Question 1

When do economies of scale occur?

Accepted Answer

A) When a firm's long-run average total costs fall as it increases the quantity of output it produces. 
B) When the marginal product of labour is greater than the average product of labour. 
C) When short-run marginal cost falls. 
D) When the demand for a firm's output increases. 
A) When a firm's long-run average total costs fall as it increases the quantity of output it produces. 
B) When the marginal product of labour is greater than the average product of labour. 
C) When short-run marginal cost falls. 
D) When the demand for a firm's output increases.

Question 2

Is it possible for technological change to be negative? If so, give an example.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Technological change could be negative,

Question 3

What is true, in the short run, if marginal product is at its maximum?

Accepted Answer

A) Average cost is at its minimum. 
B) Average variable cost is at its minimum. 
C) Marginal cost is at its minimum. 
D) Total cost is at its maximum. 
A) Average cost is at its minimum. 
B) Average variable cost is at its minimum. 
C) Marginal cost is at its minimum. 
D) Total cost is at its maximum.

Question 4

Table 7.7   Table 7.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 7.7.The average total variable cost per unit of production when the firm produces 90 lanterns is

Accepted Answer

A) $490 
B) $33.67 
C) $7.67 
D) $5.44 
A) $490 
B) $33.67 
C) $7.67 
D) $5.44

Question 5

As output increases, average fixed cost gets smaller and smaller.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a chain of convenience stores reorganised its system of supplying its stores with food.This led to a sharp reduction in the number of trucks that the company had to use and increased the amount of fresh food on store shelves.Which of the following statements best describes the chain stores' actions?

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 (increase its sales)using fewer inputs (less trucks).Therefore, the chain of convenience stores 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 (increase its sales)using fewer inputs (less trucks).Therefore, the chain of convenience stores 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 7

In the long run, which of the following is true?

Accepted Answer

A) Total cost = fixed cost + variable cost. 
B) The size of a firm's physical plant can be changed, but the firm cannot adopt new technology. 
C) There are no fixed costs. 
D) The firm can vary its explicit costs but not its implicit costs. 
A) Total cost = fixed cost + variable cost. 
B) The size of a firm's physical plant can be changed, but the firm cannot adopt new technology. 
C) There are no fixed costs. 
D) The firm can vary its explicit costs but not its implicit costs.

Question 8

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, the marginal product of the 12th worker is

Accepted Answer

A) 0)16 
B) 3 
C) 4)67 
D) 36 
A) 0)16 
B) 3 
C) 4)67 
D) 36

Question 9

Table 7.9  
-Refer to Table 7.9.Clock It To Me manufactures clock radios.The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes.
a.You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes.Record your calculations in the table below.
Average Cost of Production   b.For each of the three output levels, which plant size will generate the lowest average total cost of production?
c.Suppose the firm currently sells 8000 clock radios per period (using the optimal plant size for this output level).Now, however, it has just secured a long-term contract to supply 20 000 clock radios per period.In the short run, what is the average total cost of producing 20 000 clock radios? Provide a numerical value based on your answer in part a.
d.What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.Average Cost of Production @#IMG-DLM& b.For an o

Question 10

In economics, what is the difference between the short run and the long run?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

In economics, the short run refers to th

Question 11

Which of the following is a reason why a firm would experience diseconomies of scale?

Accepted Answer

A) To finance an increase in the size of its plant, a firm must borrow more money or sell more shares of stock. 
B) As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. 
C) As the size of the firm increases, it becomes more difficult to coordinate the operations of its manufacturing plants. 
D) As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs. 
A) To finance an increase in the size of its plant, a firm must borrow more money or sell more shares of stock. 
B) As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. 
C) As the size of the firm increases, it becomes more difficult to coordinate the operations of its manufacturing plants. 
D) As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs.

Question 12

Figure 7.8  
-Refer to Figure 7.8 above to answer the following questions.
a.Identify the curves in the diagram.
A ________
B ________
C ________
b.What is the numerical value of fixed cost when the quantity of output = 10?
c.What is the numerical value of variable cost when the quantity of output = 10?
d.What is the numerical value of total cost when the quantity of output = 10?
e.What is the numerical value of average fixed cost when the quantity of output = 10?
f.What is the numerical value of average total cost when the quantity of output = 10?
g.On the graph identify the area that represents the total variable cost of production when the quantity of output = 10.
h.On the graph identify the area that represents the fixed cost of production when the quantity of output = 10.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.A=Marginal cost curve; B = A

Question 13

Which of the following does not determine a firm's cost of production?

