufficiently in training its workers. 
D) high demand for Toyota's cars prevented the company from focusing on its strength: auto design.

Question 17

Figure 11-7
   
Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7.When the output level is 100 units average fixed cost is

Accepted Answer

A) $10. 
B) $8. 
C) $5. 
D) This cannot be determined from the diagram. 
A) $10. 
B) $8. 
C) $5. 
D) This cannot be determined from the diagram.

Question 18

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 19

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 20

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Accepted Answer

A) the firm can afford more sophisticated technology in production. 
B) labor and management can specialize even further in their tasks. 
C) as a larger input buyer, the firm can purchase inputs at a lower per unit cost. 
D) as a firm expands its production, its profit margin per-unit of output increases. 
A) the firm can afford more sophisticated technology in production. 
B) labor and management can specialize even further in their tasks. 
C) as a larger input buyer, the firm can purchase inputs at a lower per unit cost. 
D) as a firm expands its production, its profit margin per-unit of output increases.

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

Average fixed cost is equal to

Table 11-1 Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 11-1.What is the marginal product of the 4th worker?

Economic costs of production differ from accounting costs in that

When a firm experiences a positive technological change

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

The explicit cost of production is also called

The marginal rate of technical substitution is measured by

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit, what is the price of capital along the isocost CE?

The process a firm uses to turn inputs into outputs of goods and services is called technology.

A change in the slope of an isocost line is due to a change in

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-7.What is the marginal cost per unit of production when the firm produces 100 lanterns?

The law of diminishing marginal returns

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy.Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7.When the output level is 100 units average fixed cost is

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?

Economies of scale exist as a firm increases its size in the long run because of all of the following except

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

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Exam 11: Technology, Production, and Costs

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

Average fixed cost is equal to

Table 11-1 Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 11-1.What is the marginal product of the 4th worker?

Economic costs of production differ from accounting costs in that

When a firm experiences a positive technological change

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

The explicit cost of production is also called

The marginal rate of technical substitution is measured by

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit, what is the price of capital along the isocost CE?

The process a firm uses to turn inputs into outputs of goods and services is called technology.

A change in the slope of an isocost line is due to a change in

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-7.What is the marginal cost per unit of production when the firm produces 100 lanterns?

The law of diminishing marginal returns

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy.Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7.When the output level is 100 units average fixed cost is

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?

Economies of scale exist as a firm increases its size in the long run because of all of the following except

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

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