Question 1

What does the long-run average cost curve show?

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 2

Figure 6.10  
-Refer to Figure 6.10.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.The average cost of production AU: Kindly complete this question.

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 3

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 4

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Consider a variable input such as labour

Question 5

If marginal cost is above the average variable cost,then average variable cost is decreasing.

Accepted Answer

A) True 
 B)False

Question 6

If we have information about workers' marginal products,then total and average product can be found by _________.

Accepted Answer

A)  dividing marginal costs by the number of workers 
B)  multiplying the average marginal product times the number of workers 
C)  summing the marginal values to find the total and multiplying it times the number of workers to get the average 
D)  summing the marginal values to find the total and dividing it by the number of workers to get the average 
A)  dividing marginal costs by the number of workers 
B)  multiplying the average marginal product times the number of workers 
C)  summing the marginal values to find the total and multiplying it times the number of workers to get the average 
D)  summing the marginal values to find the total and dividing it by the number of workers to get the average

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

Table 6.6
 $$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Foot } \
\text { Mass ages } \
\text { perDay }
\end{array} & \begin{array} { c } 
\text { Fixed } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Variable } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & 0 & & & & & \
\hline 1 & 10 & & & & & \
\hline 2 & 25 & & & & & \
\hline 3 & 45 & & & & & \
\hline 4 & 60 & & & & & \
\hline 5 & 70 & & & & & \
\hline
\end{array}$$
-Refer to Table 6.6.Alicia Gregory owns a foot massage business.She leases four computer-controlled massage booths,for which she pays $125 per day.She cannot increase the number machines she leases without giving the manufacturer 3 months' notice.She can hire as many workers as she wants at a cost of $75 per day per worker.These are the only two inputs she uses in her business.Use this information to fill in the columns in the above table.

Accepted Answer

\[\begin{array} { | c | c | c | c | c |

Question 10

What is the difference between total costs,variable costs,and fixed costs?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Total costs are the costs of all inputs

Question 11

Table 6.3
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Boxes }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Product of } \
\text { Labour }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product of } \
\text { Labour }
\end{array} \
\hline 0 & 0 &-- - - & ---- \
\hline 1 & 50 & & \
\hline 2 & 200 & & \
\hline 3 & 240 & & \
\hline 4 & 264 & & \
\hline 5 & 284 & & \
\hline
\end{array}$$
-Refer to Table 6.3.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 12

Gertrude Stork's Chocolate Shoppe normally employs four workers.When the Chocolate Shoppe hired a fifth worker the Shoppe's total output decreased.Therefore,________.

Accepted Answer

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

Question 13

If marginal product is equal to average product,then total product is at a maximum.

Accepted Answer

A) True 
 B)False

Question 14

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 15

What is the minimum efficient scale?

Accepted Answer

A)  The level of output where diminishing returns have not set in yet. 
B)  The plant size that yields the most profit. 
C)  The level of operation where long-run average costs are lowest. 
D)  The smallest output level where the firm finally reaches productive efficiency. 
A)  The level of output where diminishing returns have not set in yet. 
B)  The plant size that yields the most profit. 
C)  The level of operation where long-run average costs are lowest. 
D)  The smallest output level where the firm finally reaches productive efficiency.

What does the long-run average cost curve show?

Figure 6.10 -Refer to Figure 6.10.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.The average cost of production AU: Kindly complete this question.

If marginal cost is above the average variable cost,then average variable cost is decreasing.

If we have information about workers' marginal products,then total and average product can be found by _________.

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

Which of the following statements is false?

What is the difference between total costs,variable costs,and fixed costs? __________________________________________________________________________________________________________________________________________________________________________________________

Gertrude Stork's Chocolate Shoppe normally employs four workers.When the Chocolate Shoppe hired a fifth worker the Shoppe's total output decreased.Therefore,________.

If marginal product is equal to average product,then total product is at a maximum.

Which of the following statements is true?

What is the minimum efficient scale?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 6: Technology,production and Costs

What does the long-run average cost curve show?

Figure 6.10 -Refer to Figure 6.10.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.The average cost of production AU: Kindly complete this question.

If marginal cost is above the average variable cost,then average variable cost is decreasing.

If we have information about workers' marginal products,then total and average product can be found by _________.

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

Which of the following statements is false?

What is the difference between total costs,variable costs,and fixed costs? __________________________________________________________________________________________________________________________________________________________________________________________

Gertrude Stork's Chocolate Shoppe normally employs four workers.When the Chocolate Shoppe hired a fifth worker the Shoppe's total output decreased.Therefore,________.

If marginal product is equal to average product,then total product is at a maximum.

Which of the following statements is true?

What is the minimum efficient scale?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Figure 6.10 -Refer to Figure 6.10.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.The average cost of production AU: Kindly complete this question.