Question 1

Which of the following costs will not change as output changes?

Accepted Answer

A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  average fixed cost 
E)  total fixed cost 
A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  average fixed cost 
E)  total fixed cost

Question 2

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35,what is the firm's average fixed cost at that level of output?

Accepted Answer

A)  $65 
B)  $50 
C)  $15 
D)  It is impossible to determine without additional information. 
A)  $65 
B)  $50 
C)  $15 
D)  It is impossible to determine without additional information.

Question 3

Fill in the missing values in the following table.Draw one graph showing how total output increases with the quantity of workers hired,and another graph showing the marginal product of labor and the average product of labor.
 $\begin{array}{|c|c|c|c|}
\hline\begin{array}{c}
\text { Quantity of } \
\text { Workers }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Output }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Product of } \
\text { Labor }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Product of } \
\text { Labor }
\end{array} \
\hline 0 & 0 & & \
\hline 1 & 200 & & \
\hline 2 & 500 & & \
\hline 3 & 900 & & \
\hline 4 & 1,150 & & \
\hline 5 & 1,300 & & \
\hline
\end{array}$

Accepted Answer

None

Question 4

Table 8-5
 $\begin{array}{|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Number of } \
\text { Workers }
\end{array} & \begin{array}{c}
\text { Output } \
\text { (boxes) }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Product of } \
\text { Labor }
\end{array} & \begin{array}{c}
\text { Office } \
\text { Rent } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Labor } \
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 0 & -- & & & \
\hline 1 & 220 & & 400 & 200 & \
\hline 2 & & 250 & & & 800 \
\hline 3 & 680 & & & & \
\hline 4 & & 160 & & & 1,200 \
\hline 5 & 940 & & & 1,000 & \
\hline 6 & 980 & & & & 1,600 \
\hline
\end{array}$
-Refer to Table 8-5.Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette's mail order business.Suzette rents space for her factory for $400 a week in a nearby strip mall.She can hire temporary workers for $200 a week.Table 8-5 above shows her output and cost data.Use the table to answer questions a-e.
a.Complete the table.
b.In the last week of summer Suzette closes her business to go on a family vacation.What are her costs during that week?
c.In one week Suzette exactly breaks even.If her revenue for the week is $1,200,how many boxes of fruit and nuts did she produce?
d.Judging from the marginal product of labor data,would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer.
e.Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months.If she expects the trend in the marginal product of labor will continue in the same direction,what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.

Accepted Answer

a.
b∙$400
c∙840 boxes
d∙Diminishing marg

Question 5

Average total cost is

Accepted Answer

A)  total cost divided by the quantity of output produced. 
B)  total explicit costs divided by the quantity of output produced. 
C)  variable cost divided by the quantity of output produced. 
D)  the change in fixed plus variable cost divided by the quantity of output produced. 
A)  total cost divided by the quantity of output produced. 
B)  total explicit costs divided by the quantity of output produced. 
C)  variable cost divided by the quantity of output produced. 
D)  the change in fixed plus variable cost divided by the quantity of output produced.

Question 6

Figure 8-10
  
-Refer to Figure 8-10.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 7

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 8

Table 8-8
 $\begin{array}{|c|c|}
\hline \begin{array}{c}
\text { Quantity } \
\text { (sets) }
\end{array} & \begin{array}{c}
\text { Long-Run } \
\text { Average Cost }
\end{array} \
\hline 100 & \$ 40 \
\hline 200 & 35 \
\hline 300 & 30 \
\hline 400 & 30 \
\hline 500 & 35 \
\hline
\end{array}$ Elegant Settings manufactures stainless steel cutlery. Table 8-8 shows the company's cost data.
-Refer to Table 8-8.Elegant Settings experiences

Accepted Answer

A)  economies of scale up to an output level of 400. 
B)  diminishing returns up to an output level of 400. 
C)  increasing returns beyond an output level of 400. 
D)  economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400. 
A)  economies of scale up to an output level of 400. 
B)  diminishing returns up to an output level of 400. 
C)  increasing returns beyond an output level of 400. 
D)  economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Question 9

If marginal product is equal to average product,then total product is at a maximum.

Accepted Answer

A) True 
 B)False

Question 10

The division of labor and specialization explain

Accepted Answer

A)  why, when the marginal product of labor increases, so does the average product of labor. 
B)  why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C)  why the marginal product of labor rises as a firm hires its first units of labor. 
D)  why firms may find it profitable to use more workers when the marginal product of labor is negative. 
A)  why, when the marginal product of labor increases, so does the average product of labor. 
B)  why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C)  why the marginal product of labor rises as a firm hires its first units of labor. 
D)  why firms may find it profitable to use more workers when the marginal product of labor is negative.

