Question 1

Suppose the price of capital and labour remain constant.As a firm's expenditures for capital and labour increase, its isocost line

Accepted Answer

A) shifts out parallel to the original isocost line. 
B) shifts in parallel to the original isocost line. 
C) rotates outward on the Y-intercept. 
D) rotates outward on the X-intercept. 
A) shifts out parallel to the original isocost line. 
B) shifts in parallel to the original isocost line. 
C) rotates outward on the Y-intercept. 
D) rotates outward on the X-intercept.

Question 2

Which of the following is an example of positive technological change?

Accepted Answer

A) A firm offers workers a higher wage to work on weekends and at night.As a result, the firm is able to increase its weekly production of surfboards. 
B) A firm buys an additional machine that it uses to make surfboards.As a result, the firm is able to increase its weekly production of surfboards. 
C) A firm conducts a new advertising campaign.As a result, the demand for the firm's surf boards increases. 
D) A firm's workers participate in a training program designed to increase the number of surfboards they can produce per day. 
A) A firm offers workers a higher wage to work on weekends and at night.As a result, the firm is able to increase its weekly production of surfboards. 
B) A firm buys an additional machine that it uses to make surfboards.As a result, the firm is able to increase its weekly production of surfboards. 
C) A firm conducts a new advertising campaign.As a result, the demand for the firm's surf boards increases. 
D) A firm's workers participate in a training program designed to increase the number of surfboards they can produce per day.

Question 3

Figure 7.1  
-Refer to Figure 7.1.What is the marginal product of the 3rd worker?

Accepted Answer

A) 57. 
B) 19. 
C) 15. 
D) 11. 
A) 57. 
B) 19. 
C) 15. 
D) 11.

Question 4

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

Question 5

If production displays economies of scale, the long-run average cost curve is

Accepted Answer

A) above the short-run average total cost curve. 
B) downward sloping. 
C) upward sloping. 
D) below the long-run marginal cost curve. 
A) above the short-run average total cost curve. 
B) downward sloping. 
C) upward sloping. 
D) below the long-run marginal cost curve.

Question 6

Table 7.1   Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 7.1.Diminishing marginal returns sets in when the ________ worker is hired.

Accepted Answer

A) 2nd 
B) 3rd 
C) 4th 
D) None of the above; the production function displays increasing marginal returns. 
A) 2nd 
B) 3rd 
C) 4th 
D) None of the above; the production function displays increasing marginal returns.

Question 7

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 8

Figure 7.5  
-Refer to Figure 7.5.Identify the curves in the diagram.

Accepted Answer

A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve 
B) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve 
C) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve,   
D) E = marginal cost curve; F = average total cost curve; G = average variable cost curve;   
A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve 
B) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve 
C) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve,   
D) E = marginal cost curve; F = average total cost curve; G = average variable cost curve;

Question 9

Which statement is true about the law of diminishing marginal returns?

Accepted Answer

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

Question 10

Which of the following equations is incorrect?

Accepted Answer

A) ATC - AFC = AVC 
B) AVC + AFC = ATC 
C) AFC = ATC - AVC 
D) ATC = AVC - AFC 
A) ATC - AFC = AVC 
B) AVC + AFC = ATC 
C) AFC = ATC - AVC 
D) ATC = AVC - AFC

Question 11

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

Accepted Answer

A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) constant average fixed costs. 
A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) constant average fixed costs.

Question 12

Maria's Yiros House sells yiros.The cost of ingredients (pita, meat, spices, etc.)to make a yiros is $2.00.Maria's pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Maria's total cost per day when she produces 50 yiros using two workers?

Accepted Answer

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

Question 13

If production displays diseconomies of scale, the long-run average cost curve is

Accepted Answer

A) above the short-run average total cost curve. 
B) above the long-run marginal cost curve. 
C) upward sloping. 
D) downward sloping. 
A) above the short-run average total cost curve. 
B) above the long-run marginal cost curve. 
C) upward sloping. 
D) downward sloping.

