Question 1

Increases in the marginal product of labour result from

Accepted Answer

A) the use of new technology. 
B) hiring more efficient workers. 
C) the division of labour and specialisation. 
D) increasing the usage of all inputs. 
A) the use of new technology. 
B) hiring more efficient workers. 
C) the division of labour and specialisation. 
D) increasing the usage of all inputs.

Question 2

In the long run

Accepted Answer

A) the firm's fixed costs are greater than its fixed costs in the short run. 
B) all of the firm's costs are explicit costs; there are no implicit costs of production. 
C) the firm is more profitable than it is in the short run. 
D) all of the firm's costs are variable costs. 
A) the firm's fixed costs are greater than its fixed costs in the short run. 
B) all of the firm's costs are explicit costs; there are no implicit costs of production. 
C) the firm is more profitable than it is in the short run. 
D) all of the firm's costs are variable costs.

Question 3

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

Consider a variable input such as labour

Question 4

Jill Johnson owns a pizzeria.She currently produces 10 000 pizzas per month at a total cost of $500.If she produced one more pizza her total cost rises to $500.11.What does this tell us about Jill's marginal cost of producing pizzas?

Accepted Answer

A) The marginal cost of producing pizzas is constant. 
B) The marginal cost of producing pizzas is falling. 
C) The marginal cost of producing pizzas cannot be determined without more information. 
D) The marginal cost of producing pizzas is rising. 
A) The marginal cost of producing pizzas is constant. 
B) The marginal cost of producing pizzas is falling. 
C) The marginal cost of producing pizzas cannot be determined without more information. 
D) The marginal cost of producing pizzas is rising.

Question 5

What is minimum efficient scale? What is likely to happen in the long run to firms that do not reach minimum efficient scale?
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Accepted Answer

Minimum efficient scale is the lowest le

Question 6

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?
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Accepted Answer

As the level of output increases, the va

Question 7

What does the production function show?

Accepted Answer

A) The total cost of producing a given quantity of output. 
B) The maximum output that can be produced from each possible quantity of inputs. 
C) The technology used to produce output. 
D) The incremental output gained by improving the production process. 
A) The total cost of producing a given quantity of output. 
B) The maximum output that can be produced from each possible quantity of inputs. 
C) The technology used to produce output. 
D) The incremental output gained by improving the production process.

Question 8

Figure 7.11   Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 7.11.If the firm chooses to produce and sell 25 000 frames per month by operating in the short run with a scale operation represented by ATCc

Accepted Answer

A) the firm will not be operating efficiently. 
B) the firm will be operating efficiently. 
C) the firm would lower its average costs by reducing its scale of operation. 
D) the firm will not be able to earn a profit. 
A) the firm will not be operating efficiently. 
B) the firm will be operating efficiently. 
C) the firm would lower its average costs by reducing its scale of operation. 
D) the firm will not be able to earn a profit.

Question 9

Figure 7.11   Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 7.11.Constant returns to scale

Accepted Answer

A) occur for output rates greater than 5000 picture frames. 
B) occur between 5000 and 20 000 picture frames per month. 
C) occur between 10 000 and 20 000 pictures frames per month. 
D) will shift the long-run average cost curve downward. 
A) occur for output rates greater than 5000 picture frames. 
B) occur between 5000 and 20 000 picture frames per month. 
C) occur between 10 000 and 20 000 pictures frames per month. 
D) will shift the long-run average cost curve downward.

Question 10

The change in a firm's total cost from producing one more unit of a good or service is

Accepted Answer

A) the result of economies of scale. 
B) the definition of marginal product. 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants. 
A) the result of economies of scale. 
B) the definition of marginal product. 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants.

Question 11

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, what is the marginal product of the 7th carpenter?

Accepted Answer

A) Negative. 
B) Less than 8 chairs. 
C) More than 8 chairs. 
D) Zero. 
A) Negative. 
B) Less than 8 chairs. 
C) More than 8 chairs. 
D) Zero.

Question 12

Which of the following statements is false?

Accepted Answer

A) An explicit cost is a nonmonetary opportunity cost. 
B) In the short run, total cost = fixed cost + variable cost. 
C) Variable costs are costs that change as output changes. 
D) In the long run there are no fixed costs. 
A) An explicit cost is a nonmonetary opportunity cost. 
B) In the short run, total cost = fixed cost + variable cost. 
C) Variable costs are costs that change as output changes. 
D) In the long run there are no fixed costs.

Question 13

Minimum efficient scale is defined as the level of output at which

Accepted Answer

A) all economies of scale are exhausted. 
B) diminishing returns affect average total cost. 
C) the firm's long-run average total cost starts falling. 
D) the maximum output is produced. 
A) all economies of scale are exhausted. 
B) diminishing returns affect average total cost. 
C) the firm's long-run average total cost starts falling. 
D) the maximum output is produced.

