Question 1

Which of the following equations is correct?

Accepted Answer

A)  AVC - ATC = AFC 
B)  AVC + ATC = AFC 
C)  AFC + AVC = ATC 
D)  ATC + AVC = AFC 
A)  AVC - ATC = AFC 
B)  AVC + ATC = AFC 
C)  AFC + AVC = ATC 
D)  ATC + AVC = AFC

Question 2

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor who has a store of the same size as yours is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price,you expect to make a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

Accepted Answer

A)  The competing store probably has a lower marginal cost of production. 
B)  The competing store probably has a lower average variable cost of production. 
C)  The competing store's goal is to maximize revenue and not profit. 
D)  The competing store probably has a lower average cost because average fixed cost falls as output increases. 
A)  The competing store probably has a lower marginal cost of production. 
B)  The competing store probably has a lower average variable cost of production. 
C)  The competing store's goal is to maximize revenue and not profit. 
D)  The competing store probably has a lower average cost because average fixed cost falls as output increases.

Question 3

State the law of diminishing marginal returns.

Accepted Answer

As more units of a variable in

Question 4

If the long-run average total cost curve is downward-sloping,then the firm is experiencing decreasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 5

Table 11-3
  
 Table 11-3 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 11-3.What is the marginal cost per unit of production when the firm produces 100 lanterns?

Accepted Answer

A)  $420 
B)  $32 
C)  $11.1 
D)  $8.1 
A)  $420 
B)  $32 
C)  $11.1 
D)  $8.1

Question 6

Figure 11-2  
-Refer to Figure 11-2.The curve labeled "E" is

Accepted Answer

A)  the total product curve. 
B)  the average product curve. 
C)  the marginal product curve. 
D)  the output supply curve. 
A)  the total product curve. 
B)  the average product curve. 
C)  the marginal product curve. 
D)  the output supply curve.

Question 7

Figure 11-5  
-Refer to Figure 11-5.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Accepted Answer

A)  In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C)  In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37. 
A)  In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C)  In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question 8

As the level of output increases,what happens to the value of average fixed cost,and what happens to the difference between the value of average total cost and average variable cost?

Accepted Answer

As the level of output increases,the val

Question 9

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

Accepted Answer

In economics,the short run refers to the

Question 10

Figure 11-8   
Figure 11-8 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-8.Consider the following statements:
 a.For each country,the marginal product per dollar spent on labor equals to the marginal product per dollar spent on capital.
b.The price of labor is relatively higher in the United States than in China and the price of capital is relatively lower in the United States than in China.
c.The price of labor and the price of capital are relatively higher in the United States than in China.Based on the figure,which of the statements above is true?

Accepted Answer

A)  All of the statements are true. 
B)  statements a and c only 
C)  statements a and b only 
D)  statements b and c only 
A)  All of the statements are true. 
B)  statements a and c only 
C)  statements a and b only 
D)  statements b and c only

Question 11

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 12

If a producer is not able to expand its plant capacity immediately,it is

Accepted Answer

A)  bankrupt. 
B)  operating in the long run. 
C)  operating in the short run. 
D)  losing money. 
A)  bankrupt. 
B)  operating in the long run. 
C)  operating in the short run. 
D)  losing money.

Question 13

Ford Motor Company started producing the Model A at plants scattered around the United States

Accepted Answer

A)  to save on transport costs. 
B)  because diseconomies of scale at its initial River Rouge plant resulted in high production costs. 
C)  to locate its production centers closer to its customers. 
D)  because it was not able to attract skilled workers in Michigan (where its first plant was located). 
A)  to save on transport costs. 
B)  because diseconomies of scale at its initial River Rouge plant resulted in high production costs. 
C)  to locate its production centers closer to its customers. 
D)  because it was not able to attract skilled workers in Michigan (where its first plant was located).

Question 14

The average total cost of production

Accepted Answer

A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied times the level of output. 
A)  is the extra cost required to produce one more unit. 
B)  equals the explicit cost of production. 
C)  equals total cost of production divided by the level of output. 
D)  equals total cost of production multiplied times the level of output.

Question 15

Figure 11-7  
-Refer to Figure 11-7.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 16

Describe the relationship between marginal cost and average total cost.

Accepted Answer

If marginal cost for a given output is b

Question 17

A firm has successfully adopted a positive technological change when

Accepted Answer

A)  it can produce more output using the same inputs. 
B)  it produces less pollution in its production process. 
C)  can pay its workers less yet increase its output. 
D)  it sees an increase in worker productivity. 
A)  it can produce more output using the same inputs. 
B)  it produces less pollution in its production process. 
C)  can pay its workers less yet increase its output. 
D)  it sees an increase in worker productivity.

Question 18

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 19

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

Accepted Answer

A) True 
 B)False

Question 20

Explain how the listed events (a-d)would affect the following at Hilton Hotels.
i.Marginal cost
ii.Average variable cost
iii.Average fixed cost
iv.Average total cost
a.Hilton decides on an across-the-board 5 percent increase in executive salaries.
b.Hilton decides to eliminate all print advertising.
c.Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers.
d.The federal government starts to levy a $5 room tax on all hotel rooms.

Accepted Answer

a.Average fixed cost and average total c

Exam 11: Technology, production, and Costs

Which of the following equations is correct?

State the law of diminishing marginal returns.

If the long-run average total cost curve is downward-sloping,then the firm is experiencing decreasing returns to scale.

Table 11-3 Table 11-3 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-3.What is the marginal cost per unit of production when the firm produces 100 lanterns?

Figure 11-2 -Refer to Figure 11-2.The curve labeled "E" is

Figure 11-5 -Refer to Figure 11-5.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

As the level of output increases,what happens to the value of average fixed cost,and what happens to the difference between the value of average total cost and average variable cost?

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

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?

If a producer is not able to expand its plant capacity immediately,it is

Ford Motor Company started producing the Model A at plants scattered around the United States

The average total cost of production

Figure 11-7 -Refer to Figure 11-7.The lines shown in the diagram are isocost lines.A movement from CE to BD occurs when

Describe the relationship between marginal cost and average total cost.

A firm has successfully adopted a positive technological change when

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

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

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

Filters

Figure 11-5 -Refer to Figure 11-5.Suppose for the past 8 years the firm has been producing Q_d units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Q_c units.What will happen to its average cost of production?