Question 14

Use the following graph to answer the following questions.   a.If the wage rate and the rental price of machines are both $50 and total cost is $800, is the cost-minimising point A, B, or C?
b.If the wage rate is $40, the rental price of equipment is $120, and total cost is $1200, is the cost-minimising point A, B, or C?
c.If the wage rate is $60, the rental price of equipment is $90, and total cost is $1800, is the cost-minimising point A, B, or C?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a. If total cost is $800 and the wage ra

Question 15

Figure 7.10  
-Refer to Figure 7.10.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.The 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 16

A U-shaped long run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Accepted Answer

A) True 
 B)False

Question 17

Figure 7.12  
-Refer to Figure 7.12.The movement from isoquant T to isoquant U depicts

Accepted Answer

A) a change in preferences with regards to input usage. 
B) an increase in the cost of production. 
C) an increase in output. 
D) an increase in labour usage holding capital and output constant. 
A) a change in preferences with regards to input usage. 
B) an increase in the cost of production. 
C) an increase in output. 
D) an increase in labour usage holding capital and output constant.

Question 18

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

Accepted Answer

A) diminishing returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) the law of supply. 
A) diminishing returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) the law of supply.

Question 19

How is the marginal product of labour defined?

Accepted Answer

A) As the change in total revenue that results when an additional unit of a labour is hired. 
B) As the additional labour required to produce one more unit of output. 
C) As the additional labour cost of producing one more unit of output. 
D) As the change in output that a firm produces as a result of hiring one more worker. 
A) As the change in total revenue that results when an additional unit of a labour is hired. 
B) As the additional labour required to produce one more unit of output. 
C) As the additional labour cost of producing one more unit of output. 
D) As the change in output that a firm produces as a result of hiring one more worker.

Question 20

Consider a manufacturing operation that uses specialised machinery and labour to produce its output.In this case, the input that is not fixed in the short run is labour.

Accepted Answer

A) True 
 B)False

Suppose the price of capital and labour remain constant.As a firm's expenditures for capital and labour increase, its isocost line

Which of the following is an example of positive technological change?

Figure 7.1 -Refer to Figure 7.1.What is the marginal product of the 3^rd worker?

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

If production displays economies of scale, the long-run average cost curve is

Table 7.1 Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 7.1.Diminishing marginal returns sets in when the ________ worker is hired.

Average fixed cost is equal to

Figure 7.5 -Refer to Figure 7.5.Identify the curves in the diagram.

Which statement is true about the law of diminishing marginal returns?

Which of the following equations is incorrect?

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

Maria's Yiros House sells yiros.The cost of ingredients (pita, meat, spices, etc.)to make a yiros is $2.00.Maria's pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Maria's total cost per day when she produces 50 yiros using two workers?

If production displays diseconomies of scale, the long-run average cost curve is

Figure 7.10 -Refer to Figure 7.10.Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Q_c units.The average cost of production

A U-shaped long run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Figure 7.12 -Refer to Figure 7.12.The movement from isoquant T to isoquant U depicts

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

How is the marginal product of labour defined?

Consider a manufacturing operation that uses specialised machinery and labour to produce its output.In this case, the input that is not fixed in the short run is labour.

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

Suppose the price of capital and labour remain constant.As a firm's expenditures for capital and labour increase, its isocost line

Which of the following is an example of positive technological change?

Figure 7.1 -Refer to Figure 7.1.What is the marginal product of the 3rd worker?

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

If production displays economies of scale, the long-run average cost curve is

Table 7.1 Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 7.1.Diminishing marginal returns sets in when the ________ worker is hired.

Average fixed cost is equal to

Figure 7.5 -Refer to Figure 7.5.Identify the curves in the diagram.

Which statement is true about the law of diminishing marginal returns?

Which of the following equations is incorrect?

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

Maria's Yiros House sells yiros.The cost of ingredients (pita, meat, spices, etc.)to make a yiros is $2.00.Maria's pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Maria's total cost per day when she produces 50 yiros using two workers?

If production displays diseconomies of scale, the long-run average cost curve is

Figure 7.10 -Refer to Figure 7.10.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.The average cost of production

A U-shaped long run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Figure 7.12 -Refer to Figure 7.12.The movement from isoquant T to isoquant U depicts

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

How is the marginal product of labour defined?

Consider a manufacturing operation that uses specialised machinery and labour to produce its output.In this case, the input that is not fixed in the short run is labour.

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

Figure 7.1 -Refer to Figure 7.1.What is the marginal product of the 3^rd worker?

Figure 7.10 -Refer to Figure 7.10.Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Q_c units.The average cost of production