Question 1

Figure 11-1  
-Refer to Figure 11-1. The marginal product of the 3rd worker is

Accepted Answer

A)  57. 
B)  19. 
C)  15. 
D)  11. 
A)  57. 
B)  19. 
C)  15. 
D)  11.

Question 2

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. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Accepted Answer

A)  $2.00 
B)  $2.40 
C)  $4.40 
D)  $6.80 
A)  $2.00 
B)  $2.40 
C)  $4.40 
D)  $6.80

Question 3

Figure 11-10  
-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 4

The marginal rate of technical substitution is

Accepted Answer

A)  the rate at which a firm is able to substitute one input for another, while keeping total cost constant. 
B)  the rate at which a firm is able to substitute one input for another, while keeping the level of output constant. 
C)  the rate at which a firm is able to institute positive technological changes to its production process. 
D)  the rate at which a firm is able to increase its output by replacing labor with technology. 
A)  the rate at which a firm is able to substitute one input for another, while keeping total cost constant. 
B)  the rate at which a firm is able to substitute one input for another, while keeping the level of output constant. 
C)  the rate at which a firm is able to institute positive technological changes to its production process. 
D)  the rate at which a firm is able to increase its output by replacing labor with technology.

Question 5

An isoquant shows

Accepted Answer

A)  the combinations of two goods that yield the same total satisfaction. 
B)  the combinations of two inputs that yield the same total product. 
C)  the combinations of two inputs that cost the same total quantity of money. 
D)  the combinations of two goods that cost the same amount of money. 
A)  the combinations of two goods that yield the same total satisfaction. 
B)  the combinations of two inputs that yield the same total product. 
C)  the combinations of two inputs that cost the same total quantity of money. 
D)  the combinations of two goods that cost the same amount of money.

Question 6

One reason why, in the short run, the marginal product of labor might increase initially as more workers are hired is that

Accepted Answer

A)  the first workers hired get to use the best equipment. 
B)  specialization allows a worker to focus on one task, thereby increasing her proficiency at that task. 
C)  the best workers are hired first and later hires are not as skillful. 
D)  beyond some point, a firm has hired too many workers. 
A)  the first workers hired get to use the best equipment. 
B)  specialization allows a worker to focus on one task, thereby increasing her proficiency at that task. 
C)  the best workers are hired first and later hires are not as skillful. 
D)  beyond some point, a firm has hired too many workers.

Question 7

If fixed costs do not change, then marginal cost

Accepted Answer

A)  also remains constant. 
B)  equals the change in variable cost divided by the change in output. 
C)  equals the change in average variable cost divided by the change in output. 
D)  equals the change in average fixed cost divided by the change in output. 
A)  also remains constant. 
B)  equals the change in variable cost divided by the change in output. 
C)  equals the change in average variable cost divided by the change in output. 
D)  equals the change in average fixed cost divided by the change in output.

Question 8

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor. This is an example of

Accepted Answer

A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management. 
A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management.

Question 9

If the average variable cost curve is above the marginal cost curve, then

Accepted Answer

A)  marginal costs must be decreasing. 
B)  average variable costs must be increasing. 
C)  marginal costs must be increasing. 
D)  marginal costs can be either increasing or decreasing. 
A)  marginal costs must be decreasing. 
B)  average variable costs must be increasing. 
C)  marginal costs must be increasing. 
D)  marginal costs can be either increasing or decreasing.

Question 10

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

Accepted Answer

A) True 
 B)False

Question 11

As a firm hires more labor in the short run, the

Accepted Answer

A)  level of total product stays constant. 
B)  output per worker rises. 
C)  extra output of another worker may rise at first, but eventually must fall. 
D)  costs of production are increasing at a fixed rate per unit of output. 
A)  level of total product stays constant. 
B)  output per worker rises. 
C)  extra output of another worker may rise at first, but eventually must fall. 
D)  costs of production are increasing at a fixed rate per unit of output.

Question 12

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

Accepted Answer

A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information. 
A)  $300 
B)  $15 
C)  $12 
D)  It is impossible to determine without additional information.

Question 13

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

Accepted Answer

A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  constant average fixed costs. 
A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  constant average fixed costs.

Question 14

An isocost line shows

Accepted Answer

A)  combinations of two inputs that result in the same total cost for a firm. 
B)  combinations of two inputs that result in the same total output for a firm. 
C)  combinations of the two inputs that result in the same profit for a firm. 
D)  the different levels of total cost that result from various combinations of two inputs. 
A)  combinations of two inputs that result in the same total cost for a firm. 
B)  combinations of two inputs that result in the same total output for a firm. 
C)  combinations of the two inputs that result in the same profit for a firm. 
D)  the different levels of total cost that result from various combinations of two inputs.

Question 15

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 16

Maximizing the level of output for a given total cost of production

Accepted Answer

A)  is equivalent to producing the profit maximizing output level. 
B)  is equivalent to minimizing cost for a given level of output. 
C)  necessitates using only relatively low-priced inputs. 
D)  will maximize total revenue. 
A)  is equivalent to producing the profit maximizing output level. 
B)  is equivalent to minimizing cost for a given level of output. 
C)  necessitates using only relatively low-priced inputs. 
D)  will maximize total revenue.

Question 17

Which of the following is a factor of production that generally is fixed in the short run?

Accepted Answer

A)  raw materials 
B)  labor 
C)  a factory building 
D)  water 
A)  raw materials 
B)  labor 
C)  a factory building 
D)  water

Question 18

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 19

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 20

A U-shaped long-run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Accepted Answer

A) True 
 B)False

Exam 11: Technology, Production, and Costs

Figure 11-1 -Refer to Figure 11-1. The marginal product of the 3rd worker is

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. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Figure 11-10 -In the long run,

The marginal rate of technical substitution is

An isoquant shows

One reason why, in the short run, the marginal product of labor might increase initially as more workers are hired is that

If fixed costs do not change, then marginal cost

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor. This is an example of

If the average variable cost curve is above the marginal cost curve, then

In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.

As a firm hires more labor in the short run, the

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

An isocost line shows

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?

Maximizing the level of output for a given total cost of production

Which of the following is a factor of production that generally is fixed in the short run?

The marginal rate of technical substitution is measured by

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.

A U-shaped long-run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

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

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Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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