Question 1

Which of the following statements best describes the economic short run?

Accepted Answer

A) It is a period of one year or less. 
B) It is a period during which firms are free to vary all of their inputs. 
C) It is a period during which at least one of the firm's inputs is fixed. 
D) It is a period during which fixed inputs become variable inputs because of depreciation. 
A) It is a period of one year or less. 
B) It is a period during which firms are free to vary all of their inputs. 
C) It is a period during which at least one of the firm's inputs is fixed. 
D) It is a period during which fixed inputs become variable inputs because of depreciation.

Question 2

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 3

When the marginal product of labor 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 4

Refer to Table 11-2.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 average product of labor will equal 60 boxes when Manny hires

Accepted Answer

A) the second worker. 
B) the third worker. 
C) the fourth worker. 
D) the fifth worker. 
A) the second worker. 
B) the third worker. 
C) the fourth worker. 
D) the fifth worker.

Question 5

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 6

Technological change is a key reason why Wal-Mart has become one of the largest firms in the world.Which of the following is a change in technology implemented by Wal-Mart?

Accepted Answer

A) Wal-Mart developed a supply chain that allows it to manage inventories efficiently. 
B) Instead of buying goods it sells from other companies,Wal-Mart makes many of these goods in its own factories. 
C) Wal-Mart employs hundreds of scientists and engineers who develop new cost-saving techniques. 
D) Wal-Mart hires managers from many of the top business schools in the United States. 
A) Wal-Mart developed a supply chain that allows it to manage inventories efficiently. 
B) Instead of buying goods it sells from other companies,Wal-Mart makes many of these goods in its own factories. 
C) Wal-Mart employs hundreds of scientists and engineers who develop new cost-saving techniques. 
D) Wal-Mart hires managers from many of the top business schools in the United States.

Question 7

Figure 11-9  
-Refer to Figure 11-9.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 8

When firms analyze 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 9

As output increases

Accepted Answer

A) average variable cost becomes smaller and smaller. 
B) the difference between average total cost and average variable cost decreases. 
C) marginal cost increases continuously. 
D) the difference between average total cost and average variable cost becomes greater and greater. 
A) average variable cost becomes smaller and smaller. 
B) the difference between average total cost and average variable cost decreases. 
C) marginal cost increases continuously. 
D) the difference between average total cost and average variable cost becomes greater and greater.

Question 10

Firms in different countries that face different input prices may produce the same good using different combinations of inputs,even though they have access to the same technology.

Accepted Answer

A) True 
 B)False

Question 11

Consider a firm that uses two inputs,labor and capital,to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Accepted Answer

A) The law of diminishing returns: for a given decline in capital,decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor,which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital,increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore,a firm must replace decreases in capital with increases in labor. 
A) The law of diminishing returns: for a given decline in capital,decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor,which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital,increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore,a firm must replace decreases in capital with increases in labor.

Question 12

Which of the following describes how output changes in the short run? Because of specialization and the division of labor,as more workers are hired

Accepted Answer

A) output will first increase at an increasing rate,then output will increase at a decreasing rate. 
B) output will first decrease at an increasing rate,then increase at a decreasing rate. 
C) the marginal product of labor will first decrease,then increase at a decreasing rate. 
D) the marginal product of labor will first be negative and then will be positive. 
A) output will first increase at an increasing rate,then output will increase at a decreasing rate. 
B) output will first decrease at an increasing rate,then increase at a decreasing rate. 
C) the marginal product of labor will first decrease,then increase at a decreasing rate. 
D) the marginal product of labor will first be negative and then will be positive.

Question 13

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

Accepted Answer

A) at the same level of output as the minimum point of the average variable cost. 
B) at a larger level of output than the minimum point of the average variable cost. 
C) at a lower level of output than the minimum point of the average variable cost. 
D) at the same level of output as the maximum of the total product curve. 
A) at the same level of output as the minimum point of the average variable cost. 
B) at a larger level of output than the minimum point of the average variable cost. 
C) at a lower level of output than the minimum point of the average variable cost. 
D) at the same level of output as the maximum of the total product curve.

