Question 1

Average variable costs equal

Accepted Answer

A)  total variable costs divided by marginal costs. 
B)  total variable costs divided by output. 
C)  the change in marginal costs from producing another unit of output. 
D)  output divided by the change in total costs. 
A)  total variable costs divided by marginal costs. 
B)  total variable costs divided by output. 
C)  the change in marginal costs from producing another unit of output. 
D)  output divided by the change in total costs.

Question 2

-Refer to the above figure. Curve (4) is the

Accepted Answer

A)  total fixed cost curve. 
B)  marginal product curve. 
C)  average fixed cost curve. 
D)  average variable cost curve. 
A)  total fixed cost curve. 
B)  marginal product curve. 
C)  average fixed cost curve. 
D)  average variable cost curve.

Question 3

Economists generally define the short run as being

Accepted Answer

A)  that period of time in which at least one of the firm's inputs, usually plant size, is fixed. 
B)  that period of time in which all inputs are variable. 
C)  any period of time less than one year. 
D)  any period of time less than six months. 
A)  that period of time in which at least one of the firm's inputs, usually plant size, is fixed. 
B)  that period of time in which all inputs are variable. 
C)  any period of time less than one year. 
D)  any period of time less than six months.

Question 4

When a firm uses technological improvements to increase output from the same amount of inputs, the result is

Accepted Answer

A)  a new production function. 
B)  losses. 
C)  guaranteed profits. 
D)  diseconomies of scale. 
A)  a new production function. 
B)  losses. 
C)  guaranteed profits. 
D)  diseconomies of scale.

Question 5

The law of diminishing marginal product is a statement

Accepted Answer

A)  that concerns changes in variable input and changes in output. 
B)  that concerns the long run. 
C)  that concerns changes in profits. 
D)  that relates to plant size. 
A)  that concerns changes in variable input and changes in output. 
B)  that concerns the long run. 
C)  that concerns changes in profits. 
D)  that relates to plant size.

Question 6

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

Accepted Answer

A)  exploiting the economies of scale available to it. 
B)  facing constant returns to scale. 
C)  facing diseconomies of scale. 
D)  not using the available technology efficiently. 
A)  exploiting the economies of scale available to it. 
B)  facing constant returns to scale. 
C)  facing diseconomies of scale. 
D)  not using the available technology efficiently.

Question 7

Suppose that a firm is currently producing 500 units of output. At this level of output, AVC is $1 per unit, and TFC is $500. What is the firm's TC?

Accepted Answer

A)  $1,500 
B)  $1,000 
C)  $500 
D)  $501 
A)  $1,500 
B)  $1,000 
C)  $500 
D)  $501

Question 8

-In the above table, the average product for 5 units of labor is

Accepted Answer

A)  20.0. 
B)  22.5. 
C)  25.0. 
D)  15.0. 
A)  20.0. 
B)  22.5. 
C)  25.0. 
D)  15.0.

Question 9

-Refer to the above table. When output rises from 2 units to 3 units, marginal costs are

Accepted Answer

A)  $7. 
B)  $10. 
C)  $22. 
D)  $41. 
A)  $7. 
B)  $10. 
C)  $22. 
D)  $41.

Question 10

The long run is

Accepted Answer

A)  over one year. 
B)  over five years. 
C)  when all factors of production are fixed. 
D)  the time period in which all factors of production can be varied. 
A)  over one year. 
B)  over five years. 
C)  when all factors of production are fixed. 
D)  the time period in which all factors of production can be varied.

Question 11

-According to the above table, what is the average product of labor when three laborers are employed?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

Question 12

-In the above table, the marginal product of the fourth worker is

Accepted Answer

A)  30. 
B)  25. 
C)  20. 
D)  15. 
A)  30. 
B)  25. 
C)  20. 
D)  15.

Question 13

The best way to think of the short run and the long run is as

Accepted Answer

A)  specific periods of time, although the time periods may differ across industries. 
B)  planning terms that apply to managers. 
C)  concepts that apply to all people who work for a firm. 
D)  a concept that only accountants are concerned with. 
A)  specific periods of time, although the time periods may differ across industries. 
B)  planning terms that apply to managers. 
C)  concepts that apply to all people who work for a firm. 
D)  a concept that only accountants are concerned with.

Question 14

-In the above table, the marginal product of the second worker is

Accepted Answer

A)  68. 
B)  98. 
C)  38. 
D)  It cannot be determined. 
A)  68. 
B)  98. 
C)  38. 
D)  It cannot be determined.

Question 15

A decrease 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 16

If a farmer buys one-hundred more acres for her flower farm, she is making a

Accepted Answer

A)  long-run decision. 
B)  short-run decision. 
C)  immediate-run decision. 
D)  variable-input decision. 
A)  long-run decision. 
B)  short-run decision. 
C)  immediate-run decision. 
D)  variable-input decision.

Question 17

Graphically, what does the marginal product curve for a labor input look like? Explain in words.

Accepted Answer

Typically, the marginal product of labor

Question 18

What happens to the marginal cost curve when the marginal physical product of labor is rising?

Accepted Answer

A)  It becomes upward sloping. 
B)  It becomes vertical. 
C)  It becomes downward sloping. 
D)  It becomes horizontal. 
A)  It becomes upward sloping. 
B)  It becomes vertical. 
C)  It becomes downward sloping. 
D)  It becomes horizontal.

Question 19

-Using the above table, the total product and average product when 3 workers are employed are

Accepted Answer

A)  36 and 12, respectively. 
B)  39 and 13, respectively. 
C)  37 and 27, respectively. 
D)  40 and 10, respectively. 
A)  36 and 12, respectively. 
B)  39 and 13, respectively. 
C)  37 and 27, respectively. 
D)  40 and 10, respectively.

Question 20

Changes in production functions are associated with changes in

Accepted Answer

A)  the level of output. 
B)  demand. 
C)  the levels of costs. 
D)  technology. 
A)  the level of output. 
B)  demand. 
C)  the levels of costs. 
D)  technology.

Exam 22: The Firm: Cost and Output Determination

Average variable costs equal

-Refer to the above figure. Curve (4) is the

Economists generally define the short run as being

When a firm uses technological improvements to increase output from the same amount of inputs, the result is

The law of diminishing marginal product is a statement

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

Suppose that a firm is currently producing 500 units of output. At this level of output, AVC is $1 per unit, and TFC is $500. What is the firm's TC?

-In the above table, the average product for 5 units of labor is

-Refer to the above table. When output rises from 2 units to 3 units, marginal costs are

The long run is

-According to the above table, what is the average product of labor when three laborers are employed?

-In the above table, the marginal product of the fourth worker is

The best way to think of the short run and the long run is as

-In the above table, the marginal product of the second worker is

A decrease in long-run average costs resulting from increases in output is

If a farmer buys one-hundred more acres for her flower farm, she is making a

Graphically, what does the marginal product curve for a labor input look like? Explain in words.

What happens to the marginal cost curve when the marginal physical product of labor is rising?

-Using the above table, the total product and average product when 3 workers are employed are

Changes in production functions are associated with changes in

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

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