Question 1

A key assumption about the way firms behave is that they

Accepted Answer

A) minimize costs. 
B) maximize profit. 
C) maximize market share. 
D) maximize revenue. 
A) minimize costs. 
B) maximize profit. 
C) maximize market share. 
D) maximize revenue.

Question 2

In the derivation of TVC, you

Accepted Answer

A) The minimum-slope ray out of the origin to the TC. 
B) Move the TC to the right a fixed distance. 
C) subtract the amount of the vertical intercept of the TC down from the TC at each quantity. 
D) The vertical intercept of the TC and draw a horizontal line. 
A) The minimum-slope ray out of the origin to the TC. 
B) Move the TC to the right a fixed distance. 
C) subtract the amount of the vertical intercept of the TC down from the TC at each quantity. 
D) The vertical intercept of the TC and draw a horizontal line.

Question 3

When you derive the average product of labor curve you use

Accepted Answer

A) The slope of the ray out of the origin to the production function. 
B) The slope of the production function. 
C) The vertical distance from the production function to the horizontal axis. 
D) The horizontal distance from the production function to the vertical axis. 
A) The slope of the ray out of the origin to the production function. 
B) The slope of the production function. 
C) The vertical distance from the production function to the horizontal axis. 
D) The horizontal distance from the production function to the vertical axis.

Question 4

Given the production function and total cost function shown in Chapter 4, as production increases, average total costs

Accepted Answer

A) decrease constantly. 
B) decrease for a while and then increase. 
C) increase constantly. 
D) increase for a while and then decrease. 
A) decrease constantly. 
B) decrease for a while and then increase. 
C) increase constantly. 
D) increase for a while and then decrease.

Question 5

If a firm can increase output by hiring more workers then

Accepted Answer

A) it will always do so. 
B) it will never do so. 
C) it will do so only if the cost of hiring the workers (and purchasing the materials)is less than the increase in revenues associated with the increase in sales. 
D) it will do so only if the cost of hiring the workers (and purchasing the materials)is more than the increase in revenues associated with the increase in sales. 
A) it will always do so. 
B) it will never do so. 
C) it will do so only if the cost of hiring the workers (and purchasing the materials)is less than the increase in revenues associated with the increase in sales. 
D) it will do so only if the cost of hiring the workers (and purchasing the materials)is more than the increase in revenues associated with the increase in sales.

Question 6

The source of the benefits of the division of labor is

Accepted Answer

A) The efficiency that results from workers specializing in one aspect of production. 
B) The fact that anytime you increase labor you get more output. 
C) The inefficiency that results from the fact that capital is fixed. 
D) The when each worker is equally capable, each worker adds to production exactly the same as the previous one. 
A) The efficiency that results from workers specializing in one aspect of production. 
B) The fact that anytime you increase labor you get more output. 
C) The inefficiency that results from the fact that capital is fixed. 
D) The when each worker is equally capable, each worker adds to production exactly the same as the previous one.

Question 7

The quantity where MC=MR is also the quantity where

Accepted Answer

A) TC is minimized. 
B) TR is maximized. 
C) TC and TR have the same slope. 
D) TC=TR. 
A) TC is minimized. 
B) TR is maximized. 
C) TC and TR have the same slope. 
D) TC=TR.

Question 8

-Refer to Table 4.1, Box B should be filled with

Accepted Answer

A) $0. 
B) $1 
C) $100. 
D) $200. 
A) $0. 
B) $1 
C) $100. 
D) $200.

Question 9

-Refer to Table 4.2, Box E should be filled with ء

Accepted Answer

A) $0. 
B) $3. 
C) $20. 
D) $30. 
A) $0. 
B) $3. 
C) $20. 
D) $30.

Question 10

The Marginal Cost curve usually

Accepted Answer

A) is J-shaped. 
B) cuts through the minimum of the average variable cost curve. 
C) cuts through the minimum of the average total cost curve. 
D) all of the options are correct. 
A) is J-shaped. 
B) cuts through the minimum of the average variable cost curve. 
C) cuts through the minimum of the average total cost curve. 
D) all of the options are correct.

Question 11

If the firm has many competitors, the marginal revenue curve is

Accepted Answer

A) flat (horizontal). 
B) vertical. 
C) upward sloping. 
D) downward sloping. 
A) flat (horizontal). 
B) vertical. 
C) upward sloping. 
D) downward sloping.