Question 11

Table 8-2
 $\begin{array}{|c|c|}
\hline \begin{array}{c}
\text { Number of } \
\text { Workers }
\end{array} & \begin{array}{c}
\text { Applesper Day } \
\text { (bushels) }
\end{array} \
\hline 1 & 50 \
\hline 2 & 120 \
\hline 3 & 180 \
\hline 4 & 230 \
\hline 5 & 270 \
\hline 6 & 300 \
\hline
\end{array}$ Table 8-2 summarizes production at the Crunchy Apple Orchard for the month of April.
-Refer to Table 8-2.What is the average product of labor when the orchard employs 5 workers?

Accepted Answer

A)  270 bushels 
B)  54 bushels 
C)  40 bushels 
D)  8 bushels 
A)  270 bushels 
B)  54 bushels 
C)  40 bushels 
D)  8 bushels

Question 12

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

Accepted Answer

A)  production function. 
B)  supply curve, or supply schedule. 
C)  marginal product of labor. 
D)  average product of labor. 
A)  production function. 
B)  supply curve, or supply schedule. 
C)  marginal product of labor. 
D)  average product of labor.

Question 13

Figure 8-3
   Fancy Footwear manufactures shoes. Figure 8-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run.
-Refer to Figure 8-3.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 14

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker,the Shoppe's total output decreased.Therefore

Accepted Answer

A)  the marginal product of the 5th worker is negative. 
B)  the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C)  the average product of the 5th worker is negative. 
D)  the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers. 
A)  the marginal product of the 5th worker is negative. 
B)  the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C)  the average product of the 5th worker is negative. 
D)  the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers.

Question 15

Figure 8-6
   Figure 8-6 contains information about the short run cost structure of a firm.
-Refer to Figure 8-6.In the figure above,which letter represents the average total cost curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 16

Assume that you observe the long-run average cost curve of ACME Bookstores,a national chain.Starting from the point on the curve where output is zero and moving to the right,which of the following lists the behavior of long-run average costs in the correct sequence (that is,which will be observed first,second,etc.)?

Accepted Answer

A)  minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale 
B)  economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale 
C)  constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale 
D)  economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale 
A)  minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale 
B)  economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale 
C)  constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale 
D)  economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale

Question 17

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 18

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 19

Describe the difference between technology and positive technological change.

Accepted Answer

A firm's technology refers to the proces

Question 20

Table 8-3
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity of } \
\text { Workers }
\end{array} & \begin{array}{c}
\text { Quantity of } \
\text { Boxes }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Product of } \
\text { Labor }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Product of } \
\text { Labor }
\end{array} \
\hline 0 & 0 & \cdots \cdots & \cdots \
\hline 1 & 50 & & \
\hline 2 & 200 & & \
\hline 3 & 240 & & \
\hline 4 & 264 & & \
\hline 5 & 284 & & \
\hline
\end{array}$
-Refer to Table 8-3.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

Which of the following costs will not change as output changes?

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35,what is the firm's average fixed cost at that level of output?

Average total cost is

Figure 8-10 -Refer to Figure 8-10.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?

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

Table 8-8 Quantity (sets) Long-Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery. Table 8-8 shows the company's cost data. -Refer to Table 8-8.Elegant Settings experiences

If marginal product is equal to average product,then total product is at a maximum.

The division of labor and specialization explain

Table 8-2 Number of Workers Applesper Day (bushels) 1 50 2 120 3 180 4 230 5 270 6 300 Table 8-2 summarizes production at the Crunchy Apple Orchard for the month of April. -Refer to Table 8-2.What is the average product of labor when the orchard employs 5 workers?

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

Figure 8-3 Fancy Footwear manufactures shoes. Figure 8-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 8-3.Which of the following statements correctly describes the curves in the figure?

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker,the Shoppe's total output decreased.Therefore

Figure 8-6 Figure 8-6 contains information about the short run cost structure of a firm. -Refer to Figure 8-6.In the figure above,which letter represents the average total cost curve?

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

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

Describe the difference between technology and positive technological change.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 8: Technology,Production,and Costs

Which of the following costs will not change as output changes?

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35,what is the firm's average fixed cost at that level of output?

Average total cost is

Figure 8-10 -Refer to Figure 8-10.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?

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

Table 8-8 Quantity (sets) Long-Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery. Table 8-8 shows the company's cost data. -Refer to Table 8-8.Elegant Settings experiences

If marginal product is equal to average product,then total product is at a maximum.

The division of labor and specialization explain

Table 8-2 Number of Workers Applesper Day (bushels) 1 50 2 120 3 180 4 230 5 270 6 300 Table 8-2 summarizes production at the Crunchy Apple Orchard for the month of April. -Refer to Table 8-2.What is the average product of labor when the orchard employs 5 workers?

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

Figure 8-3 Fancy Footwear manufactures shoes. Figure 8-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 8-3.Which of the following statements correctly describes the curves in the figure?

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker,the Shoppe's total output decreased.Therefore

Figure 8-6 Figure 8-6 contains information about the short run cost structure of a firm. -Refer to Figure 8-6.In the figure above,which letter represents the average total cost curve?

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

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

Describe the difference between technology and positive technological change.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters