Question 1

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 higher 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 higher 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 2

The statement that correctly describes the distinction between technology and technological change is

Accepted Answer

A) Technology refers to the processes used by a firm to transform inputs into output of goods and services, while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs, and technological change is the process by which the firm achieves this productivity gain. 
C) Technology is product-centered in that it refers to developing new products with limited resources, while technological change is process-centered in that it focuses on developing new production techniques. 
D) Technology involves research and development, while technological change involves the use of more efficient machinery. 
A) Technology refers to the processes used by a firm to transform inputs into output of goods and services, while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs, and technological change is the process by which the firm achieves this productivity gain. 
C) Technology is product-centered in that it refers to developing new products with limited resources, while technological change is process-centered in that it focuses on developing new production techniques. 
D) Technology involves research and development, while technological change involves the use of more efficient machinery.

Question 3

Figure 7.5  
-Refer to Figure 7.5.The vertical difference between curves F and G measures

Accepted Answer

A) average fixed costs. 
B) marginal costs. 
C) fixed costs. 
D) sunk costs. 
A) average fixed costs. 
B) marginal costs. 
C) fixed costs. 
D) sunk costs.

Question 4

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker, the average product of labour declines.Which of the following statements must be true?

Accepted Answer

A) The marginal product of the 8th worker is negative. 
B) The marginal product of the 8th worker is less than the average product of labour before the 8th worker was hired. 
C) Suzie's profits would be greater if she did not hire the 8th worker. 
D) The average product of labour is negative. 
A) The marginal product of the 8th worker is negative. 
B) The marginal product of the 8th worker is less than the average product of labour before the 8th worker was hired. 
C) Suzie's profits would be greater if she did not hire the 8th worker. 
D) The average product of labour is negative.

Question 5

Consider a firm that uses two inputs, labour and capital, to produce its output.Assume labour 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 labour 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 labour, which drives up the cost of labour. 
C) The law of diminishing returns: For a given decline in capital, increasing amounts of labour are required to produce the same level of output. 
D) The law of imperfect substitutability: Labour and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labour. 
A) The law of diminishing returns: For a given decline in capital, decreasing amounts of labour 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 labour, which drives up the cost of labour. 
C) The law of diminishing returns: For a given decline in capital, increasing amounts of labour are required to produce the same level of output. 
D) The law of imperfect substitutability: Labour and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labour.

Question 6

Table 7.7   Table 7.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 7.7.The marginal cost per unit of production when the firm produces 100 lanterns is

Accepted Answer

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

Question 7

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 labour and the average product of labour.

Accepted Answer

The answer of Fill in the missing values in the...

Question 8

If we have information about workers' marginal products, then total and average product can be found by

Accepted Answer

A) dividing marginal costs by the number of workers. 
B) multiplying the average marginal product times the number of workers. 
C) summing the marginal values to find the total and multiplying it times the number of workers to get the average. 
D) summing the marginal values to find the total and dividing it by the number of workers to get the average. 
A) dividing marginal costs by the number of workers. 
B) multiplying the average marginal product times the number of workers. 
C) summing the marginal values to find the total and multiplying it times the number of workers to get the average. 
D) summing the marginal values to find the total and dividing it by the number of workers to get the average.

Question 9

As output increases,

Accepted Answer

A) average variable cost becomes smaller and smaller. 
B) the difference between average total cost and average variable cost decreases. 
C) marginal cost increases continuously. 
D) the difference between average total cost and average variable cost becomes greater and greater. 
A) average variable cost becomes smaller and smaller. 
B) the difference between average total cost and average variable cost decreases. 
C) marginal cost increases continuously. 
D) the difference between average total cost and average variable cost becomes greater and greater.

Question 10

Describe the difference between technology and positive technological change.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

A firm's technology refers to the proces

Question 11

Average variable cost can be calculated using any of the formulas below except

Accepted Answer

A) TVC/Q. 
B) (TC - F
C) /Q. 
C) Δ(TC - F
C) /ΔQ. 
D) (TC/Q)- AFC. 
A) TVC/Q. 
B) (TC - F
C) /Q. 
C) Δ(TC - F
C) /ΔQ. 
D) (TC/Q)- AFC.

Question 12

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations.Which of the following best explains this trend?

Accepted Answer

A) Diseconomies of scale in farming 
B) Economies of scale in farming 
C) Diminishing returns to labour in farming 
D) Declining productivity 
A) Diseconomies of scale in farming 
B) Economies of scale in farming 
C) Diminishing returns to labour in farming 
D) Declining productivity

Question 13

Which of the following is a characteristic of the long run?