Accepted Answer

A) The technology used to produce its output. 
B) The productivity of its workers. 
C) The cost of raw material used in production. 
D) The amount of corporate taxes it must pay on its profit. 
A) The technology used to produce its output. 
B) The productivity of its workers. 
C) The cost of raw material used in production. 
D) The amount of corporate taxes it must pay on its profit.

Question 14

Figure 7.13  
-Refer to Figure 7.13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the price of labour 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 15

If the total cost of producing 20 units of output is $1000 and the average variable cost is $35, the firm's average fixed cost at that level of output is

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 16

Red Stone Creamery currently hires 5 workers.When it added a 6th worker, its output actually fell.Which of the following statements is true?

Accepted Answer

A) The marginal product of the sixth worker must be negative. 
B) The average product of the sixth worker is negative. 
C) The sixth worker is not as skilled as the fifth worker. 
D) The total product becomes negative. 
A) The marginal product of the sixth worker must be negative. 
B) The average product of the sixth worker is negative. 
C) The sixth worker is not as skilled as the fifth worker. 
D) The total product becomes negative.

Question 17

Figure 7.15  
-Refer to Figure 7.15.The figure above illustrates a series of isoquants.Which of the following statements is true?

Accepted Answer

A) Points x, z, and y all represent the same output. 
B) Points z and y represent the same output; this output is produced with more capital at z than at y. 
C) Point x and y represent the same output, but the cost of production at y is greater than the cost of production at x. 
D) Point z represents a greater output than point x or point y. 
A) Points x, z, and y all represent the same output. 
B) Points z and y represent the same output; this output is produced with more capital at z than at y. 
C) Point x and y represent the same output, but the cost of production at y is greater than the cost of production at x. 
D) Point z represents a greater output than point x or point y.

Question 18

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 19

The correct formula for the marginal product of labour is

Accepted Answer

A) L/Q. 
B) ΔL/ΔQ. 
C) ΔQ/ΔL. 
D) Q/L. 
A) L/Q. 
B) ΔL/ΔQ. 
C) ΔQ/ΔL. 
D) Q/L.

Question 20

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

Accepted Answer

A) True 
 B)False

When do economies of scale occur?

Is it possible for technological change to be negative? If so, give an example. __________________________________________________________________________________________________________________________________________________________________________________________

What is true, in the short run, if marginal product is at its maximum?

Table 7.7 Table 7.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 7.7.The average total variable cost per unit of production when the firm produces 90 lanterns is

As output increases, average fixed cost gets smaller and smaller.

In the long run, which of the following is true?

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, the marginal product of the 12^th worker is

In economics, what is the difference between the short run and the long run? __________________________________________________________________________________________________________________________________________________________________________________________

Which of the following is a reason why a firm would experience diseconomies of scale?

Which of the following does not determine a firm's cost of production?

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the price of labour while the price of capital remains unchanged?

If the total cost of producing 20 units of output is $1000 and the average variable cost is $35, the firm's average fixed cost at that level of output is

Red Stone Creamery currently hires 5 workers.When it added a 6th worker, its output actually fell.Which of the following statements is true?

Figure 7.15 -Refer to Figure 7.15.The figure above illustrates a series of isoquants.Which of the following statements is true?

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

The correct formula for the marginal product of labour is

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

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

Filters

Exam 7: Technology Production and Costs

When do economies of scale occur?

Is it possible for technological change to be negative? If so, give an example. __________________________________________________________________________________________________________________________________________________________________________________________

What is true, in the short run, if marginal product is at its maximum?

Table 7.7 Table 7.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 7.7.The average total variable cost per unit of production when the firm produces 90 lanterns is

As output increases, average fixed cost gets smaller and smaller.

In the long run, which of the following is true?

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, the marginal product of the 12th worker is

In economics, what is the difference between the short run and the long run? __________________________________________________________________________________________________________________________________________________________________________________________

Which of the following is a reason why a firm would experience diseconomies of scale?

Which of the following does not determine a firm's cost of production?

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the price of labour while the price of capital remains unchanged?

If the total cost of producing 20 units of output is $1000 and the average variable cost is $35, the firm's average fixed cost at that level of output is

Red Stone Creamery currently hires 5 workers.When it added a 6th worker, its output actually fell.Which of the following statements is true?

Figure 7.15 -Refer to Figure 7.15.The figure above illustrates a series of isoquants.Which of the following statements is true?

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

The correct formula for the marginal product of labour is

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

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

Filters

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, the marginal product of the 12^th worker is