Question 1

If a firm experiences diminishing returns its marginal product must be negative.

Accepted Answer

A) True 
 B)False

Question 2

The Santa Fe Spark Plug Company supplies spark plugs to automotive parts dealers.An increase in the demand for its product led Santa Fe to hire 150 new workers.Santa Fe also plans to expand the capacity of its plant but this project will take 2 years to complete.Which of the following statements is true?

Accepted Answer

A)  The wages and benefits paid to the new workers are implicit costs. 
B)  The long run for Santa Fe is longer than 1 year. 
C)  The short run for Santa Fe is 1 year. 
D)  In the short run Santa Fe's variable costs increase but its fixed costs decrease. 
A)  The wages and benefits paid to the new workers are implicit costs. 
B)  The long run for Santa Fe is longer than 1 year. 
C)  The short run for Santa Fe is 1 year. 
D)  In the short run Santa Fe's variable costs increase but its fixed costs decrease.

Question 3

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 4

Which of the following statements is false?

Accepted Answer

A)  Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B)  When marginal cost is less than average total cost, average total cost will fall. 
C)  When marginal cost is greater than average total cost, average total cost will rise. 
D)  Marginal cost will equal average total cost when average total cost is at its lowest point. 
A)  Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B)  When marginal cost is less than average total cost, average total cost will fall. 
C)  When marginal cost is greater than average total cost, average total cost will rise. 
D)  Marginal cost will equal average total cost when average total cost is at its lowest point.

Question 5

Figure 11-7   Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7.When output level is 100,what is the total cost of production?

Accepted Answer

A)  $20 
B)  $1,000 
C)  $1,200 
D)  $2,000 
A)  $20 
B)  $1,000 
C)  $1,200 
D)  $2,000

Question 6

Figure 11-18  
-Refer to Figure 11-18.A curve that connects points a,d and e is called

Accepted Answer

A)  an input-output curve. 
B)  a total cost line. 
C)  an expansion path. 
D)  an indifference line. 
A)  an input-output curve. 
B)  a total cost line. 
C)  an expansion path. 
D)  an indifference line.

Question 7

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 8

The president of Toyota's Georgetown plant was quoted as saying,"Demand for high volumes saps your energy.Over a period of time,it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that

Accepted Answer

A)  Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with. 
B)  as Toyota expanded its capacity, it experienced diseconomies of scale. 
C)  Toyota was focused on "churning" out cars for which it did not invest sufficiently in training its workers. 
D)  high demand for Toyota's cars prevented the company from focusing on its strength: auto design. 
A)  Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with. 
B)  as Toyota expanded its capacity, it experienced diseconomies of scale. 
C)  Toyota was focused on "churning" out cars for which it did not invest sufficiently in training its workers. 
D)  high demand for Toyota's cars prevented the company from focusing on its strength: auto design.

Question 9

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

Accepted Answer

A)  opportunity cost of inputs. 
B)  marginal rate of technical substitution. 
C)  input trade-off rate. 
D)  isoquant substitution rate. 
A)  opportunity cost of inputs. 
B)  marginal rate of technical substitution. 
C)  input trade-off rate. 
D)  isoquant substitution rate.

Question 10

Figure 11-9  
-Refer to Figure 11-9 above to solve the following problems.
a.Calculate the fixed cost of production.
b.Calculate the average total cost of production when the firm produces 20 units of output.
c.Calculate the average variable cost of production when the firm produces 20 units of output.
d.Calculate the average fixed cost of production when the firm produces 20 units of output.
e.Calculate the average fixed cost of production when the firm produces 15 units of output.
f.If the firm increases output from 15 to 20 units what is the marginal cost of output?

Accepted Answer

a.$100
b.$

Question 11

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.The minimum efficient scale of output is reached at what rate of output?

Accepted Answer

A)  10,000 workers 
B)  5,000 picture frames 
C)  20,000 picture frames 
D)  10,000 picture frames 
A)  10,000 workers 
B)  5,000 picture frames 
C)  20,000 picture frames 
D)  10,000 picture frames

Question 12

The marginal product of labor is defined as

Accepted Answer

A)  the additional sales revenue that results when one more worker is hired. 
B)  the additional output that results when one more worker is hired, holding all other resources constant. 
C)  the additional number of workers required to produce one more unit of output. 
D)  the cost of hiring one more worker. 
A)  the additional sales revenue that results when one more worker is hired. 
B)  the additional output that results when one more worker is hired, holding all other resources constant. 
C)  the additional number of workers required to produce one more unit of output. 
D)  the cost of hiring one more worker.

