Question 1

Figure 11-2  
-Refer to Figure 11-2.The average product of labor declines after L2 because

Accepted Answer

A)  the marginal product of labor is below the average product of labor. 
B)  the marginal product of labor is falling. 
C)  the marginal product of labor is negative. 
D)  the marginal product of labor is positive. 
A)  the marginal product of labor is below the average product of labor. 
B)  the marginal product of labor is falling. 
C)  the marginal product of labor is negative. 
D)  the marginal product of labor is positive.

Question 2

Joan Jillson owns a coffee shop.Assume that the marginal product of the labor Joan employs (MPL) equals 500 cups per week and the marginal product of her shop's capital (MPK)equals 1,000.Assume also that the wage (w)Joan pays her workers equals $250 per week and the rental price (r)of her capital - her coffee machines - equals $500 per week.Which of the following correctly analyzes whether Joan is minimizing her costs?

Accepted Answer

A)  No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w. 
B)  Yes, Joan is minimizing her costs because MPK/r equals MPL/w. 
C)  No, Joan is not minimizing her costs because MPL × w is less than MPK × r. 
D)  Yes, Joan is minimizing her costs because the she is a price-taker in the markets for labor and capital. 
A)  No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w. 
B)  Yes, Joan is minimizing her costs because MPK/r equals MPL/w. 
C)  No, Joan is not minimizing her costs because MPL × w is less than MPK × r. 
D)  Yes, Joan is minimizing her costs because the she is a price-taker in the markets for labor and capital.

Question 3

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 4

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

Accepted Answer

A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs. 
A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs.

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

What are economies of scale? What are diseconomies of scale?

Accepted Answer

Economies of scale occur when

Question 7

Diminishing marginal product of labor occurs when adding another unit of labor

Accepted Answer

A)  decreases output. 
B)  changes output by an amount smaller than the output added by the previous unit of labor. 
C)  increases output by an amount larger than the output added by the previous unit of labor. 
D)  decreases output by an amount smaller than the output added by the previous unit of labor. 
A)  decreases output. 
B)  changes output by an amount smaller than the output added by the previous unit of labor. 
C)  increases output by an amount larger than the output added by the previous unit of labor. 
D)  decreases output by an amount smaller than the output added by the previous unit of labor.

Question 8

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 9

Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist,12 for the second artist,and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?

Accepted Answer

The average product of labor i

Question 10

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

Question 11

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

Accepted Answer

A)  production function. 
B)  supply curve, or supply schedule. 
C)  marginal product of labor. 
D)  average product of labor. 
A)  production function. 
B)  supply curve, or supply schedule. 
C)  marginal product of labor. 
D)  average product of labor.

Question 12

Suppose a chain of convenience stores reorganized its system of supplying its stores with food.This led to a sharp reduction in the number of trucks that the company had to use and increased the amount of fresh food on store shelves.Which of the following statements best describes the chain stores' actions?

Accepted Answer

A)  The change implemented is not an example of technological change because it did not require the use of new machinery of equipment. 
B)  Technological change refers only to the introduction of new products or improvements to existing product. As such, the scenario described in the question is not technological change. 
C)  The firm is able to produce more output (increase its sales) using fewer inputs (less trucks). Therefore, the chain of convenience stores has implemented a positive technological change. 
D)  The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business. 
A)  The change implemented is not an example of technological change because it did not require the use of new machinery of equipment. 
B)  Technological change refers only to the introduction of new products or improvements to existing product. As such, the scenario described in the question is not technological change. 
C)  The firm is able to produce more output (increase its sales) using fewer inputs (less trucks). Therefore, the chain of convenience stores has implemented a positive technological change. 
D)  The scenario described is an example of management efficiency and not technological change. Essentially, the chain changes its way of operating its business.

Question 13

A curve that shows all the combinations of two inputs,such as labor and capital,that will produce the same level of output is called

Accepted Answer

A)  an isoquant. 
B)  an isocost line 
C)  a budget line. 
D)  an optimal input combination curve. 
A)  an isoquant. 
B)  an isocost line 
C)  a budget line. 
D)  an optimal input combination curve.

Question 14

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

Accepted Answer

Assume the two companies are o

Question 15

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Accepted Answer

A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of labor increases. 
D)  marginal product of labor increases. 
A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of labor increases. 
D)  marginal product of labor increases.

Question 16

Assume that you observe the long-run average cost curve of ACME Bookstores,a national chain.Starting from the point on the curve where output is zero and moving to the right which of the following lists the behavior of long-run average costs in the correct sequence (that is,which will be observed first,second,etc.)?

Accepted Answer

A)  minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale 
B)  economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale 
C)  constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale 
D)  economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale 
A)  minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale 
B)  economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale 
C)  constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale 
D)  economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale

Question 17

Figure 11-11   Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 11-11.If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc

Accepted Answer

A)  the firm will not be operating efficiently. 
B)  the firm will be operating efficiently. 
C)  the firm would lower its average costs by reducing its scale of operation. 
D)  the firm will not be able to earn a profit. 
A)  the firm will not be operating efficiently. 
B)  the firm will be operating efficiently. 
C)  the firm would lower its average costs by reducing its scale of operation. 
D)  the firm will not be able to earn a profit.

Question 18

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

@#IMG-DLM& @#IMG-DLM& d. @#IMG-DLM& e.If Juan can sell his fish for $2

Question 19

Jennifer Borts moves her office from the premises she rents at a local mall to her home.As a result of this move

Accepted Answer

A)  Jennifer's explicit costs fall and her implicit costs rise. 
B)  Jennifer's total costs fall. 
C)  Jennifer's implicit costs fall. 
D)  Jennifer's opportunity costs fall. 
A)  Jennifer's explicit costs fall and her implicit costs rise. 
B)  Jennifer's total costs fall. 
C)  Jennifer's implicit costs fall. 
D)  Jennifer's opportunity costs fall.

Question 20

Which of the following is an example of market "production," as used by economist?

Accepted Answer

A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Art's College stages a play at the local theatre. 
A)  Garvey takes out a low-cost government loan to start his pet-sitting business. 
B)  Heidi makes a pizza for her family's dinner. 
C)  Katrina works as a cashier at the local produce stand. 
D)  The theatre and film studies department in Fine Art's College stages a play at the local theatre.

Figure 11-2 -Refer to Figure 11-2.The average product of labor declines after L₂ because

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

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

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

What are economies of scale? What are diseconomies of scale?

Diminishing marginal product of labor occurs when adding another unit of labor

The minimum efficient scale is

Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist,12 for the second artist,and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

A curve that shows all the combinations of two inputs,such as labor and capital,that will produce the same level of output is called

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Jennifer Borts moves her office from the premises she rents at a local mall to her home.As a result of this move

Which of the following is an example of market "production," as used by economist?

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 11-2 -Refer to Figure 11-2.The average product of labor declines after L2 because

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

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

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

What are economies of scale? What are diseconomies of scale?

Diminishing marginal product of labor occurs when adding another unit of labor

The minimum efficient scale is

Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist,12 for the second artist,and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

A curve that shows all the combinations of two inputs,such as labor and capital,that will produce the same level of output is called

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Jennifer Borts moves her office from the premises she rents at a local mall to her home.As a result of this move

Which of the following is an example of market "production," as used by economist?

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

Figure 11-2 -Refer to Figure 11-2.The average product of labor declines after L₂ because