Question 1

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 2

Figure 11-16  
-Refer to Figure 11-16. The figure above illustrates a series of isoquants. Which of the following statements is true?

Accepted Answer

A)  Points x, z, and y all represent the same output. 
B)  Points z and y represent the same output; this output is produced with more capital at z than at y. 
C)  Point x and y represent the same output, but the cost of production at y is greater than the cost of production at x. 
D)  Point z represents a greater output than point x or point y. 
A)  Points x, z, and y all represent the same output. 
B)  Points z and y represent the same output; this output is produced with more capital at z than at y. 
C)  Point x and y represent the same output, but the cost of production at y is greater than the cost of production at x. 
D)  Point z represents a greater output than point x or point y.

Question 3

Figure 11-12  
-Refer to Figure 11-12. The movement from isoquant T to isoquant U depicts

Accepted Answer

A)  a change in preferences with regards to input usage. 
B)  an increase in the cost of production. 
C)  an increase in output. 
D)  an increase in labor usage holding capital and output constant. 
A)  a change in preferences with regards to input usage. 
B)  an increase in the cost of production. 
C)  an increase in output. 
D)  an increase in labor usage holding capital and output constant.

Question 4

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 ra

Question 5

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 6

Table 11-4
  
-Refer to Table 11-4. The table above shows the following relationship between hours spent fishing and the quantity of fish caught for Juan, a commercial fisherman.a. Complete the Marginal Product column in Table 11-4.
b. Characterize the production function, i.e. does the production function display increasing marginal returns, diminishing marginal returns, etc.
c. Using the data above, graph Juan's marginal product curve. Be sure to label the horizontal and vertical axes. Is your graph consistent with your answer to part (b)? Explain.
d. Juan uses the following inputs for fishing - a small wooden boat (B), a fishing pole (P) and of course, his labor (L). Treating the boat and the fishing pole as fixed inputs and using the data above, graph Juan's Total Product of Labor curve. Be sure to label the horizontal and vertical axes.
e. (Extra Credit) The opportunity cost of Juan's time is $8 per hour. If Juan receives $2 per pound for his fish, what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer. Hint: Recall marginal benefit and marginal cost analysis.

Accepted Answer

a.
 @#IMG-DLM& b. The production displays diminish

Question 7

Suppose the price of capital and labor remain constant but that the average educational level of workers has increased and therefore, productivity of labor increases. This would lead a firm

Accepted Answer

A)  to adopt a more capital-intensive production technology. 
B)  to adopt a more labor-intensive technology. 
C)  to keep its output and production technology unchanged, but to use fewer units of labor. 
D)  to use only labor to produce the product. 
A)  to adopt a more capital-intensive production technology. 
B)  to adopt a more labor-intensive technology. 
C)  to keep its output and production technology unchanged, but to use fewer units of labor. 
D)  to use only labor to produce the product.

Question 8

Table 11-8
   Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company's cost data.
-Two stores-Lazy Guy's and Ralph's Recliners-are located in the same city. Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same. Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production. Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

Accepted Answer

A)  Because Ralph's Recliners sells more output, its average fixed costs are lower than Lazy Guy's average fixed cost. 
B)  The rent Lazy Guy's pays for its building is greater than the rent paid by Ralph's Recliners. 
C)  Ralph's explicit costs are less because Ralph owns the land on which his building is located. Lazy Guy must make lease payments for the land on which its store is located. 
D)  The price of recliners charged by Ralph's is greater than the price charged by Lazy Guy's. 
A)  Because Ralph's Recliners sells more output, its average fixed costs are lower than Lazy Guy's average fixed cost. 
B)  The rent Lazy Guy's pays for its building is greater than the rent paid by Ralph's Recliners. 
C)  Ralph's explicit costs are less because Ralph owns the land on which his building is located. Lazy Guy must make lease payments for the land on which its store is located. 
D)  The price of recliners charged by Ralph's is greater than the price charged by Lazy Guy's.

Question 9

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

Question 10

Figure 11-17  
-Refer to Figure 11-17. Assume that production isoquants are convex. Total cost and output produced must increase for each of the following movements except one. Which movement is the exception?

Accepted Answer

A)  point a to point b 
B)  point a to point c 
C)  point b to point c 
D)  point b to point d 
A)  point a to point b 
B)  point a to point c 
C)  point b to point c 
D)  point b to point d

Question 11

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 12

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

Accepted Answer

A) True 
 B)False

Question 13

The level of output at which all economies of scale have been exhausted is known as

Accepted Answer

A)  constant returns to scale. 
B)  minimum efficient scale. 
C)  the economically efficient output level. 
D)  optimal economic size. 
A)  constant returns to scale. 
B)  minimum efficient scale. 
C)  the economically efficient output level. 
D)  optimal economic size.

Question 14

Figure 11-13  
-Refer to Figure 11-13. The lines shown in the diagram are isocost lines. A movement from CE to BD occurs when

Accepted Answer

A)  the price of capital increases while the price of labor remains unchanged. 
B)  the price of labor decreases while the price of capital remains unchanged. 
C)  the price of capital increases while the price of labor decreases. 
D)  the price of capital decreases while the price of labor increases. 
A)  the price of capital increases while the price of labor remains unchanged. 
B)  the price of labor decreases while the price of capital remains unchanged. 
C)  the price of capital increases while the price of labor decreases. 
D)  the price of capital decreases while the price of labor increases.

Question 15

Bill owns "Bill's Home of Blues" a store that specializes 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 16

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

A) True 
 B)False

Question 17

The minimum efficient scale is

Accepted Answer

A)  the level of output where diminishing returns have not set in yet. 
B)  the plant size that yields the most profit. 
C)  level of operation where long-run average costs are lowest. 
D)  the smallest output level where the firm finally reaches productive efficiency. 
A)  the level of output where diminishing returns have not set in yet. 
B)  the plant size that yields the most profit. 
C)  level of operation where long-run average costs are lowest. 
D)  the smallest output level where the firm finally reaches productive efficiency.

Question 18

Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.

Accepted Answer

A) True 
 B)False

Question 19

In economics, what is the difference between the short run and the long run?

Accepted Answer

In economics, the short run refers to th

Question 20

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her explicit costs?

Accepted Answer

A)  $45,000 
B)  $45,500 
C)  $47,000 
D)  $87,000 
A)  $45,000 
B)  $45,500 
C)  $47,000 
D)  $87,000

Exam 11: Technology, Production, and Costs

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

Figure 11-16 -Refer to Figure 11-16. The figure above illustrates a series of isoquants. Which of the following statements is true?

Figure 11-12 -Refer to Figure 11-12. The movement from isoquant T to isoquant U depicts

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

Suppose the price of capital and labor remain constant but that the average educational level of workers has increased and therefore, productivity of labor increases. This would lead a firm

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.

Figure 11-17 -Refer to Figure 11-17. Assume that production isoquants are convex. Total cost and output produced must increase for each of the following movements except one. Which movement is the exception?

Which of the following statements is false?

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

The level of output at which all economies of scale have been exhausted is known as

Figure 11-13 -Refer to Figure 11-13. The lines shown in the diagram are isocost lines. A movement from CE to BD occurs when

Bill owns "Bill's Home of Blues" a store that specializes 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

Average total cost is equal to average variable cost minus average fixed cost.

The minimum efficient scale is

Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.

In economics, what is the difference between the short run and the long run?

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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