Question 14

If average total cost is falling, marginal cost must also be falling.

Accepted Answer

A) True 
 B)False

Question 15

Figure 7.11   Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 7.11.In the short run, if the firm sells fewer than 5000 picture frames per month,

Accepted Answer

A) it should produce with the scale of operation associated with ATCa. 
B) it should produce with the scale of operation associated with ATCb. 
C) it should produce with the scale of operation associated with ATCc. 
D) it will experience constant returns to scale. 
A) it should produce with the scale of operation associated with ATCa. 
B) it should produce with the scale of operation associated with ATCb. 
C) it should produce with the scale of operation associated with ATCc. 
D) it will experience constant returns to scale.

Question 16

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

Accepted Answer

A) its labour is more productive in a smaller plant. 
B) its diseconomies of scale are less. 
C) the firm should reduce its plant size even more. 
D) the firm is now profitable. 
A) its labour is more productive in a smaller plant. 
B) its diseconomies of scale are less. 
C) the firm should reduce its plant size even more. 
D) the firm is now profitable.

Question 17

Figure 7.11   Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 7.11.At what rate of output is the minimum efficient scale of output reached?

Accepted Answer

A) 10000 workers 
B) 5000 picture frames 
C) 20000 picture frames 
D) 10000 picture frames 
A) 10000 workers 
B) 5000 picture frames 
C) 20000 picture frames 
D) 10000 picture frames

Question 18

Table 7.6  
-Refer to Table 7.6.Alicia Gregory owns a foot massage business.She leases 4 computer-controlled massage booths, for which she pays $125 per day.She cannot increase the number machines she leases without giving the manufacturer 3 months notice.She can hire as many workers as she wants at a cost of $75 per day per worker.These are the only two inputs she uses in her business.Use this information to fill in the columns in the above table.

Accepted Answer

The answer of Table 7.6  
-Refer to Table 7.6.Alicia...

Question 19

In the short run, marginal product of labour increases at first and then falls because

Accepted Answer

A) as more labour is hired, they are not as skilled as the first ones hired. 
B) there are fewer opportunities for division of labour and specialisation when fewer workers are hired. 
C) managerial inefficiency sets in when a firm gets too large. 
D) the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive. 
A) as more labour is hired, they are not as skilled as the first ones hired. 
B) there are fewer opportunities for division of labour and specialisation when fewer workers are hired. 
C) managerial inefficiency sets in when a firm gets too large. 
D) the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive.

Question 20

Figure 7.13  
-Refer to Figure 7.13.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

Accepted Answer

A) the price of capital increases while the price of labour remains unchanged. 
B) the price of labour decreases while the price of capital remains unchanged. 
C) the price of capital increases while the price of labour decreases. 
D) the price of capital decreases while the price of labour increases. 
A) the price of capital increases while the price of labour remains unchanged. 
B) the price of labour decreases while the price of capital remains unchanged. 
C) the price of capital increases while the price of labour decreases. 
D) the price of capital decreases while the price of labour increases.

Increases in the marginal product of labour result from

In the long run

Jill Johnson owns a pizzeria.She currently produces 10 000 pizzas per month at a total cost of $500.If she produced one more pizza her total cost rises to $500.11.What does this tell us about Jill's marginal cost of producing pizzas?

What does the production function show?

Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATC_a, ATC_b and ATC_c. -Refer to Figure 7.11.Constant returns to scale

The change in a firm's total cost from producing one more unit of a good or service is

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6^th carpenter is 8 chairs, what is the marginal product of the 7^th carpenter?

Which of the following statements is false?

Minimum efficient scale is defined as the level of output at which

If average total cost is falling, marginal cost must also be falling.

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

In the short run, marginal product of labour increases at first and then falls because

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

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

Increases in the marginal product of labour result from

In the long run

Jill Johnson owns a pizzeria.She currently produces 10 000 pizzas per month at a total cost of $500.If she produced one more pizza her total cost rises to $500.11.What does this tell us about Jill's marginal cost of producing pizzas?

What does the production function show?

Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 7.11.Constant returns to scale

The change in a firm's total cost from producing one more unit of a good or service is

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, what is the marginal product of the 7th carpenter?

Which of the following statements is false?

Minimum efficient scale is defined as the level of output at which

If average total cost is falling, marginal cost must also be falling.

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 7.11.At what rate of output is the minimum efficient scale of output reached?

In the short run, marginal product of labour increases at first and then falls because

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

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 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATC_a, ATC_b and ATC_c. -Refer to Figure 7.11.Constant returns to scale

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6^th carpenter is 8 chairs, what is the marginal product of the 7^th carpenter?