Question 1

Figure 11-3   Figure 11-3 shows the cost structure for a firm.
-Refer to Figure 11-3.When the output level is 100 units average fixed cost is

Accepted Answer

A) $10. 
B) $8. 
C) $5. 
D) This cannot be determined from the diagram. 
A) $10. 
B) $8. 
C) $5. 
D) This cannot be determined from the diagram.

Question 2

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

Accepted Answer

A) TFC/Q. 
B) (TC - V
C) /Q. 
C) Δ(TC - V
C) /ΔQ. 
D) (TC/Q)- AVC. 
A) TFC/Q. 
B) (TC - V
C) /Q. 
C) Δ(TC - V
C) /ΔQ. 
D) (TC/Q)- AVC.

Question 3

In the short run,why does a production function eventually display diminishing returns to labor?

Accepted Answer

A) As the number of workers increases it becomes difficult to monitor them. 
B) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. 
C) As the number of workers increases eventually the gains from the division of labor and specialization are used up. 
D) The opportunity cost of hiring additional workers must eventually rise. 
A) As the number of workers increases it becomes difficult to monitor them. 
B) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. 
C) As the number of workers increases eventually the gains from the division of labor and specialization are used up. 
D) The opportunity cost of hiring additional workers must eventually rise.

Question 4

Which of the following explains why the marginal cost curve has a U shape?

Accepted Answer

A) Initially,the marginal product of labor falls,then rises. 
B) Initially,the average product of labor rises,then falls. 
C) Initially,the marginal product of labor rises,then falls. 
D) Initially,the average cost of production rises,then falls. 
A) Initially,the marginal product of labor falls,then rises. 
B) Initially,the average product of labor rises,then falls. 
C) Initially,the marginal product of labor rises,then falls. 
D) Initially,the average cost of production rises,then falls.

Question 5

Average total cost is

Accepted Answer

A) total cost divided by the quantity of output produced. 
B) total explicit costs divided by the quantity of output produced. 
C) variable cost divided by the quantity of output produced. 
D) the change in fixed plus variable cost divided by the quantity of output produced. 
A) total cost divided by the quantity of output produced. 
B) total explicit costs divided by the quantity of output produced. 
C) variable cost divided by the quantity of output produced. 
D) the change in fixed plus variable cost divided by the quantity of output produced.

Question 6

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of

Accepted Answer

A) diminishing returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) the law of supply. 
A) diminishing returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) the law of supply.

Question 7

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,then the expansion would 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 8

Table 11-1
   Table 11-1 summarizes production at the Crunchy Apple Orchard for the month of April 2005.
-Refer to Table 11-1.What is the marginal product of the 4th worker?

Accepted Answer

A) 230 bushels 
B) 57.4 bushels 
C) 50 bushels 
D) 12.4 bushels 
A) 230 bushels 
B) 57.4 bushels 
C) 50 bushels 
D) 12.4 bushels

Question 9

Use the following graph to answer the following questions.   a.If the wage rate and the rental price of machines are both $50 and total cost is $800,is the cost-minimizing point A,B,or C?
b.If the wage rate is $40,the rental price of equipment is $120,and total cost is $1,200,is the cost-minimizing point A,B,or C?
c.If the wage rate is $60,the rental price of equipment is $90,and total cost is $1,800,is the cost-minimizing point A,B,or C?

Accepted Answer

a.If total cost is $800 and the wage rat

Question 10

In the long run

Accepted Answer

A) the firm's fixed costs are greater than its fixed costs in the short run. 
B) all of the firm's costs are explicit costs; there are no implicit costs of production. 
C) the firm is more profitable than it is in the short run. 
D) all of the firm's costs are variable costs. 
A) the firm's fixed costs are greater than its fixed costs in the short run. 
B) all of the firm's costs are explicit costs; there are no implicit costs of production. 
C) the firm is more profitable than it is in the short run. 
D) all of the firm's costs are variable costs.

Question 11

When solar panels were first introduced to the market,sales numbers were low and production costs were high.Manufacturers realized the need to produce and sell more solar panels at a lower average total cost in order to achieve

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) positive technological change. 
D) a reduction in total fixed costs. 
A) economies of scale. 
B) diseconomies of scale. 
C) positive technological change. 
D) a reduction in total fixed costs.

Question 12

In the long run which of the following is true?

Accepted Answer

A) Total cost = fixed cost + variable cost. 
B) The size of a firm's physical plant can be changed but the firm cannot adopt new technology. 
C) There are no fixed costs. 
D) The firm can vary its explicit costs but not its implicit costs. 
A) Total cost = fixed cost + variable cost. 
B) The size of a firm's physical plant can be changed but the firm cannot adopt new technology. 
C) There are no fixed costs. 
D) The firm can vary its explicit costs but not its implicit costs.