Question 12

A graph that maps output against the input required to make that output is called a/an

Accepted Answer

A) average cost function. 
B) a production function. 
C) a cost function. 
D) a marginal cost function. 
A) average cost function. 
B) a production function. 
C) a cost function. 
D) a marginal cost function.

Question 13

-Refer to Table 4.1, Box D should be filled with

Accepted Answer

A) $0. 
B) $1. 
C) $100. 
D) $200. 
A) $0. 
B) $1. 
C) $100. 
D) $200.

Question 14

-Refer to Table 4.2, Box P should be filled with

Accepted Answer

A) $0. 
B) $67. 
C) $9.00. 
D) $17. 
A) $0. 
B) $67. 
C) $9.00. 
D) $17.

Question 15

At any particular quantity on the TC, its slope will be

Accepted Answer

A) The same as the slope of the TVC 
B) Greater than the slope at the quantity on the TVC 
C) Smaller than the slope at the quantity on the TVC 
D) Greater than the slope of the ray out of the origin to that point on the TC 
A) The same as the slope of the TVC 
B) Greater than the slope at the quantity on the TVC 
C) Smaller than the slope at the quantity on the TVC 
D) Greater than the slope of the ray out of the origin to that point on the TC

Question 16

If a price taker attempts to raise its price by a small amount, the quantity that its customers will buy will

Accepted Answer

A) increase. 
B) decrease by a small amount. 
C) decrease to zero. 
D) remain constant. 
A) increase. 
B) decrease by a small amount. 
C) decrease to zero. 
D) remain constant.

Question 17

If price is greater than average variable cost, a profit maximizing firm will always

Accepted Answer

A) produce where Marginal Cost is minimized. 
B) produce where Average Total Cost is minimized. 
C) where Total Revenue is maximized. 
D) produce where Marginal Cost equals Marginal Revenue. 
A) produce where Marginal Cost is minimized. 
B) produce where Average Total Cost is minimized. 
C) where Total Revenue is maximized. 
D) produce where Marginal Cost equals Marginal Revenue.

Question 18

-In Figure 4.2, the reason that the increase in output from point A to B is much less than the increase in output from point B to C is that

Accepted Answer

A) it always costs more money to increase output. 
B) small levels of production are often inefficient and that significant increases in production can occur thereafter at only a small additional cost. 
C) it is very difficult and very expensive to increase output once the capacity of the machinery has been reached. 
D) there is waste. 
A) it always costs more money to increase output. 
B) small levels of production are often inefficient and that significant increases in production can occur thereafter at only a small additional cost. 
C) it is very difficult and very expensive to increase output once the capacity of the machinery has been reached. 
D) there is waste.

Question 19

Suppose a firm has $1,000,000 in fixed costs and variable costs equal to $100 for every unit they produce,

Accepted Answer

A) their marginal costs are decreasing. 
B) their average costs are decreasing. 
C) their fixed costs are decreasing. 
D) the marginal costs are increasing. 
A) their marginal costs are decreasing. 
B) their average costs are decreasing. 
C) their fixed costs are decreasing. 
D) the marginal costs are increasing.

Question 20

If an input must be increased for output to increase it is called a

Accepted Answer

A) fixed input. 
B) changeable input. 
C) variable input. 
D) unchangeable input. 
A) fixed input. 
B) changeable input. 
C) variable input. 
D) unchangeable input.

Exam 4: Firm Production, Cost, and Revenue

A key assumption about the way firms behave is that they

In the derivation of TVC, you

When you derive the average product of labor curve you use

Given the production function and total cost function shown in Chapter 4, as production increases, average total costs

If a firm can increase output by hiring more workers then

The source of the benefits of the division of labor is

The quantity where MC=MR is also the quantity where

-Refer to Table 4.1, Box B should be filled with

-Refer to Table 4.2, Box E should be filled with ء

The Marginal Cost curve usually

If the firm has many competitors, the marginal revenue curve is

A graph that maps output against the input required to make that output is called a/an

-Refer to Table 4.1, Box D should be filled with

-Refer to Table 4.2, Box P should be filled with

At any particular quantity on the TC, its slope will be

If a price taker attempts to raise its price by a small amount, the quantity that its customers will buy will

If price is greater than average variable cost, a profit maximizing firm will always

-In Figure 4.2, the reason that the increase in output from point A to B is much less than the increase in output from point B to C is that

Suppose a firm has $1,000,000 in fixed costs and variable costs equal to $100 for every unit they produce,

If an input must be increased for output to increase it is called a

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