Question 1

An important reason why diseconomies of scale arise is because firms may have to hire lower-skilled workers as firms expand.

Accepted Answer

A) True 
 B)False

Question 2

The marginal product of labour is calculated using the formula

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 3

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

Question 4

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

Question 5

-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 6

In the short run, if marginal product is at its maximum, then

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 7

Diminishing marginal product of labour occurs when adding another unit of labour

Accepted Answer

A)  decreases output. 
B)  changes output by an amount smaller than the output added by the previous unit of labour. 
C)  increases output by an amount larger than the output added by the previous unit of labour. 
D)  decreases output by an amount smaller than the output added by the previous unit of labour. 
A)  decreases output. 
B)  changes output by an amount smaller than the output added by the previous unit of labour. 
C)  increases output by an amount larger than the output added by the previous unit of labour. 
D)  decreases output by an amount smaller than the output added by the previous unit of labour.

Question 8

Which of the following is true at the output level where average total cost is at its minimum?

Accepted Answer

A)  Marginal cost equals average total cost. 
B)  Average variable cost equals fixed cost. 
C)  Marginal cost equals average variable cost. 
D)  Average total cost equals average fixed cost. 
A)  Marginal cost equals average total cost. 
B)  Average variable cost equals fixed cost. 
C)  Marginal cost equals average variable cost. 
D)  Average total cost equals average fixed cost.

Question 9

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

Accepted Answer

A)  TFC/Q. 
B)  (TC - V
C) /Q. 
C)  Δ(TC - V
C) /ΔQ. 
D)  (TC/Q) - AVC. 
A)  TFC/Q. 
B)  (TC - V
C) /Q. 
C)  Δ(TC - V
C) /ΔQ. 
D)  (TC/Q) - AVC.

Question 10

-Refer to Table 7-5. Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette's mail order business. Suzette rents space for her factory for $400 a week in a nearby strip mall. She can hire temporary workers for $200 a week. Table 7-5 above shows her output and cost data. Use the table to answer questions a-e.
a. Complete the table.
b. In the last week of summer Suzette closes her business to go on a family vacation. What are her costs during that week?
c. In one week Suzette exactly breaks even. If her revenue for the week is $1200, how many boxes of fruit and nuts did she produce?
d. Judging from the marginal product of labour data, would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer.
e. Suzette has received an order for 1500 boxes of nuts per week for the next 3 months. If she expects the trend in the marginal product of labour will continue in the same direction, what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.

Accepted Answer

a.
 @#IMG-DLM& b. $400
c. 840 boxes
d. Diminishing

Question 11

-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 =

Question 12

-Refer to Table 7-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?

Accepted Answer

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

Question 13

When a firm produces 50 000 units of output, its total cost equals $6.5 million. When it increases its production to 70 000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

Accepted Answer

A)  $41.43. 
B)  $134.29. 
C)  $135. 
D)  $145. 
A)  $41.43. 
B)  $134.29. 
C)  $135. 
D)  $145.

Question 14

Marginal cost is calculated for a particular increase in output by

Accepted Answer

A)  multiplying the total cost by the change in output. 
B)  multiplying the change in total cost by the change in output. 
C)  dividing the total cost by the change in output. 
D)  dividing the change in total cost by the change in output. 
A)  multiplying the total cost by the change in output. 
B)  multiplying the change in total cost by the change in output. 
C)  dividing the total cost by the change in output. 
D)  dividing the change in total cost by the change in output.

Question 15

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

Accepted Answer

Technological change could be negative,

Question 16

The absolute value of the slope of an isocost line equals the ratio of

Accepted Answer

A)  the marginal productivities of the two inputs. 
B)  the prices of the two inputs. 
C)  the marginal utilities of the two inputs. 
D)  the quantities of the two inputs. 
A)  the marginal productivities of the two inputs. 
B)  the prices of the two inputs. 
C)  the marginal utilities of the two inputs. 
D)  the quantities of the two inputs.

