Question 1

-Refer to Figure 7-4. What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Accepted Answer

A)  It remains constant. 
B)  It rises. 
C)  It falls. 
D)  It could rise or fall depending on what happens to total cost. 
A)  It remains constant. 
B)  It rises. 
C)  It falls. 
D)  It could rise or fall depending on what happens to total cost.

Question 2

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

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 3

Maria's Yiros House sells yiros. The cost of ingredients (pita, meat, spices, etc.) to make a yiros is $2.00. Maria pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Maria's total cost per day when she does not produce any yiros and does not hire any workers?

Accepted Answer

A)  $0 
B)  $2 
C)  $60 
D)  $120 
A)  $0 
B)  $2 
C)  $60 
D)  $120

Question 4

-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 5

-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 a

Question 6

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labour if the

Accepted Answer

A)  price of capital increases. 
B)  price of labour decreases. 
C)  price of labour increases. 
D)  marginal product of labour increases. 
A)  price of capital increases. 
B)  price of labour decreases. 
C)  price of labour increases. 
D)  marginal product of labour increases.

Question 7

The long-run average cost curve shows

Accepted Answer

A)  the lowest average cost of producing every level of output in the long run. 
B)  where the most profitable level of output occurs. 
C)  the average cost of producing where diminishing returns are not present. 
D)  the plant size or scale that the firm should build. 
A)  the lowest average cost of producing every level of output in the long run. 
B)  where the most profitable level of output occurs. 
C)  the average cost of producing where diminishing returns are not present. 
D)  the plant size or scale that the firm should build.

Question 8

The slope of an isoquant is equal to the ratio of the price of the input on the horizontal axis divided by the price of the input on the vertical axis, multiplied by -1.

Accepted Answer

A) True 
 B)False

Question 9

As output increases, the distance between average total cost and average variable cost increases.

Accepted Answer

A) True 
 B)False

Question 10

If the marginal product of labour is decreasing, then marginal cost of production must be rising.

Accepted Answer

A) True 
 B)False

Question 11

In the world oil market, oil is supplied up to the point where

Accepted Answer

A)  the marginal cost of the last barrel is just equal to the price buyers are willing to pay for that last barrel. 
B)  the marginal cost of the last barrel is zero. 
C)  the marginal cost of the last barrel is the greatest distance from the price buyers are willing to pay for that last barrel. 
D)  the marginal cost of the last barrel is at a maximum. 
A)  the marginal cost of the last barrel is just equal to the price buyers are willing to pay for that last barrel. 
B)  the marginal cost of the last barrel is zero. 
C)  the marginal cost of the last barrel is the greatest distance from the price buyers are willing to pay for that last barrel. 
D)  the marginal cost of the last barrel is at a maximum.

Question 12

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

Accepted Answer

A)  $1000. 
B)  $700. 
C)  $300. 
D)  impossible to determine without additional information. 
A)  $1000. 
B)  $700. 
C)  $300. 
D)  impossible to determine without additional information.

Question 13

-Refer to Figure 7-14. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labour for capital when labour is increased from 10 to 20 hours?

Accepted Answer

A)  1 unit of capital 
B)  10 units of capital 
C)  14 units of capital 
D)  24 units of capital 
A)  1 unit of capital 
B)  10 units of capital 
C)  14 units of capital 
D)  24 units of capital

Question 14

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Accepted Answer

A)  at the same level of output as the minimum point of the average variable cost. 
B)  at a higher level of output than the minimum point of the average variable cost. 
C)  at a lower level of output than the minimum point of the average variable cost. 
D)  at the same level of output as the maximum of the total product curve. 
A)  at the same level of output as the minimum point of the average variable cost. 
B)  at a higher level of output than the minimum point of the average variable cost. 
C)  at a lower level of output than the minimum point of the average variable cost. 
D)  at the same level of output as the maximum of the total product curve.

Question 15

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 16

The law of diminishing marginal returns states

Accepted Answer

A)  that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B)  that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C)  that in the presence of a fixed factor, at some point average product of labour starts to fall as more and more variable inputs are added. 
D)  that average total costs of production initially fall and after some point start to rise at a decreasing rate as output increases. 
A)  that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B)  that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C)  that in the presence of a fixed factor, at some point average product of labour starts to fall as more and more variable inputs are added. 
D)  that average total costs of production initially fall and after some point start to rise at a decreasing rate as output increases.

Question 17

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 18

A firm's cost of production is determined by all of the following except

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 19

Which of the following statements is true?

Accepted Answer

A)  As output increases, average fixed cost becomes smaller and smaller. 
B)  Average fixed cost does not change as output increases. 
C)  The marginal cost curve intersects the average fixed cost curve at its minimum point. 
D)  When marginal cost is greater than average fixed cost, average fixed cost increases. 
A)  As output increases, average fixed cost becomes smaller and smaller. 
B)  Average fixed cost does not change as output increases. 
C)  The marginal cost curve intersects the average fixed cost curve at its minimum point. 
D)  When marginal cost is greater than average fixed cost, average fixed cost increases.

Question 20

An isocost line shows

Accepted Answer

A)  all the possible combinations of two inputs that a firm can use to produce its output. 
B)  all the possible combinations of two inputs a firm can use that have the same total cost. 
C)  all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D)  all the possible combinations of two inputs with constant returns to scale. 
A)  all the possible combinations of two inputs that a firm can use to produce its output. 
B)  all the possible combinations of two inputs a firm can use that have the same total cost. 
C)  all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D)  all the possible combinations of two inputs with constant returns to scale.

-Refer to Figure 7-4. What happens to the average fixed cost of production when the firm increases output from 150 to 200?

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

Maria's Yiros House sells yiros. The cost of ingredients (pita, meat, spices, etc.) to make a yiros is $2.00. Maria pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Maria's total cost per day when she does not produce any yiros and does not hire any workers?

-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 ATC_c

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labour if the

The long-run average cost curve shows

The slope of an isoquant is equal to the ratio of the price of the input on the horizontal axis divided by the price of the input on the vertical axis, multiplied by -1.

As output increases, the distance between average total cost and average variable cost increases.

If the marginal product of labour is decreasing, then marginal cost of production must be rising.

In the world oil market, oil is supplied up to the point where

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

-Refer to Figure 7-14. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labour for capital when labour is increased from 10 to 20 hours?

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

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.

The law of diminishing marginal returns states

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?

A firm's cost of production is determined by all of the following except

Which of the following statements is true?

An isocost line shows

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

-Refer to Figure 7-4. What happens to the average fixed cost of production when the firm increases output from 150 to 200?

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

Maria's Yiros House sells yiros. The cost of ingredients (pita, meat, spices, etc.) to make a yiros is $2.00. Maria pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Maria's total cost per day when she does not produce any yiros and does not hire any workers?

-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

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labour if the

The long-run average cost curve shows

The slope of an isoquant is equal to the ratio of the price of the input on the horizontal axis divided by the price of the input on the vertical axis, multiplied by -1.

As output increases, the distance between average total cost and average variable cost increases.

If the marginal product of labour is decreasing, then marginal cost of production must be rising.

In the world oil market, oil is supplied up to the point where

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

-Refer to Figure 7-14. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labour for capital when labour is increased from 10 to 20 hours?

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

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.

The law of diminishing marginal returns states

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?

A firm's cost of production is determined by all of the following except

Which of the following statements is true?

An isocost line shows

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

-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 ATC_c