Accepted Answer

A) there are fixed inputs. 
B) all inputs can be varied. 
C) plant capacity cannot be increased or decreased. 
D) there are both fixed and variable inputs. 
A) there are fixed inputs. 
B) all inputs can be varied. 
C) plant capacity cannot be increased or decreased. 
D) there are both fixed and variable inputs.

Question 14

In the short run, why does a production function eventually display diminishing returns to labour?

Accepted Answer

A) As the number of workers increases, it becomes difficult to monitor them. 
B) As a firm hires more workers, the skills and the work ethic of the additional workers will eventually decline. 
C) As the number of workers increases, eventually the gains from the division of labour and specialisation are used up. 
D) The opportunity cost of hiring additional workers must eventually rise. 
A) As the number of workers increases, it becomes difficult to monitor them. 
B) As a firm hires more workers, the skills and the work ethic of the additional workers will eventually decline. 
C) As the number of workers increases, eventually the gains from the division of labour and specialisation are used up. 
D) The opportunity cost of hiring additional workers must eventually rise.

Question 15

Figure 7.14  
-Refer to Figure 7.14.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labour for capital when labour is increased from 10 to 20 hours?

Accepted Answer

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

Question 16

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Accepted Answer

A) investment in human capital. 
B) economies of scale. 
C) positive technological change. 
D) inspired management. 
A) investment in human capital. 
B) economies of scale. 
C) positive technological change. 
D) inspired management.

Question 17

What is marginal cost?

Accepted Answer

A) Change in average cost when an additional unit of output is produced. 
B) Additional output when total cost is increased by one dollar. 
C) Additional cost of producing an additional unit of output. 
D) Change in the price of inputs if a firm buys more inputs to produce an additional unit of output. 
A) Change in average cost when an additional unit of output is produced. 
B) Additional output when total cost is increased by one dollar. 
C) Additional cost of producing an additional unit of output. 
D) Change in the price of inputs if a firm buys more inputs to produce an additional unit of output.

Question 18

Figure 7.2  
-Refer to Figure 7.2.At what point is short run output maximised?

Accepted Answer

A) L1. 
B) L2. 
C) L3. 
D) Insufficient information to determine 
A) L1. 
B) L2. 
C) L3. 
D) Insufficient information to determine

Question 19

Higher isocost lines correspond to higher

Accepted Answer

A) profits. 
B) total costs of production. 
C) input prices. 
D) sales revenue. 
A) profits. 
B) total costs of production. 
C) input prices. 
D) sales revenue.

Question 20

Bill owns 'Bill's Home of Blues' a store that specialises 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.

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

The statement that correctly describes the distinction between technology and technological change is

Figure 7.5 -Refer to Figure 7.5.The vertical difference between curves F and G measures

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker, the average product of labour declines.Which of the following statements must be true?

Table 7.7 Table 7.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 7.7.The marginal cost per unit of production when the firm produces 100 lanterns is

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 labour and the average product of labour.

If we have information about workers' marginal products, then total and average product can be found by

As output increases,

Describe the difference between technology and positive technological change. __________________________________________________________________________________________________________________________________________________________________________________________

Average variable cost can be calculated using any of the formulas below except

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations.Which of the following best explains this trend?

Which of the following is a characteristic of the long run?

In the short run, why does a production function eventually display diminishing returns to labour?

Figure 7.14 -Refer to Figure 7.14.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labour for capital when labour is increased from 10 to 20 hours?

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

What is marginal cost?

Figure 7.2 -Refer to Figure 7.2.At what point is short run output maximised?

Higher isocost lines correspond to higher

Bill owns 'Bill's Home of Blues' a store that specialises 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

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 7: Technology Production and Costs

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

The statement that correctly describes the distinction between technology and technological change is

Figure 7.5 -Refer to Figure 7.5.The vertical difference between curves F and G measures

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker, the average product of labour declines.Which of the following statements must be true?

Table 7.7 Table 7.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 7.7.The marginal cost per unit of production when the firm produces 100 lanterns is

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 labour and the average product of labour.

If we have information about workers' marginal products, then total and average product can be found by

As output increases,

Describe the difference between technology and positive technological change. __________________________________________________________________________________________________________________________________________________________________________________________

Average variable cost can be calculated using any of the formulas below except

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations.Which of the following best explains this trend?

Which of the following is a characteristic of the long run?

In the short run, why does a production function eventually display diminishing returns to labour?

Figure 7.14 -Refer to Figure 7.14.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labour for capital when labour is increased from 10 to 20 hours?

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

What is marginal cost?

Figure 7.2 -Refer to Figure 7.2.At what point is short run output maximised?

Higher isocost lines correspond to higher

Bill owns 'Bill's Home of Blues' a store that specialises 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

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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