Question 13

Stan owns a software design business.He obtained a bank loan to buy computer equipment for his business.He pays $1,000 per month for interest on the loan.He has 10 employees,each of whom is paid $4,000 per month.Because his business has been successful,next month he will increase employee wages to $5,000.If the revenue from his business remains at its current level,Stan is considering an addition to his office.Which of the following statements regarding Stan's business is false?

Accepted Answer

A) The payments Stan makes to his employees are variable costs and explicit costs. 
B) The monthly payment Stan makes for his bank loan is an implicit cost. 
C) The monthly payment Stan makes for his bank loan is a fixed cost. 
D) The time and effort Stan spends on his software design business is an implicit cost. 
A) The payments Stan makes to his employees are variable costs and explicit costs. 
B) The monthly payment Stan makes for his bank loan is an implicit cost. 
C) The monthly payment Stan makes for his bank loan is a fixed cost. 
D) The time and effort Stan spends on his software design business is an implicit cost.

Question 14

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 labor.

Question 15

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 marginal cost curve?

Accepted Answer

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

Question 16

The slope of an isocost line ________ and equals the negative of ________.

Accepted Answer

A) increases as we move down the line; the ratio of input prices 
B) decreases as we move down the line; the ratio of the marginal products 
C) is constant; the ratio of input prices 
D) is constant; the ratio of the marginal products 
A) increases as we move down the line; the ratio of input prices 
B) decreases as we move down the line; the ratio of the marginal products 
C) is constant; the ratio of input prices 
D) is constant; the ratio of the marginal products

Question 17

The division of labor and specialization explain

Accepted Answer

A) why,when the marginal product of labor increases,so does the average product of labor. 
B) why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C) why the marginal product of labor rises as a firm hires its first units of labor. 
D) why firms may find it profitable to use more workers when the marginal product of labor is negative. 
A) why,when the marginal product of labor increases,so does the average product of labor. 
B) why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C) why the marginal product of labor rises as a firm hires its first units of labor. 
D) why firms may find it profitable to use more workers when the marginal product of labor is negative.

Question 18

Economic costs include implicit costs but not explicit costs.

Accepted Answer

A) True 
 B)False

Question 19

The marginal rate of technical substitution is measured by

Accepted Answer

A) the slope of the isoquant. 
B) the relative input prices. 
C) the slope of the isocost line. 
D) the ratio of the product's price to the product's cost of production. 
A) the slope of the isoquant. 
B) the relative input prices. 
C) the slope of the isocost line. 
D) the ratio of the product's price to the product's cost of production.

Question 20

State the law of diminishing returns.How do diminishing returns differ from diseconomies of scale? Be sure to define diseconomies of scale in your answer.

Accepted Answer

The law of diminishing returns states th

Figure 11-3 Figure 11-3 shows the cost structure for a firm. -Refer to Figure 11-3.When the output level is 100 units average fixed cost is

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

In the short run,why does a production function eventually display diminishing returns to labor?

Which of the following explains why the marginal cost curve has a U shape?

Average total cost is

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of

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

Table 11-1 Table 11-1 summarizes production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 11-1.What is the marginal product of the 4th worker?

In the long run

When solar panels were first introduced to the market,sales numbers were low and production costs were high.Manufacturers realized the need to produce and sell more solar panels at a lower average total cost in order to achieve

In the long run which of the following is true?

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

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 marginal cost curve?

The slope of an isocost line and equals the negative of .

The division of labor and specialization explain

Economic costs include implicit costs but not explicit costs.

The marginal rate of technical substitution is measured by

State the law of diminishing returns.How do diminishing returns differ from diseconomies of scale? Be sure to define diseconomies of scale in your answer.

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

Figure 11-3 Figure 11-3 shows the cost structure for a firm. -Refer to Figure 11-3.When the output level is 100 units average fixed cost is

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

In the short run,why does a production function eventually display diminishing returns to labor?

Which of the following explains why the marginal cost curve has a U shape?

Average total cost is

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of

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

Table 11-1 Table 11-1 summarizes production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 11-1.What is the marginal product of the 4th worker?

In the long run

When solar panels were first introduced to the market,sales numbers were low and production costs were high.Manufacturers realized the need to produce and sell more solar panels at a lower average total cost in order to achieve

In the long run which of the following is true?

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

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 marginal cost curve?

The slope of an isocost line ________ and equals the negative of ________.

The division of labor and specialization explain

Economic costs include implicit costs but not explicit costs.

The marginal rate of technical substitution is measured by

State the law of diminishing returns.How do diminishing returns differ from diseconomies of scale? Be sure to define diseconomies of scale in your answer.

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

The slope of an isocost line and equals the negative of .