Question 13

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Accepted Answer

A) True 
 B)False

Question 14

The total output produced by a firm divided by the quantity of workers employed by the firm is the definition of

Accepted Answer

A)  the marginal product of labor. 
B)  the division of labor. 
C)  the average product of labor. 
D)  the average cost of production. 
A)  the marginal product of labor. 
B)  the division of labor. 
C)  the average product of labor. 
D)  the average cost of production.

Question 15

Economists Cade Massey and Richard Thaler analyzed whether teams in the National Football League distributed salaries efficiently.Massey and Thaler found that

Accepted Answer

A)  the first few players selected in first round of the NFL draft are paid much higher salaries relative to their marginal products than players drafted later in the first round. 
B)  rookies are paid salaries greater than their marginal products; veteran players are paid salaries less than their marginal products. 
C)  veteran players who sign as free agents are paid more relative to their marginal products than rookie players selected in the first round of the draft. 
D)  both rookie players and veteran players are paid less than the value of their marginal products because of the lack of competition among teams. 
A)  the first few players selected in first round of the NFL draft are paid much higher salaries relative to their marginal products than players drafted later in the first round. 
B)  rookies are paid salaries greater than their marginal products; veteran players are paid salaries less than their marginal products. 
C)  veteran players who sign as free agents are paid more relative to their marginal products than rookie players selected in the first round of the draft. 
D)  both rookie players and veteran players are paid less than the value of their marginal products because of the lack of competition among teams.

Question 16

Figure 11-15  
-Refer to Figure 11-15.What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

Accepted Answer

A)  combination e: 10 hours of labor and 48 units of capital 
B)  combination f: 40 hours of labor and 24 units of capital 
C)  combination g: 60 hours of labor and 14 units of capital 
D)  combination h: 60 hours of labor and 9 units of capital 
A)  combination e: 10 hours of labor and 48 units of capital 
B)  combination f: 40 hours of labor and 24 units of capital 
C)  combination g: 60 hours of labor and 14 units of capital 
D)  combination h: 60 hours of labor and 9 units of capital

Question 17

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 18

Higher isocost lines correspond to higher

Accepted Answer

A)  profits. 
B)  total costs of production. 
C)  input prices. 
D)  sales revenue. 
A)  profits. 
B)  total costs of production. 
C)  input prices. 
D)  sales revenue.

Question 19

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 20

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

If a firm experiences diminishing returns its marginal product must be negative.

As a firm moves to higher isocost lines

Which of the following statements is false?

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7.When output level is 100,what is the total cost of production?

Figure 11-18 -Refer to Figure 11-18.A curve that connects points a,d and e is called

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

The president of Toyota's Georgetown plant was quoted as saying,"Demand for high volumes saps your energy.Over a period of time,it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

The marginal product of labor is defined as

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

The total output produced by a firm divided by the quantity of workers employed by the firm is the definition of

Economists Cade Massey and Richard Thaler analyzed whether teams in the National Football League distributed salaries efficiently.Massey and Thaler found that

Figure 11-15 -Refer to Figure 11-15.What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

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

Higher isocost lines correspond to higher

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

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

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

If a firm experiences diminishing returns its marginal product must be negative.

As a firm moves to higher isocost lines

Which of the following statements is false?

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7.When output level is 100,what is the total cost of production?

Figure 11-18 -Refer to Figure 11-18.A curve that connects points a,d and e is called

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

The president of Toyota's Georgetown plant was quoted as saying,"Demand for high volumes saps your energy.Over a period of time,it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

The marginal product of labor is defined as

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

The total output produced by a firm divided by the quantity of workers employed by the firm is the definition of

Economists Cade Massey and Richard Thaler analyzed whether teams in the National Football League distributed salaries efficiently.Massey and Thaler found that

Figure 11-15 -Refer to Figure 11-15.What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

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

Higher isocost lines correspond to higher

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

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

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