Question 17

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 18

-Refer to Figure 7-1. In a diagram that shows the marginal product of labour on the vertical axis and labour on the horizontal axis, the marginal product curve

Accepted Answer

A)  never intersects the horizontal axis. 
B)  intersects the horizontal axis at a point corresponding to the 5th worker. 
C)  intersects the horizontal axis at a point corresponding to the 6th worker. 
D)  intersects the horizontal axis at a point corresponding to the 8th worker. 
A)  never intersects the horizontal axis. 
B)  intersects the horizontal axis at a point corresponding to the 5th worker. 
C)  intersects the horizontal axis at a point corresponding to the 6th worker. 
D)  intersects the horizontal axis at a point corresponding to the 8th worker.

Question 19

Which of the following can a firm do in the long run but not in the short run?

Accepted Answer

A)  decrease the size of its physical plant 
B)  reduce its rate of output by laying off workers 
C)  increase its variable costs 
D)  increase its use of raw materials 
A)  decrease the size of its physical plant 
B)  reduce its rate of output by laying off workers 
C)  increase its variable costs 
D)  increase its use of raw materials

Question 20

-Refer to Figure 7-12. Which of the following statements about the input combinations shown in the diagram is false?

Accepted Answer

A)  The firm produces a higher output level when it uses input combination b compared to input combination a. 
B)  The firm produces a lower output level when it uses input combination d compared to input combination a. 
C)  The firm produces the same output level when it uses input combination a or c. 
D)  The firm incurs the same total cost when it uses input combination a or c to produce a given quantity of output. 
A)  The firm produces a higher output level when it uses input combination b compared to input combination a. 
B)  The firm produces a lower output level when it uses input combination d compared to input combination a. 
C)  The firm produces the same output level when it uses input combination a or c. 
D)  The firm incurs the same total cost when it uses input combination a or c to produce a given quantity of output.

An important reason why diseconomies of scale arise is because firms may have to hire lower-skilled workers as firms expand.

The marginal product of labour is calculated using the formula

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.

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

-Refer to Figure 7-11. In the short run, if the firm sells fewer than 5000 picture frames per month,

In the short run, if marginal product is at its maximum, then

Diminishing marginal product of labour occurs when adding another unit of labour

Which of the following is true at the output level where average total cost is at its minimum?

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

-Refer to Table 7-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?

When a firm produces 50 000 units of output, its total cost equals $6.5 million. When it increases its production to 70 000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

Marginal cost is calculated for a particular increase in output by

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

The absolute value of the slope of an isocost line equals the ratio of

-Refer to Figure 7-1. In a diagram that shows the marginal product of labour on the vertical axis and labour on the horizontal axis, the marginal product curve

Which of the following can a firm do in the long run but not in the short run?

-Refer to Figure 7-12. Which of the following statements about the input combinations shown in the diagram is false?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

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

An important reason why diseconomies of scale arise is because firms may have to hire lower-skilled workers as firms expand.

The marginal product of labour is calculated using the formula

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.

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

-Refer to Figure 7-11. In the short run, if the firm sells fewer than 5000 picture frames per month,

In the short run, if marginal product is at its maximum, then

Diminishing marginal product of labour occurs when adding another unit of labour

Which of the following is true at the output level where average total cost is at its minimum?

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

-Refer to Table 7-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?

When a firm produces 50 000 units of output, its total cost equals $6.5 million. When it increases its production to 70 000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

Marginal cost is calculated for a particular increase in output by

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

The absolute value of the slope of an isocost line equals the ratio of

-Refer to Figure 7-1. In a diagram that shows the marginal product of labour on the vertical axis and labour on the horizontal axis, the marginal product curve

Which of the following can a firm do in the long run but not in the short run?

-Refer to Figure 7-12. Which of the following statements about the input combinations shown in the diagram is false?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters