Question 1

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

Accepted Answer

A)  $1,000. 
B)  $700. 
C)  $300. 
D)  impossible to determine without additional information. 
A)  $1,000. 
B)  $700. 
C)  $300. 
D)  impossible to determine without additional information.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is

Accepted Answer

A)  impossible to determine with the information given. 
B)  12,800. 
C)  784. 
D)  50. 
A)  impossible to determine with the information given. 
B)  12,800. 
C)  784. 
D)  50.

Question 4

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

Accepted Answer

A)  Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B)  Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C)  Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D)  Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. 
A)  Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B)  Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C)  Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D)  Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.

Question 5

Marginal cost is the

Accepted Answer

A)  change in average cost when an additional unit of output is produced. 
B)  the additional output when total cost is increased by one dollar. 
C)  additional cost of producing an additional unit of output. 
D)  change in the price of inputs if a firm buys more inputs to produce an additional unit of output. 
A)  change in average cost when an additional unit of output is produced. 
B)  the additional output when total cost is increased by one dollar. 
C)  additional cost of producing an additional unit of output. 
D)  change in the price of inputs if a firm buys more inputs to produce an additional unit of output.

Question 6

As a firm moves to higher isocost lines,

Accepted Answer

A)  its profits increase. 
B)  its revenue increases. 
C)  its input price ratio increases. 
D)  its total cost increases. 
A)  its profits increase. 
B)  its revenue increases. 
C)  its input price ratio increases. 
D)  its total cost increases.

Question 7

Figure 11-14   Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14. Which of the following could explain why the United States and China use different input combinations to produce a given quantity of cotton and yet, each country produces that quantity at the lowest possible cost?

Accepted Answer

A)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C)  because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D)  because the marginal product per dollar spent on capital yields a higher return in the United States than in China 
A)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C)  because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D)  because the marginal product per dollar spent on capital yields a higher return in the United States than in China

Question 8

Describe the difference between technology and positive technological change.

Accepted Answer

A firm's technology refers to the proces

Question 9

All of the following statements are true of the minimum efficient scale except one. Which one?

Accepted Answer

A)  All possible economies of scale have been exhausted. 
B)  The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C)  Any increase in the scale of operation will encounter diseconomies of scale. 
D)  An increase in the output level will increase profit. 
A)  All possible economies of scale have been exhausted. 
B)  The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C)  Any increase in the scale of operation will encounter diseconomies of scale. 
D)  An increase in the output level will increase profit.

Question 10

Figure 11-10  
-Economies of scale occur when

Accepted Answer

A)  a firm's long-run average total costs fall as it increases the quantity of output it produces. 
B)  the marginal product of labor is greater than the average product of labor. 
C)  short-run marginal cost falls. 
D)  the demand for a firm's output increases. 
A)  a firm's long-run average total costs fall as it increases the quantity of output it produces. 
B)  the marginal product of labor is greater than the average product of labor. 
C)  short-run marginal cost falls. 
D)  the demand for a firm's output increases.

Question 11

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least cost combination and what should be done if they are not?

Accepted Answer

The marginal product per dollar spent on

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

Consider a manufacturing operation that uses specialized machinery and labor to produce its output. In this case, the input that is not fixed in the short run is labor.

Accepted Answer

A) True 
 B)False

Question 14

The law of diminishing marginal returns

Accepted Answer

A)  sets in because not all workers are equally productive. 
B)  applies only in the short run. 
C)  holds even when there are no fixed factors. 
D)  ultimately explains why production displays diseconomies of scale. 
A)  sets in because not all workers are equally productive. 
B)  applies only in the short run. 
C)  holds even when there are no fixed factors. 
D)  ultimately explains why production displays diseconomies of scale.

Question 15

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

Accepted Answer

A)  $0 
B)  $2 
C)  $60 
D)  $120 
A)  $0 
B)  $2 
C)  $60 
D)  $120

Question 16

The marginal product of labor is calculated using the formula

Accepted Answer

A)  L/Q. 
B)  ΔL/ΔQ. 
C)  ΔQ/ΔL. 
D)  Q/L. 
A)  L/Q. 
B)  ΔL/ΔQ. 
C)  ΔQ/ΔL. 
D)  Q/L.

Question 17

The formula for total fixed cost is

Accepted Answer

A)  TFC = TC + TVC. 
B)  TFC = TVC - TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC - TVC. 
A)  TFC = TC + TVC. 
B)  TFC = TVC - TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC - TVC.

Question 18

Minimum efficient scale is defined as the level of output at which

Accepted Answer

A)  all economies of scale are exhausted. 
B)  diminishing returns affect average total cost. 
C)  the firm's long-run average total cost starts falling. 
D)  the maximum output is produced. 
A)  all economies of scale are exhausted. 
B)  diminishing returns affect average total cost. 
C)  the firm's long-run average total cost starts falling. 
D)  the maximum output is produced.

Question 19

Table 11-8
   Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data.
-Refer to Table 11-8. What is the minimum efficient scale of production?

Accepted Answer

A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units 
A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units

Question 20

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Accepted Answer

A) True 
 B)False

Exam 11: Technology, Production, and Costs

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

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

When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

Marginal cost is the

As a firm moves to higher isocost lines,

Describe the difference between technology and positive technological change.

All of the following statements are true of the minimum efficient scale except one. Which one?

Figure 11-10 -Economies of scale occur when

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least cost combination and what should be done if they are not?

In the long run, which of the following is true?

Consider a manufacturing operation that uses specialized machinery and labor to produce its output. In this case, the input that is not fixed in the short run is labor.

The law of diminishing marginal returns

The marginal product of labor is calculated using the formula

The formula for total fixed cost is

Minimum efficient scale is defined as the level of output at which

Table 11-8 Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data. -Refer to Table 11-8. What is the minimum efficient scale of production?

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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