Question 1

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

Accepted Answer

A)  at the same level of output as the minimum point of the average variable cost. 
B)  at a larger level of output than the minimum point of the average variable cost. 
C)  at a lower level of output than the minimum point of the average variable cost. 
D)  at the same level of output as the maximum of the total product curve. 
A)  at the same level of output as the minimum point of the average variable cost. 
B)  at a larger level of output than the minimum point of the average variable cost. 
C)  at a lower level of output than the minimum point of the average variable cost. 
D)  at the same level of output as the maximum of the total product curve.

Question 2

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 3

Figure 11-13  
-Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,then along the isocost AF,the total cost

Accepted Answer

A)  is $500. 
B)  is $750. 
C)  is $1,250. 
D)  cannot be determined without the price of capital. 
A)  is $500. 
B)  is $750. 
C)  is $1,250. 
D)  cannot be determined without the price of capital.

Question 4

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 5

In the world oil market,oil is supplied up to the point where

Accepted Answer

A)  the marginal cost of the last barrel is just equal to the price buyers are willing to pay for that last barrel. 
B)  the marginal cost of the last barrel is zero. 
C)  the marginal cost of the last barrel is the greatest distance from the price buyers are willing to pay for that last barrel. 
D)  the marginal cost of the last barrel is at a maximum. 
A)  the marginal cost of the last barrel is just equal to the price buyers are willing to pay for that last barrel. 
B)  the marginal cost of the last barrel is zero. 
C)  the marginal cost of the last barrel is the greatest distance from the price buyers are willing to pay for that last barrel. 
D)  the marginal cost of the last barrel is at a maximum.

Question 6

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 7

Figure 11-8  
-Refer to Figure 11-8 above to answer the following questions.
a.Identify the curves in the diagram.
A ________
B ________
C ________
b.What is the numerical value of fixed cost when the quantity of output=10?
c.What is the numerical value of variable cost when the quantity of output=10?
d.What is the numerical value of total cost when the quantity of output =10?
e.What is the numerical value of average fixed cost when the quantity of output =10?
f.What is the numerical value of average total cost when the quantity of output =10?
g.On the graph identify the area that represents the total variable cost of production when the quantity of output =10.
h.On the graph identify the area that represents the fixed cost of production when the quantity of output =10.

Accepted Answer

a.A=Marginal cost curve; B = A

Question 8

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Accepted Answer

A)  the firm can afford more sophisticated technology in production. 
B)  labor and management can specialize even further in their tasks. 
C)  as a larger input buyer, the firm can purchase inputs at a lower per unit cost. 
D)  as a firm expands its production, its profit margin per-unit of output increases. 
A)  the firm can afford more sophisticated technology in production. 
B)  labor and management can specialize even further in their tasks. 
C)  as a larger input buyer, the firm can purchase inputs at a lower per unit cost. 
D)  as a firm expands its production, its profit margin per-unit of output increases.

Question 9

Economic costs of production differ from accounting costs in that

Accepted Answer

A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic cost. 
A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic cost.

Question 10

Figure 11-6   Figure 11-6 contains information about the short run cost structure of a firm.
-Refer to Figure 11-6.In the figure above which letter represents the marginal cost curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 11

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 12

The law of diminishing marginal returns

Accepted Answer

A)  sets in because not all workers are equally productive. 
B)  applies only in the short run. 
C)  holds even when there are no fixed factors. 
D)  ultimately explains why production displays diseconomies of scale. 
A)  sets in because not all workers are equally productive. 
B)  applies only in the short run. 
C)  holds even when there are no fixed factors. 
D)  ultimately explains why production displays diseconomies of scale.

Question 13

Suppose a firm uses labor and capital to produce output.The last unit of labor hired has a marginal product of 12 units of output,and the last unit of capital employed has a marginal product of 20 units.Use the optimal combination of inputs rule to calculate the price of capital if the price of labor is $6 per unit.The price of capital is

Accepted Answer

A)  $2. 
B)  $10. 
C)  $20. 
D)  impossible to determine with the information given. 
A)  $2. 
B)  $10. 
C)  $20. 
D)  impossible to determine with the information given.

Question 14

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 15

Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours,asking his current employees to work more hours,or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his

Accepted Answer

A)  long-run production function. 
B)  production possibilities frontier. 
C)  short-run production function. 
D)  cost function. 
A)  long-run production function. 
B)  production possibilities frontier. 
C)  short-run production function. 
D)  cost function.

Question 16

Figure 11-10  
-Refer to Figure 11-10.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 17

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output,what is the marginal product of the 12th worker?

Accepted Answer

A)  0.16 
B)  3 
C)  4.67 
D)  36 
A)  0.16 
B)  3 
C)  4.67 
D)  36

Question 18

Table 11-9
  
-Refer to Table 11-9.Clock It To Me manufactures clock radios.The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes.
a.You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes.Record your calculations in the table below.
Average Cost of Production
   b.For each of the three output levels,which plant size will generate the lowest average total cost of production?
c.Suppose the firm currently sells 8,000 clock radios per period (using the optimal plant size for this output level).Now,however,it has just secured a long-term contract to supply 20,000 clock radios per period.In the short run,what is the average total cost of producing 20,000 clock radios? Provide a numerical value based on your answer in part a.
d.What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.

Accepted Answer

a.
Average Cost of Production
 @#IMG-DLM& b.For an

Question 19

Suppose the total cost of producing 40,000 flash drives is $120,000,and the fixed cost is $30,000.
a.What is the variable cost?
b.When output is 40,000,what are the average variable cost and the average fixed cost?
c.Assuming the cost curves have the usual shape,is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain.

Accepted Answer

a.Variable cost = total cost - fixed cos

Question 20

Figure 11-3   Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run.
-Refer to Figure 11-3.Which of the following statements correctly describes the curves in the figure?

Accepted Answer

A)  The marginal product of labor curve is represented by curve A and the average product of labor curve is represented by curve B. 
B)  The marginal product of labor curve is represented by curve B and the average product of labor curve is represented by curve A. 
C)  Curve A could represent either the average product curve or the marginal product and curve. Curve B represents the total product curve. 
D)  Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve. 
A)  The marginal product of labor curve is represented by curve A and the average product of labor curve is represented by curve B. 
B)  The marginal product of labor curve is represented by curve B and the average product of labor curve is represented by curve A. 
C)  Curve A could represent either the average product curve or the marginal product and curve. Curve B represents the total product curve. 
D)  Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve.

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

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

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,then along the isocost AF,the total cost

The short run is the time period during which a firm has at least one input constraint.

In the world oil market,oil is supplied up to the point where

An isocost line shows

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Economic costs of production differ from accounting costs in that

Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6.In the figure above which letter represents the marginal cost curve?

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?

The law of diminishing marginal returns

The marginal rate of technical substitution is

Figure 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Q_dunits 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?

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output,what is the marginal product of the 12th worker?

Figure 11-3 Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 11-3.Which of the following statements correctly describes the curves in the figure?

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

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

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

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,then along the isocost AF,the total cost

The short run is the time period during which a firm has at least one input constraint.

In the world oil market,oil is supplied up to the point where

An isocost line shows

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Economic costs of production differ from accounting costs in that

Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6.In the figure above which letter represents the marginal cost curve?

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?

The law of diminishing marginal returns

The marginal rate of technical substitution is

Figure 11-10 -Refer to Figure 11-10.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?

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output,what is the marginal product of the 12th worker?

Figure 11-3 Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. -Refer to Figure 11-3.Which of the following statements correctly describes the curves in the figure?

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 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Q_dunits 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?