Question 1

When firms analyse the relationship between their level of production and their costs, they separate the time period involved into

Accepted Answer

A)  morning and evening. 
B)  6 months or less; 6 months to 1 year; more than 1 year. 
C)  a fixed period and a variable period. 
D)  the short run and the long run. 
A)  morning and evening. 
B)  6 months or less; 6 months to 1 year; more than 1 year. 
C)  a fixed period and a variable period. 
D)  the short run and the long run.

Question 2

As output increases, average fixed cost gets smaller and smaller.

Accepted Answer

A) True 
 B)False

Question 3

The law of diminishing marginal returns

Accepted Answer

A)  explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B)  explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run. 
C)  causes average total costs to rise at a decreasing rate as output increases. 
D)  causes the difference between average total cost and average variable cost to get smaller as output increases. 
A)  explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B)  explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run. 
C)  causes average total costs to rise at a decreasing rate as output increases. 
D)  causes the difference between average total cost and average variable cost to get smaller as output increases.

Question 4

Average total cost is equal to

Accepted Answer

A)  average fixed cost minus average variable cost. 
B)  total cost divided by the level of output. 
C)  marginal cost plus variable cost. 
D)  total cost divided by the number of workers. 
A)  average fixed cost minus average variable cost. 
B)  total cost divided by the level of output. 
C)  marginal cost plus variable cost. 
D)  total cost divided by the number of workers.

Question 5

Which of the following statements is true?

Accepted Answer

A)  An explicit cost is an actual cost; an implicit cost is a theoretical cost. 
B)  Economic costs include both explicit costs and implicit costs. 
C)  An explicit cost is more important, dollar for dollar, than an implicit cost. 
D)  Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs. 
A)  An explicit cost is an actual cost; an implicit cost is a theoretical cost. 
B)  Economic costs include both explicit costs and implicit costs. 
C)  An explicit cost is more important, dollar for dollar, than an implicit cost. 
D)  Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs.

Question 6

-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. The highest value of the average product of labour is ________ when Manny hires ________ workers.

Accepted Answer

A)  80; 3 
B)  100; 3 
C)  100; 2 
D)  80; 4 
A)  80; 3 
B)  100; 3 
C)  100; 2 
D)  80; 4

Question 7

In economics, what is the difference between the short run and the long run?

Accepted Answer

In economics, the short run refers to th

Question 8

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased. Therefore

Accepted Answer

A)  the marginal product of the 5th worker is negative. 
B)  the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C)  the average product of the 5th worker is negative. 
D)  the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers. 
A)  the marginal product of the 5th worker is negative. 
B)  the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C)  the average product of the 5th worker is negative. 
D)  the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers.

Question 9

Which of the following statements is false?

Accepted Answer

A)  An implicit cost is a nonmonetary opportunity cost. 
B)  Economic costs include both accounting costs and implicit costs. 
C)  An explicit cost is a cost that involves spending money. 
D)  Economists consider all costs to be implicit costs. 
A)  An implicit cost is a nonmonetary opportunity cost. 
B)  Economic costs include both accounting costs and implicit costs. 
C)  An explicit cost is a cost that involves spending money. 
D)  Economists consider all costs to be implicit costs.

Question 10

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

Accepted Answer

Yes. As long as the marginal c

Question 11

Which of the following equations is correct?

Accepted Answer

A)  AVC - ATC = AFC 
B)  AVC + ATC = AFC 
C)  AFC + AVC = ATC 
D)  ATC + AVC = AFC 
A)  AVC - ATC = AFC 
B)  AVC + ATC = AFC 
C)  AFC + AVC = ATC 
D)  ATC + AVC = AFC

Question 12

On an isoquant/isocost graph, the least cost input combination of producing a given output is

Accepted Answer

A)  any point on the isoquant curve. 
B)  any point on the isocost curve. 
C)  given by the tangency between the isoquant curve and the isocost line. 
D)  one of the intercept values on the graph. 
A)  any point on the isoquant curve. 
B)  any point on the isocost curve. 
C)  given by the tangency between the isoquant curve and the isocost line. 
D)  one of the intercept values on the graph.

Question 13

Economic costs include implicit costs but not explicit costs.

Accepted Answer

A) True 
 B)False

Question 14

If, after hiring the 6th worker, a firm's output falls, then the marginal product of the 6th worker is negative.

Accepted Answer

A) True 
 B)False

Question 15

-Refer to Figure 7-3. Which of the following statements correctly describes the curves in the figure?

