Question 1

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 2

-Refer to Figure 7-11. The minimum efficient scale of output is reached at what rate of output?

Accepted Answer

A)  10 000 workers 
B)  5000 picture frames 
C)  20 000 picture frames 
D)  10 000 picture frames 
A)  10 000 workers 
B)  5000 picture frames 
C)  20 000 picture frames 
D)  10 000 picture frames

Question 3

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 4

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 5

-Refer to Table 7-1. What is the average product of labour when the farm hires 5 workers?

Accepted Answer

A)  4 pounds 
B)  10.8 pounds 
C)  38.2 pounds 
D)  54 pounds 
A)  4 pounds 
B)  10.8 pounds 
C)  38.2 pounds 
D)  54 pounds

Question 6

Suppose you have just opened a store to sell espresso machines. Both you and a competing store buy this machine from a manufacturer for $130 each. Your competitor, who has a store of the same size as yours, is currently selling about 10 machines a month at a price of $200 per machine. You expect to sell about 6 machines a month at a price of $220 per machine. If you lower your price, you expect to incur a loss. Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

Accepted Answer

A)  The competing store probably has a lower marginal cost of production. 
B)  The competing store probably has a lower average variable cost of production. 
C)  The competing store's goal is to maximise revenue and not profit. 
D)  The competing store probably has a lower average cost because average fixed cost falls as output increases. 
A)  The competing store probably has a lower marginal cost of production. 
B)  The competing store probably has a lower average variable cost of production. 
C)  The competing store's goal is to maximise revenue and not profit. 
D)  The competing store probably has a lower average cost because average fixed cost falls as output increases.

Question 7

Which of the following explains why the marginal cost curve has a U shape?

Accepted Answer

A)  Initially, the marginal product of labour falls, then rises. 
B)  Initially, the average product of labour rises, then falls. 
C)  Initially, the marginal product of labour rises, then falls. 
D)  Initially, the average cost of production rises, then falls. 
A)  Initially, the marginal product of labour falls, then rises. 
B)  Initially, the average product of labour rises, then falls. 
C)  Initially, the marginal product of labour rises, then falls. 
D)  Initially, the average cost of production rises, then falls.

Question 8

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker, the average product of labour declines. Which of the following statements must be true?

Accepted Answer

A)  The marginal product of the 8th worker is negative. 
B)  The marginal product of the 8th worker is less than the average product of labour before the 8th worker was hired. 
C)  Suzie's profits would be greater if she did not hire the 8th worker. 
D)  The average product of labour is negative. 
A)  The marginal product of the 8th worker is negative. 
B)  The marginal product of the 8th worker is less than the average product of labour before the 8th worker was hired. 
C)  Suzie's profits would be greater if she did not hire the 8th worker. 
D)  The average product of labour is negative.

Question 9

The shape of the average total cost curve is determined by the shape of

Accepted Answer

A)  the marginal cost curve. 
B)  the average fixed cost curve. 
C)  the average product curve. 
D)  the firm's production function. 
A)  the marginal cost curve. 
B)  the average fixed cost curve. 
C)  the average product curve. 
D)  the firm's production function.

Question 10

As a firm hires more labour in the short run, the

Accepted Answer

A)  level of total product stays constant. 
B)  output per worker rises. 
C)  extra output of another worker may rise at first, but eventually must fall. 
D)  costs of production are increasing at a fixed rate per unit of output. 
A)  level of total product stays constant. 
B)  output per worker rises. 
C)  extra output of another worker may rise at first, but eventually must fall. 
D)  costs of production are increasing at a fixed rate per unit of output.

Question 11

The average total cost of production

Accepted Answer

A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied times the level of output. 
A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied times the level of output.

Question 12

In the long run, which of the following is true?

Accepted Answer

A)  Total cost = fixed cost + variable cost. 
B)  The size of a firm's physical plant can be changed, but the firm cannot adopt new technology. 
C)  There are no fixed costs. 
D)  The firm can vary its explicit costs but not its implicit costs. 
A)  Total cost = fixed cost + variable cost. 
B)  The size of a firm's physical plant can be changed, but the firm cannot adopt new technology. 
C)  There are no fixed costs. 
D)  The firm can vary its explicit costs but not its implicit costs.