Question 14

Figure 11-2   Figure 11-2 contains information about the short run cost structure of a firm.
-Refer to Figure 11-2.In the figure above which letter represents the average total cost curve?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 15

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books?

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 16

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Accepted Answer

A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity. 
A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity.

Question 17

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

Accepted Answer

A) explicit cost of production. 
B) marginal cost of production. 
C) average cost of production. 
D) implicit cost of production. 
A) explicit cost of production. 
B) marginal cost of production. 
C) average cost of production. 
D) implicit cost of production.

Question 18

Figure 11-6   Figure 11-6 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: ATCa,ATCb and ATCc.
-Refer to Figure 11-6.In the short run,if the firm sells fewer than 5,000 picture frames per month

Accepted Answer

A) it should produce with the scale of operation associated with ATCa. 
B) it should produce with the scale of operation associated with ATCb. 
C) it should produce with the scale of operation associated with ATCc. 
D) it will experience constant returns to scale. 
A) it should produce with the scale of operation associated with ATCa. 
B) it should produce with the scale of operation associated with ATCb. 
C) it should produce with the scale of operation associated with ATCc. 
D) it will experience constant returns to scale.

Question 19

Which of the following statements is true?

Accepted Answer

A) The average product of labor is at its maximum when the average product of labor equals the marginal product of labor. 
B) The average product of labor is at its minimum when the average product of labor equals the marginal product of labor. 
C) The average product of labor tells us how much output changes as the quantity of workers hired changes. 
D) Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing. 
A) The average product of labor is at its maximum when the average product of labor equals the marginal product of labor. 
B) The average product of labor is at its minimum when the average product of labor equals the marginal product of labor. 
C) The average product of labor tells us how much output changes as the quantity of workers hired changes. 
D) Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing.

Question 20

Table 11-2
  
-Refer to Table 11-2.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 labor 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

Which of the following statements best describes the economic short 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,

When the marginal product of labor rises

Refer to Table 11-2.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 average product of labor will equal 60 boxes when Manny hires

Which of the following statements is false?

Technological change is a key reason why Wal-Mart has become one of the largest firms in the world.Which of the following is a change in technology implemented by Wal-Mart?

Figure 11-9 -Refer to Figure 11-9.Starting from point d a movement along isoquant1 to point f

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

As output increases

Firms in different countries that face different input prices may produce the same good using different combinations of inputs,even though they have access to the same technology.

Consider a firm that uses two inputs,labor and capital,to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Which of the following describes how output changes in the short run? Because of specialization and the division of labor,as more workers are hired

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

Figure 11-2 Figure 11-2 contains information about the short run cost structure of a firm. -Refer to Figure 11-2.In the figure above which letter represents the average total cost curve?

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books?

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

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

Which of the following statements is true?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Exam 11: Technology, production, and Costs

Which of the following statements best describes the economic short 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,

When the marginal product of labor rises

Refer to Table 11-2.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 average product of labor will equal 60 boxes when Manny hires

Which of the following statements is false?

Technological change is a key reason why Wal-Mart has become one of the largest firms in the world.Which of the following is a change in technology implemented by Wal-Mart?

Figure 11-9 -Refer to Figure 11-9.Starting from point d a movement along isoquant1 to point f

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

As output increases

Firms in different countries that face different input prices may produce the same good using different combinations of inputs,even though they have access to the same technology.

Consider a firm that uses two inputs,labor and capital,to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Which of the following describes how output changes in the short run? Because of specialization and the division of labor,as more workers are hired

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

Figure 11-2 Figure 11-2 contains information about the short run cost structure of a firm. -Refer to Figure 11-2.In the figure above which letter represents the average total cost curve?

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books?

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

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

Which of the following statements is true?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters