Question 1

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs. 
A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs.

Question 2

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

Accepted Answer

A)  TVC/Q. 
B)  (TC - F
C) /Q. 
C)  Δ(TC - F
C) /ΔQ. 
D)  (TC/Q) - AFC. 
A)  TVC/Q. 
B)  (TC - F
C) /Q. 
C)  Δ(TC - F
C) /ΔQ. 
D)  (TC/Q) - AFC.

Question 3

What is the marginal product of labour and what is the average product of labour.

Accepted Answer

The marginal product of labour is the ad

Question 4

Which of the following costs will not change as output changes?

Accepted Answer

A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  total fixed cost 
A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  total fixed cost

Question 5

If production displays economies of scale, the long-run average cost curve is

Accepted Answer

A)  above the short-run average total cost curve. 
B)  downward sloping. 
C)  upward sloping. 
D)  below the long-run marginal cost curve. 
A)  above the short-run average total cost curve. 
B)  downward sloping. 
C)  upward sloping. 
D)  below the long-run marginal cost curve.

Question 6

Suppose a chain of convenience stores reorganised its system of supplying its stores with food. This led to a sharp reduction in the number of trucks that the company had to use and increased the amount of fresh food on store shelves. Which of the following statements best describes the chain stores' actions?

Accepted Answer

A)  The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B)  Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change. 
C)  The firm is able to produce more output (increase its sales) using fewer inputs (less trucks). Therefore, the chain of convenience stores has implemented a positive technological change. 
D)  The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business. 
A)  The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B)  Technological change refers only to the introduction of new products or improvements to existing products. As such, the scenario described in the question is not technological change. 
C)  The firm is able to produce more output (increase its sales) using fewer inputs (less trucks). Therefore, the chain of convenience stores has implemented a positive technological change. 
D)  The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business.

Question 7

-Refer to Figure 7-2. Short run output is maximised at

Accepted Answer

A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine 
A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine

Question 8

The typical shape of an isoquant is

Accepted Answer

A)  convex towards the origin. 
B)  concave towards the origin. 
C)  linear and downward sloping. 
D)  linear and upward sloping. 
A)  convex towards the origin. 
B)  concave towards the origin. 
C)  linear and downward sloping. 
D)  linear and upward sloping.

Question 9

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?

Accepted Answer

A)  0.16 
B)  3 
C)  4.67 
D)  36 
A)  0.16 
B)  3 
C)  4.67 
D)  36

Question 10

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labour remains unchanged?

Accepted Answer

A)  the movement from AF to BF 
B)  the movement from BF to AF 
C)  the movement from BF to BD 
D)  the movement from BF to CE 
A)  the movement from AF to BF 
B)  the movement from BF to AF 
C)  the movement from BF to BD 
D)  the movement from BF to CE

Question 12

-Refer to Table 7-1. Diminishing marginal returns sets in when the ________ worker is hired.

Accepted Answer

A)  2nd 
B)  3rd 
C)  4th 
D)  None of the above; the production function displays increasing marginal returns. 
A)  2nd 
B)  3rd 
C)  4th 
D)  None of the above; the production function displays increasing marginal returns.

Question 13

-Refer to Figure 7-17. Starting from point d, a movement along isoquant1 to point f

Accepted Answer

A)  increases the total cost of production with no change in output. 
B)  increases output but not the total cost of production. 
C)  increases the total cost of production and decreases output. 
D)  increases both the total cost of production and output. 
A)  increases the total cost of production with no change in output. 
B)  increases output but not the total cost of production. 
C)  increases the total cost of production and decreases output. 
D)  increases both the total cost of production and output.

Question 14

Explain how the listed events (a-d) would affect the following at Hilton Hotels.
i. Marginal cost
ii. Average variable cost
iii. Average fixed cost
iv. Average total cost
a. Hilton decides on an across-the-board 5 per cent increase in executive salaries.
b. Hilton decides to eliminate all print advertising.
c. Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers.
d. The federal government starts to levy a $5 room tax on all hotel rooms.

Accepted Answer

a. Average fixed cost and average total

Question 15

-Refer to Figure 7-10. Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4. Now, following a permanent change in demand, it plans to cut production to Qc units. What will happen to its average cost of production?

Accepted Answer

A)  In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C)  In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37. 
A)  In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C)  In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question 16

The level of output at which all economies of scale have been exhausted is known as

Accepted Answer

A)  constant returns to scale. 
B)  minimum efficient scale. 
C)  the economically efficient output level. 
D)  optimal economic size. 
A)  constant returns to scale. 
B)  minimum efficient scale. 
C)  the economically efficient output level. 
D)  optimal economic size.

Question 17

In economics, technology only refers to the development of new products.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is false?

Accepted Answer

A)  When marginal cost equals average total cost, average total cost is at its highest value. 
B)  The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points. 
C)  The difference between average total cost and average fixed cost is average variable cost. 
D)  Firms often refer to the process of lowering average fixed cost as 'spreading the overhead.' 
A)  When marginal cost equals average total cost, average total cost is at its highest value. 
B)  The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points. 
C)  The difference between average total cost and average fixed cost is average variable cost. 
D)  Firms often refer to the process of lowering average fixed cost as 'spreading the overhead.'

Question 19

At the minimum efficient scale

Accepted Answer

A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum. 
A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum.

Question 20

If a firm produces 20 units of output and incurs a total cost of $1000, and the variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

Accepted Answer

A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information. 
A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information.

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

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

What is the marginal product of labour and what is the average product of labour.

Which of the following costs will not change as output changes?

If production displays economies of scale, the long-run average cost curve is

-Refer to Figure 7-2. Short run output is maximised at

The typical shape of an isoquant is

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labour remains unchanged?

-Refer to Table 7-1. Diminishing marginal returns sets in when the ________ worker is hired.

-Refer to Figure 7-17. Starting from point d, a movement along isoquant₁ to point f

-Refer to Figure 7-10. Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄. Now, following a permanent change in demand, it plans to cut production to Q_c units. What will happen to its average cost of production?

The level of output at which all economies of scale have been exhausted is known as

In economics, technology only refers to the development of new products.

Which of the following statements is false?

At the minimum efficient scale

If a firm produces 20 units of output and incurs a total cost of $1000, and the variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

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

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

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

What is the marginal product of labour and what is the average product of labour.

Which of the following costs will not change as output changes?

If production displays economies of scale, the long-run average cost curve is

-Refer to Figure 7-2. Short run output is maximised at

The typical shape of an isoquant is

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labour remains unchanged?

-Refer to Table 7-1. Diminishing marginal returns sets in when the ________ worker is hired.

-Refer to Figure 7-17. Starting from point d, a movement along isoquant1 to point f

-Refer to Figure 7-10. Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4. Now, following a permanent change in demand, it plans to cut production to Qc units. What will happen to its average cost of production?

The level of output at which all economies of scale have been exhausted is known as

In economics, technology only refers to the development of new products.

Which of the following statements is false?

At the minimum efficient scale

If a firm produces 20 units of output and incurs a total cost of $1000, and the variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

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 7-17. Starting from point d, a movement along isoquant₁ to point f

-Refer to Figure 7-10. Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄. Now, following a permanent change in demand, it plans to cut production to Q_c units. What will happen to its average cost of production?