Question 1

Red Stone Creamery currently hires 5 workers.When it added a sixth worker,its output actually fell.Which of the following statements is true?

Accepted Answer

A)  The marginal product of the sixth worker must be negative. 
B)  The average product of the sixth worker is negative. 
C)  The sixth worker is not as skilled as the fifth worker. 
D)  The total product becomes negative. 
A)  The marginal product of the sixth worker must be negative. 
B)  The average product of the sixth worker is negative. 
C)  The sixth worker is not as skilled as the fifth worker. 
D)  The total product becomes negative.

Question 2

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.
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Accepted Answer

Explicit costs are costs that involve sp

Question 3

If another worker adds 9 units of output to a group of workers who had an average product of 7 units,what is the average product of labour?

Accepted Answer

A)  Will remain the same 
B)  Will increase 
C)  Will decrease 
D)  And what will happen to it cannot be determined 
A)  Will remain the same 
B)  Will increase 
C)  Will decrease 
D)  And what will happen to it cannot be determined

Question 4

If the total cost of producing 20 units of output is $1 000 and the average variable cost is $35,the firm's average fixed cost at that level of output is _________.

Accepted Answer

A)  $65 
B)  $50 
C)  $15 
D)  It is impossible to determine without additional information. 
A)  $65 
B)  $50 
C)  $15 
D)  It is impossible to determine without additional information.

Question 5

Adam spent $10 000 on new equipment for his small business,'Adam's Fitness Studio'.Membership at his fitness centre is very low and at this rate,Adam needs an additional $12 000 per year to keep his studio open.Which of the following is true?

Accepted Answer

A)  The fixed cost of running the studio is $22 000. 
B)  The variable cost of running the studio is $22 000. 
C)  The $10 000 Adam spent on equipment is a fixed cost of business, and the $12 000 he'll need to continue operations is a variable cost. 
D)  The $10 000 Adam spent on equipment is the total cost of starting the business, and the $12 000 he'll need to continue operations is a marginal cost. 
A)  The fixed cost of running the studio is $22 000. 
B)  The variable cost of running the studio is $22 000. 
C)  The $10 000 Adam spent on equipment is a fixed cost of business, and the $12 000 he'll need to continue operations is a variable cost. 
D)  The $10 000 Adam spent on equipment is the total cost of starting the business, and the $12 000 he'll need to continue operations is a marginal cost.

Question 6

Bill owns 'Bill's Home of Blues' a store that specialises in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment ________.

Accepted Answer

A)  is a long-run implicit cost 
B)  is a fixed cost 
C)  is a short-run implicit cost 
D)  is a variable cost 
A)  is a long-run implicit cost 
B)  is a fixed cost 
C)  is a short-run implicit cost 
D)  is a variable cost

Question 7

How is the marginal product of labour defined?

Accepted Answer

A)  As the change in total revenue that results when an additional unit of a labour is hired 
B)  As the additional labour required to produce one more unit of output 
C)  As the additional labour cost of producing one more unit of output 
D)  As the change in output that a firm produces as a result of hiring one more worker 
A)  As the change in total revenue that results when an additional unit of a labour is hired 
B)  As the additional labour required to produce one more unit of output 
C)  As the additional labour cost of producing one more unit of output 
D)  As the change in output that a firm produces as a result of hiring one more worker

Question 8

What happens when the marginal product of labour rises?

Accepted Answer

A)  The marginal cost of production will exceed the average total cost 
B)  The marginal cost of production also rises 
C)  The marginal cost of production falls 
D)  The average total cost of production also rises 
A)  The marginal cost of production will exceed the average total cost 
B)  The marginal cost of production also rises 
C)  The marginal cost of production falls 
D)  The average total cost of production also rises

Question 9

Sally quit her job as an auto mechanic earning $50 000 per year to start her own business.To save money,she operates her business out of a small building she owns which,until she started her own business,she had rented out for $10 000 per year.She also invested her $20 000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.
Total revenue $120 000
Cost of labour 40 000
Cost of materials 15 000
Equipment rental 5 000
a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?
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Accepted Answer

a.$121 000 = 40 000 (labour)+ 15 000 (ma

Question 10

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

Accepted Answer

A) True 
 B)False

Question 11

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,what would the expansion provide to the airlines?

Accepted Answer

A)  Economies of scale 
B)  Diseconomies of scale 
C)  Higher average costs but lower total costs 
D)  Higher marginal costs but lower total costs 
A)  Economies of scale 
B)  Diseconomies of scale 
C)  Higher average costs but lower total costs 
D)  Higher marginal costs but lower total costs

Question 12

Figure 6.11   Figure 6.11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0S1U1B1,S1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 6.11.For output rates greater than 20 000 picture frames per month,__________.

