Question 1

Which of the following can a firm do in the long run but not in the short run?

Accepted Answer

A) decrease the size of its physical plant 
B) reduce its rate of output by laying off workers 
C) increase its variable costs 
D) increase its use of raw materials 
A) decrease the size of its physical plant 
B) reduce its rate of output by laying off workers 
C) increase its variable costs 
D) increase its use of raw materials

Question 2

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

Question 3

Implicit costs can be defined as

Accepted Answer

A) accounting profit minus explicit cost. 
B) the non-monetary opportunity cost of using the firm's own resources. 
C) the deferred cost of production. 
D) total cost minus fixed costs. 
A) accounting profit minus explicit cost. 
B) the non-monetary opportunity cost of using the firm's own resources. 
C) the deferred cost of production. 
D) total cost minus fixed costs.

Question 4

Table 11-6
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline\text { Quantity of } & \text { Quantity of foot } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Average } & \text { Marginal } \
\text { workers } & \text { massages per day } & \text { cost } & \text { cost } & \text { cost } & \text { total cost } & \text { cost }\
\hline0 & 0&&&&& \
\hline 1 & 10 &&&&&\
\hline 2 & 25 &&&&&\
\hline 3 & 45&&&&& \
\hline 4 & 60&&&&& \
\hline 5 & 70&&&&&\
\hline
\end{array}$  
-Refer to Table 11-6.Alicia Gregory owns a foot massage business.She leases 4 computer-controlled massage booths,for which she pays $125 per day.She cannot increase the number machines she leases without giving the manufacturer 3 months notice.She can hire as many workers as she wants at a cost of $75 per day per worker.These are the only two inputs she uses in her business.Use this information to fill in the columns in the above table.

Accepted Answer

None

Question 5

A firm's cost of production is determined by all of the following except

Accepted Answer

A) the technology used to produce its output. 
B) the productivity of its workers. 
C) the cost of raw material used in production. 
D) the amount of corporate taxes it must pay on its profit. 
A) the technology used to produce its output. 
B) the productivity of its workers. 
C) the cost of raw material used in production. 
D) the amount of corporate taxes it must pay on its profit.

Question 6

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Accepted Answer

A) investment in human capital. 
B) economies of scale. 
C) positive technological change. 
D) inspired management. 
A) investment in human capital. 
B) economies of scale. 
C) positive technological change. 
D) inspired management.

Question 7

The level of output at which all economies of scale have been exhausted is known as

Accepted Answer

A) constant returns to scale. 
B) minimum efficient scale. 
C) the economically efficient output level. 
D) optimal economic size. 
A) constant returns to scale. 
B) minimum efficient scale. 
C) the economically efficient output level. 
D) optimal economic size.

Question 8

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 9

The marginal product of labor is defined as

Accepted Answer

A) the change in total revenue that results when an additional unit of a labor is hired. 
B) the additional labor required to produce one more unit of output. 
C) the additional labor cost of producing one more unit of output. 
D) the change in output that a firm produces as a result of hiring one more worker. 
A) the change in total revenue that results when an additional unit of a labor is hired. 
B) the additional labor required to produce one more unit of output. 
C) the additional labor cost of producing one more unit of output. 
D) the change in output that a firm produces as a result of hiring one more worker.

Question 10

As output increases,average fixed cost gets smaller and smaller.

Accepted Answer

A) True 
 B)False

Question 11

An isoquant shows

Accepted Answer

A) the combinations of two goods that yield the same total satisfaction. 
B) the combinations of two inputs that yield the same total product. 
C) the combinations of two inputs that cost the same total quantity of money. 
D) the combination of two goods that cost the same amount of money. 
A) the combinations of two goods that yield the same total satisfaction. 
B) the combinations of two inputs that yield the same total product. 
C) the combinations of two inputs that cost the same total quantity of money. 
D) the combination of two goods that cost the same amount of money.

Question 12

Figure 11-17  
-Refer to Figure 11-17.Assume that production isoquants are convex.Total cost and output produced must increase for each of the following movements except one.Which movement is the exception?

Accepted Answer

A) point a to point b 
B) point a to point c 
C) point b to point c 
D) point b to point d 
A) point a to point b 
B) point a to point c 
C) point b to point c 
D) point b to point d

Question 13

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: ATCa,ATCb and ATCc.
-Refer to Figure 11-11.For output rates greater than 20,000 picture frames per month

Accepted Answer

A) the firm will not make a profit because the average cost of production will be too high. 
B) the firm will experience diseconomies of scale. 
C) the firm will experience diminishing returns. 
D) the short-run average total cost will equal the long-run average total cost of production. 
A) the firm will not make a profit because the average cost of production will be too high. 
B) the firm will experience diseconomies of scale. 
C) the firm will experience diminishing returns. 
D) the short-run average total cost will equal the long-run average total cost of production.

Question 14

The long-run average cost curve shows

Accepted Answer

A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build. 
A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build.

Question 15

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 16

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 17

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 11-1.Diminishing marginal returns sets in when the ________ worker is hired.

Accepted Answer

A) 2nd 
B) 3rd 
C) 4th 
D) None of the above;the production function displays increasing marginal returns. 
A) 2nd 
B) 3rd 
C) 4th 
D) None of the above;the production function displays increasing marginal returns.

Question 18

The production function shows

Accepted Answer

A) the total cost of producing a given quantity of output. 
B) the maximum output that can be produced from each possible quantity of inputs. 
C) the technology used to produce output. 
D) the incremental output gained by improving the production process. 
A) the total cost of producing a given quantity of output. 
B) the maximum output that can be produced from each possible quantity of inputs. 
C) the technology used to produce output. 
D) the incremental output gained by improving the production process.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The shape of the average total cost curve is determined by the shape of

Accepted Answer

A) the marginal cost curve. 
B) the average fixed cost curve. 
C) the average product curve. 
D) the firm's production function. 
A) the marginal cost curve. 
B) the average fixed cost curve. 
C) the average product curve. 
D) the firm's production function.

Exam 11: Technology,production,and Costs

Which of the following can a firm do in the long run but not in the short run?

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

Implicit costs can be defined as

A firm's cost of production is determined by all of the following except

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

The level of output at which all economies of scale have been exhausted is known as

The marginal product of labor is defined as

The marginal product of labor is defined as

As output increases,average fixed cost gets smaller and smaller.

An isoquant shows

Figure 11-17 -Refer to Figure 11-17.Assume that production isoquants are convex.Total cost and output produced must increase for each of the following movements except one.Which movement is the exception?

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: ATCa,ATCb and ATCc. -Refer to Figure 11-11.For output rates greater than 20,000 picture frames per month

The long-run average cost curve shows

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 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

1eaaa28_a9cb_7b34_9b29_2f66e61cebfd_TB3018_00_TB3018_00_TB3018_00 Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 11-1.Diminishing marginal returns sets in when the ________ worker is hired.

The production function shows

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

The shape of the average total cost curve is determined by the shape of

Economics: Foundations and Models

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