Question 13

Which of the following is an example of market 'production,' as used by economists?

Accepted Answer

A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Arts University stages a play at the local theatre. 
A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Arts University stages a play at the local theatre.

Question 14

Economic costs of production differ from accounting costs in that

Accepted Answer

A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic costs. 
A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic costs.

Question 15

Average total cost is

Accepted Answer

A)  total cost divided by the quantity of output produced. 
B)  total explicit costs divided by the quantity of output produced. 
C)  variable cost divided by the quantity of output produced. 
D)  the change in fixed plus variable cost divided by the quantity of output produced. 
A)  total cost divided by the quantity of output produced. 
B)  total explicit costs divided by the quantity of output produced. 
C)  variable cost divided by the quantity of output produced. 
D)  the change in fixed plus variable cost divided by the quantity of output produced.

Question 16

-Refer to Table 7-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. Diminishing returns to labour are first observed in this example after Manny hires the ________ worker.

Accepted Answer

A)  second 
B)  third 
C)  fourth 
D)  fifth 
A)  second 
B)  third 
C)  fourth 
D)  fifth

Question 17

Which of the following is a reason why a firm would experience diseconomies of scale?

Accepted Answer

A)  To finance an increase in the size of its plant, a firm must borrow more money or sell more shares of stock. 
B)  As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. 
C)  As the size of the firm increases, it becomes more difficult to coordinate the operations of its manufacturing plants. 
D)  As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs. 
A)  To finance an increase in the size of its plant, a firm must borrow more money or sell more shares of stock. 
B)  As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. 
C)  As the size of the firm increases, it becomes more difficult to coordinate the operations of its manufacturing plants. 
D)  As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs.

Question 18

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 19

-Refer to Figure 7-10. Identify the minimum efficient scale of production.

Accepted Answer

A)  Qa 
B)  Qb 
C)  Qc 
D)  Qd 
A)  Qa 
B)  Qb 
C)  Qc 
D)  Qd

Question 20

-Refer to Figure 7-1. Diminishing marginal productivity sets in after

Accepted Answer

A)  the 2nd worker is hired. 
B)  the 3rd worker is hired. 
C)  the 4th worker is hired. 
D)  the 5th worker is hired. 
A)  the 2nd worker is hired. 
B)  the 3rd worker is hired. 
C)  the 4th worker is hired. 
D)  the 5th worker is hired.

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

-Refer to Figure 7-11. The minimum efficient scale of output is reached at what rate of output?

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

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

-Refer to Table 7-1. What is the average product of labour when the farm hires 5 workers?

Which of the following explains why the marginal cost curve has a U shape?

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker, the average product of labour declines. Which of the following statements must be true?

The shape of the average total cost curve is determined by the shape of

As a firm hires more labour in the short run, the

The average total cost of production

In the long run, which of the following is true?

Which of the following is an example of market 'production,' as used by economists?

Economic costs of production differ from accounting costs in that

Average total cost is

Which of the following is a reason why a firm would experience diseconomies of scale?

Which of the following statements is false?

-Refer to Figure 7-10. Identify the minimum efficient scale of production.

-Refer to Figure 7-1. Diminishing marginal productivity sets in after

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

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Exam 7: Technology , Production and Costs

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

-Refer to Figure 7-11. The minimum efficient scale of output is reached at what rate of output?

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

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

-Refer to Table 7-1. What is the average product of labour when the farm hires 5 workers?

Which of the following explains why the marginal cost curve has a U shape?

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker, the average product of labour declines. Which of the following statements must be true?

The shape of the average total cost curve is determined by the shape of

As a firm hires more labour in the short run, the

The average total cost of production

In the long run, which of the following is true?

Which of the following is an example of market 'production,' as used by economists?

Economic costs of production differ from accounting costs in that

Average total cost is

Which of the following is a reason why a firm would experience diseconomies of scale?

Which of the following statements is false?

-Refer to Figure 7-10. Identify the minimum efficient scale of production.

-Refer to Figure 7-1. Diminishing marginal productivity sets in after

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