Question 1

The short run is

Accepted Answer

A)  a period of time during which at least one input cannot be changed. 
B)  a period of time during which no inputs can be changed. 
C)  a period of time during which all inputs can be changed. 
D)  a period of time shorter than one year. 
A)  a period of time during which at least one input cannot be changed. 
B)  a period of time during which no inputs can be changed. 
C)  a period of time during which all inputs can be changed. 
D)  a period of time shorter than one year.

Question 2

Marginal cost equals

Accepted Answer

A)  TC/Q. 
B)  TVC/Q. 
C)  TFC/Q. 
D)  change in total cost/change in output. 
A)  TC/Q. 
B)  TVC/Q. 
C)  TFC/Q. 
D)  change in total cost/change in output.

Question 3

Which of the following would NOT be a short-run decision for the firm?

Accepted Answer

A)  Recall workers who were previously laid-off. 
B)  Have labor work two hours overtime each day in order to expand output 
C)  Build another wing on the plant in order to add a new assembly line. 
D)  Place an order with a supplier for additional raw materials. 
A)  Recall workers who were previously laid-off. 
B)  Have labor work two hours overtime each day in order to expand output 
C)  Build another wing on the plant in order to add a new assembly line. 
D)  Place an order with a supplier for additional raw materials.

Question 4

The main source of diseconomies of scale is

Accepted Answer

A)  dimensional factors associated with many physical relationships. 
B)  specialization of labor. 
C)  limits to the efficient functioning of management. 
D)  improvements in production technology. 
A)  dimensional factors associated with many physical relationships. 
B)  specialization of labor. 
C)  limits to the efficient functioning of management. 
D)  improvements in production technology.

Question 5

-In the above table, the average product of the fifth worker is

Accepted Answer

A)  35. 
B)  135. 
C)  -5. 
D)  27. 
A)  35. 
B)  135. 
C)  -5. 
D)  27.

Question 6

The typical cost curves are U-shaped due to the

Accepted Answer

A)  law of diminishing marginal utility. 
B)  law of supply. 
C)  law of demand. 
D)  law of diminishing marginal product. 
A)  law of diminishing marginal utility. 
B)  law of supply. 
C)  law of demand. 
D)  law of diminishing marginal product.

Question 7

Costs that do NOT vary with output are

Accepted Answer

A)  total costs. 
B)  variable costs. 
C)  fixed costs. 
D)  marginal costs. 
A)  total costs. 
B)  variable costs. 
C)  fixed costs. 
D)  marginal costs.

Question 8

Which of the following is a long-run adjustment?

Accepted Answer

A)  A restaurant hires a new chef. 
B)  A company relocate to a new headquarter in another city. 
C)  A bank hires a new CEO. 
D)  A company hires ten new management trainees. 
A)  A restaurant hires a new chef. 
B)  A company relocate to a new headquarter in another city. 
C)  A bank hires a new CEO. 
D)  A company hires ten new management trainees.

Question 9

The time period during which all factors of production can be varied is the

Accepted Answer

A)  production time. 
B)  calendar year. 
C)  long run. 
D)  short run. 
A)  production time. 
B)  calendar year. 
C)  long run. 
D)  short run.

Question 10

Total product divided by the variable input is

Accepted Answer

A)  average total cost. 
B)  marginal cost. 
C)  average product. 
D)  marginal product. 
A)  average total cost. 
B)  marginal cost. 
C)  average product. 
D)  marginal product.

Question 11

-In the above table, the average product of the 6th worker is

Accepted Answer

A)  5. 
B)  4. 
C)  3. 
D)  0. 
A)  5. 
B)  4. 
C)  3. 
D)  0.

Question 12

What is the difference between the short run and the long run? What is the appropriate time dimension of the long run?

Accepted Answer

The short run is the time period when at

Question 13

Production functions indicate the relationship between

Accepted Answer

A)  factor costs and output prices. 
B)  factor inputs and the quantity of output. 
C)  the value of inputs and average costs. 
D)  factor inputs and factor prices. 
A)  factor costs and output prices. 
B)  factor inputs and the quantity of output. 
C)  the value of inputs and average costs. 
D)  factor inputs and factor prices.