Accepted Answer

A)  The marginal product of labour curve is represented by curve A and the average product of labour curve is represented by curve B. 
B)  The marginal product of labour curve is represented by curve B and the average product of labour curve is represented by curve A. 
C)  Curve A could represent either the average product curve or the marginal product curve. Curve B represents the total product curve. 
D)  Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve. 
A)  The marginal product of labour curve is represented by curve A and the average product of labour curve is represented by curve B. 
B)  The marginal product of labour curve is represented by curve B and the average product of labour curve is represented by curve A. 
C)  Curve A could represent either the average product curve or the marginal product curve. Curve B represents the total product curve. 
D)  Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve.

Question 16

Higher isocost lines correspond to higher

Accepted Answer

A)  profits. 
B)  total costs of production. 
C)  input prices. 
D)  sales revenue. 
A)  profits. 
B)  total costs of production. 
C)  input prices. 
D)  sales revenue.

Question 17

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the firm's total cost while the price of labour and capital remain unchanged?

Accepted Answer

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

Question 18

The difference between technology and technological change is that

Accepted Answer

A)  technology refers to the processes used by a firm to transform inputs into output, while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B)  technology is carried out by firms producing physical goods, but technological change is an intellectual exercise in seeking ways to improve production. 
C)  technology is product-centered, that is, developing new products with our limited resources, while technological change is process-centered in that it focuses on developing new production techniques. 
D)  technology involves the use of capital equipment, while technological change requires the use of brain power. 
A)  technology refers to the processes used by a firm to transform inputs into output, while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B)  technology is carried out by firms producing physical goods, but technological change is an intellectual exercise in seeking ways to improve production. 
C)  technology is product-centered, that is, developing new products with our limited resources, while technological change is process-centered in that it focuses on developing new production techniques. 
D)  technology involves the use of capital equipment, while technological change requires the use of brain power.

Question 19

Which of the following is a factor of production that generally is fixed in the short run?

Accepted Answer

A)  raw materials 
B)  labour 
C)  a factory building 
D)  water 
A)  raw materials 
B)  labour 
C)  a factory building 
D)  water

Question 20

Damian owns a tattoo parlor and has hired three tattoo artists to work for him. The marginal product of labour is 8 for the first artist, 12 for the second artist, and 7 for the third artist. What is Damian's average product of labour for these three tattoo artists?

Accepted Answer

The answer of Damian owns a tattoo parlor and has...

When firms analyse the relationship between their level of production and their costs, they separate the time period involved into

As output increases, average fixed cost gets smaller and smaller.

The law of diminishing marginal returns

Average total cost is equal to

Which of the following statements is true?

In economics, what is the difference between the short run and the long run?

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased. Therefore

Which of the following statements is false?

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

Which of the following equations is correct?

On an isoquant/isocost graph, the least cost input combination of producing a given output is

Economic costs include implicit costs but not explicit costs.

If, after hiring the 6th worker, a firm's output falls, then the marginal product of the 6th worker is negative.

-Refer to Figure 7-3. Which of the following statements correctly describes the curves in the figure?

Higher isocost lines correspond to higher

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the firm's total cost while the price of labour and capital remain unchanged?

The difference between technology and technological change is that

Which of the following is a factor of production that generally is fixed in the short run?

Damian owns a tattoo parlor and has hired three tattoo artists to work for him. The marginal product of labour is 8 for the first artist, 12 for the second artist, and 7 for the third artist. What is Damian's average product of labour for these three tattoo artists?

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

When firms analyse the relationship between their level of production and their costs, they separate the time period involved into

As output increases, average fixed cost gets smaller and smaller.

The law of diminishing marginal returns

Average total cost is equal to

Which of the following statements is true?

In economics, what is the difference between the short run and the long run?

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased. Therefore

Which of the following statements is false?

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

Which of the following equations is correct?

On an isoquant/isocost graph, the least cost input combination of producing a given output is

Economic costs include implicit costs but not explicit costs.

If, after hiring the 6th worker, a firm's output falls, then the marginal product of the 6th worker is negative.

-Refer to Figure 7-3. Which of the following statements correctly describes the curves in the figure?

Higher isocost lines correspond to higher

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the firm's total cost while the price of labour and capital remain unchanged?

The difference between technology and technological change is that

Which of the following is a factor of production that generally is fixed in the short run?

Damian owns a tattoo parlor and has hired three tattoo artists to work for him. The marginal product of labour is 8 for the first artist, 12 for the second artist, and 7 for the third artist. What is Damian's average product of labour for these three tattoo artists?

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