Accepted Answer

A)  the firm will not make a profit because the average cost of production will be too high 
B)  the firm will experience diseconomies of scale 
C)  the firm will experience diminishing returns 
D)  the short-run average total cost will equal the long-run average total cost of production 
A)  the firm will not make a profit because the average cost of production will be too high 
B)  the firm will experience diseconomies of scale 
C)  the firm will experience diminishing returns 
D)  the short-run average total cost will equal the long-run average total cost of production

Question 13

Figure 6.5  
-Refer to Figure 6.5.Curve G approaches curve F because _________.

Accepted Answer

A)  marginal cost is above average variable costs 
B)  average fixed cost falls as output rises 
C)  fixed cost falls as capacity rises 
D)  total cost falls as more and more is produced 
A)  marginal cost is above average variable costs 
B)  average fixed cost falls as output rises 
C)  fixed cost falls as capacity rises 
D)  total cost falls as more and more is produced

Question 14

If a firm experiences positive technological change,it is able to produce more output using the same inputs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is false?

Accepted Answer

A)  Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B)  When marginal cost is less than average total cost, average total cost will fall. 
C)  When marginal cost is greater than average total cost, average total cost will rise. 
D)  Marginal cost will equal average total cost when average total cost is at its lowest point. 
A)  Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B)  When marginal cost is less than average total cost, average total cost will fall. 
C)  When marginal cost is greater than average total cost, average total cost will rise. 
D)  Marginal cost will equal average total cost when average total cost is at its lowest point.

Question 16

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Accepted Answer

A) True 
 B)False

Question 17

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 18

In the long run,all of a firm's inputs are variable.

Accepted Answer

A) True 
 B)False

Question 19

A cost that is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books is ________.

Accepted Answer

A)  postage and supplies 
B)  travel 
C)  rent 
D)  wages and salaries 
A)  postage and supplies 
B)  travel 
C)  rent 
D)  wages and salaries

Question 20

Over the past 20 years,the number of small family farms has fallen significantly,and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

Accepted Answer

A)  Diseconomies of scale in farming 
B)  Economies of scale in farming 
C)  Diminishing returns to labour in farming 
D)  Declining productivity 
A)  Diseconomies of scale in farming 
B)  Economies of scale in farming 
C)  Diminishing returns to labour in farming 
D)  Declining productivity

Red Stone Creamery currently hires 5 workers.When it added a sixth worker,its output actually fell.Which of the following statements is true?

If another worker adds 9 units of output to a group of workers who had an average product of 7 units,what is the average product of labour?

If the total cost of producing 20 units of output is $1 000 and the average variable cost is $35,the firm's average fixed cost at that level of output is _________.

Adam spent $10 000 on new equipment for his small business,'Adam's Fitness Studio'.Membership at his fitness centre is very low and at this rate,Adam needs an additional $12 000 per year to keep his studio open.Which of the following is true?

Bill owns 'Bill's Home of Blues' a store that specialises in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment ________.

How is the marginal product of labour defined?

What happens when the marginal product of labour rises?

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,what would the expansion provide to the airlines?

Figure 6.5 -Refer to Figure 6.5.Curve G approaches curve F because _________.

If a firm experiences positive technological change,it is able to produce more output using the same inputs.

Which of the following statements is false?

The process a firm uses to turn inputs into outputs of goods and services is called technology.

The short run is the time period during which a firm has at least one input constraint.

In the long run,all of a firm's inputs are variable.

A cost that is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books is ________.

Over the past 20 years,the number of small family farms has fallen significantly,and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

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

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Exam 6: Technology,production and Costs

Red Stone Creamery currently hires 5 workers.When it added a sixth worker,its output actually fell.Which of the following statements is true?

If another worker adds 9 units of output to a group of workers who had an average product of 7 units,what is the average product of labour?

If the total cost of producing 20 units of output is $1 000 and the average variable cost is $35,the firm's average fixed cost at that level of output is _________.

Adam spent $10 000 on new equipment for his small business,'Adam's Fitness Studio'.Membership at his fitness centre is very low and at this rate,Adam needs an additional $12 000 per year to keep his studio open.Which of the following is true?

Bill owns 'Bill's Home of Blues' a store that specialises in selling CDs and DVDs of blues musicians of the 1960s and 1970s.Bill took out a loan from his bank to pay for his store and its initial inventory.Bill pays the bank $900 per week for his loan.The $900 bank payment ________.

How is the marginal product of labour defined?

What happens when the marginal product of labour rises?

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,what would the expansion provide to the airlines?

Figure 6.5 -Refer to Figure 6.5.Curve G approaches curve F because _________.

If a firm experiences positive technological change,it is able to produce more output using the same inputs.

Which of the following statements is false?

The process a firm uses to turn inputs into outputs of goods and services is called technology.

The short run is the time period during which a firm has at least one input constraint.

In the long run,all of a firm's inputs are variable.

A cost that is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books is ________.

Over the past 20 years,the number of small family farms has fallen significantly,and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

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