Question 14

-In the above figure, at an output level of Q1, total variable cost is

Accepted Answer

A)  OF times Q1. 
B)  OD times Q2. 
C)  OF. 
D)  OF minus DF. 
A)  OF times Q1. 
B)  OD times Q2. 
C)  OF. 
D)  OF minus DF.

Question 15

"The short-run average total cost curve and the long-run average cost curve are both U-shaped for the same reasons." Do you agree or disagree? Why?

Accepted Answer

Disagree. The U-shaped short-run average

Question 16

For a hotdog vendor, the hotdog buns represents his

Accepted Answer

A)  fixed input. 
B)  variable input. 
C)  sunk cost. 
D)  none of the above. 
A)  fixed input. 
B)  variable input. 
C)  sunk cost. 
D)  none of the above.

Question 17

The production function

Accepted Answer

A)  gives the maximum amount of output for a given level of inputs. 
B)  gives the implicit costs for all inputs. 
C)  gives the amount of time necessary to reach the long run. 
D)  allows us to compute the difference between accounting and economic profits. 
A)  gives the maximum amount of output for a given level of inputs. 
B)  gives the implicit costs for all inputs. 
C)  gives the amount of time necessary to reach the long run. 
D)  allows us to compute the difference between accounting and economic profits.

Question 18

An increase in long-run average costs resulting from increases in output is

Accepted Answer

A)  attributed to economies of scale. 
B)  attributed to diseconomies to scale. 
C)  attributed to constant returns to scale. 
D)  attributed to the law of diminishing marginal product. 
A)  attributed to economies of scale. 
B)  attributed to diseconomies to scale. 
C)  attributed to constant returns to scale. 
D)  attributed to the law of diminishing marginal product.

Question 19

Which of the following statements is TRUE?

Accepted Answer

A)  If a firm is experiencing economies of scale, diminishing marginal product has not set in yet. 
B)  No firm would ever operate at a level of output for which it experiences diseconomies of scale. 
C)  A firm can experience diminishing marginal product and economies of scale at the same time. 
D)  Diseconomies of scale is a short-run concept, while economies of scale is a long-run concept. 
A)  If a firm is experiencing economies of scale, diminishing marginal product has not set in yet. 
B)  No firm would ever operate at a level of output for which it experiences diseconomies of scale. 
C)  A firm can experience diminishing marginal product and economies of scale at the same time. 
D)  Diseconomies of scale is a short-run concept, while economies of scale is a long-run concept.

Question 20

Suppose that when the level of output for the firm increases from 50 to 60 units, its variable costs increase from $500 to $700. What is the firm's marginal cost?

Accepted Answer

A)  $5 
B)  $10 
C)  $20 
D)  $115 
A)  $5 
B)  $10 
C)  $20 
D)  $115

Exam 22: The Firm: Cost and Output Determination

The short run is

Marginal cost equals

Which of the following would NOT be a short-run decision for the firm?

The main source of diseconomies of scale is

-In the above table, the average product of the fifth worker is

The typical cost curves are U-shaped due to the

Costs that do NOT vary with output are

Which of the following is a long-run adjustment?

The time period during which all factors of production can be varied is the

Total product divided by the variable input is

-In the above table, the average product of the 6th worker is

What is the difference between the short run and the long run? What is the appropriate time dimension of the long run?

Production functions indicate the relationship between

-In the above figure, at an output level of Q1, total variable cost is

"The short-run average total cost curve and the long-run average cost curve are both U-shaped for the same reasons." Do you agree or disagree? Why?

For a hotdog vendor, the hotdog buns represents his

The production function

An increase in long-run average costs resulting from increases in output is

Which of the following statements is TRUE?

Suppose that when the level of output for the firm increases from 50 to 60 units, its variable costs increase from $500 to $700. What is the firm's marginal cost?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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