Question 1

After Suzie,owner of Suzie's Sweet Shop,hires her 8th worker the average product of labor declines.Which of the following statements must be true?

Accepted Answer

A) The marginal product of the 8th worker is negative. 
B) The marginal product of the 8th worker is less than the average product of labor before the 8th worker was hired. 
C) Suzie's profits would be greater if she did not hire the 8th worker. 
D) The average product of labor is negative. 
A) The marginal product of the 8th worker is negative. 
B) The marginal product of the 8th worker is less than the average product of labor before the 8th worker was hired. 
C) Suzie's profits would be greater if she did not hire the 8th worker. 
D) The average product of labor is negative.

Question 2

Figure 11-15  
-Refer to Figure 11-15.Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

Accepted Answer

A) $3,600 
B) $1,120 
C) $592 
D) $560 
A) $3,600 
B) $1,120 
C) $592 
D) $560

Question 3

The average total cost of production

Accepted Answer

A) is the extra cost required to produce one more unit. 
B) equals the explicit cost of production. 
C) equals total cost of production divided by the level of output. 
D) equals total cost of production multiplied by the level of output. 
A) is the extra cost required to produce one more unit. 
B) equals the explicit cost of production. 
C) equals total cost of production divided by the level of output. 
D) equals total cost of production multiplied by the level of output.

Question 4

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Accepted Answer

A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity. 
A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity.

Question 5

To improve package delivery,one change UPS made involved improvements in how packages were routed.The firm started using more detailed maps to plan the routes for packages.As a result,the typical delivery driver could travel several miles less per day while delivering more packages.Which of the following statements best describes this change at UPS?

Accepted Answer

A) The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B) Technological change refers only to the introduction of new products or improvements to existing products.As such,the scenario described in the question is not technological change. 
C) The firm is able to produce more output (deliver more packages)using the same number of inputs (trucks and drivers).Therefore,UPS has implemented a positive technological change. 
D) The scenario described is an example of management efficiency and not technological change.Essentially,the chain changed its way of operating its business. 
A) The change implemented is not an example of technological change because it did not require the use of new machinery or equipment. 
B) Technological change refers only to the introduction of new products or improvements to existing products.As such,the scenario described in the question is not technological change. 
C) The firm is able to produce more output (deliver more packages)using the same number of inputs (trucks and drivers).Therefore,UPS has implemented a positive technological change. 
D) The scenario described is an example of management efficiency and not technological change.Essentially,the chain changed its way of operating its business.

Question 6

Average fixed cost is equal to

Accepted Answer

A) the amount of total cost that does not change as output changes in the short run. 
B) fixed cost divided by the quantity of output produced. 
C) fixed cost multiplied by the quantity of output produced. 
D) average total cost plus average variable cost. 
A) the amount of total cost that does not change as output changes in the short run. 
B) fixed cost divided by the quantity of output produced. 
C) fixed cost multiplied by the quantity of output produced. 
D) average total cost plus average variable cost.

Question 7

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35,what is the firm's average fixed cost at that level of output?

Accepted Answer

A) $65 
B) $50 
C) $15 
D) It is impossible to determine without additional information. 
A) $65 
B) $50 
C) $15 
D) It is impossible to determine without additional information.

Question 8

Describe how UPS has used positive technological change to improve its package handling and delivery schedule.

Accepted Answer

Some of the new technology took the form

Question 9

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.For what quantity of labor does production start to display diminishing returns?

Accepted Answer

A) for more than 1 units of labor 
B) for more than 4 units of labor 
C) for more than 5 units of labor 
D) for more than 8 units of labor 
A) for more than 1 units of labor 
B) for more than 4 units of labor 
C) for more than 5 units of labor 
D) for more than 8 units of labor

Question 10

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 11

Two stores-Lazy Guys and Ralph's Recliners-are located in the same city.Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size,so that the fixed costs of production for both stores are the same.Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production.Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

Accepted Answer

A) Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guys' average fixed costs. 
B) The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners. 
C) Ralph's explicit costs are less because Ralph owns the land on which his building is located.Lazy Guys must make lease payments for the land on which its store is located. 
D) The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys. 
A) Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guys' average fixed costs. 
B) The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners. 
C) Ralph's explicit costs are less because Ralph owns the land on which his building is located.Lazy Guys must make lease payments for the land on which its store is located. 
D) The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys.

Question 12

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Accepted Answer

A) a long-run production function. 
B) a long-run marginal cost curve. 
C) a minimum efficient scale curve. 
D) a long-run average total cost curve. 
A) a long-run production function. 
B) a long-run marginal cost curve. 
C) a minimum efficient scale curve. 
D) a long-run average total cost curve.

Question 13

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor who has a store of the same size as yours is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price,you expect to make a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

Accepted Answer

A) The competing store probably has a lower marginal cost of production. 
B) The competing store probably has a lower average variable cost of production. 
C) The competing store's goal is to maximize revenue and not profit. 
D) The competing store probably has a lower average cost because average fixed cost falls as output increases. 
A) The competing store probably has a lower marginal cost of production. 
B) The competing store probably has a lower average variable cost of production. 
C) The competing store's goal is to maximize revenue and not profit. 
D) The competing store probably has a lower average cost because average fixed cost falls as output increases.

Question 14

Which of the following statements is true?

Accepted Answer

A) As output increases,average fixed cost becomes smaller and smaller. 
B) Average fixed cost does not change as output increases. 
C) The marginal cost curve intersects the average fixed cost curve at its minimum point. 
D) When marginal cost is greater than average fixed cost,average fixed cost increases. 
A) As output increases,average fixed cost becomes smaller and smaller. 
B) Average fixed cost does not change as output increases. 
C) The marginal cost curve intersects the average fixed cost curve at its minimum point. 
D) When marginal cost is greater than average fixed cost,average fixed cost increases.

Question 15

The basic activity of a firm is

Accepted Answer

A) to set the prices of its products as high as possible. 
B) to compete with other firms that produce similar products. 
C) to provide jobs for its employees. 
D) to use inputs to produce outputs of goods and services. 
A) to set the prices of its products as high as possible. 
B) to compete with other firms that produce similar products. 
C) to provide jobs for its employees. 
D) to use inputs to produce outputs of goods and services.

Question 16

If,when a firm doubles all its inputs,its average cost of production decreases,then production displays

Accepted Answer

A) diminishing returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) declining fixed costs. 
A) diminishing returns. 
B) economies of scale. 
C) diseconomies of scale. 
D) declining fixed costs.

Question 17

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 18

Which of the following statements is true?

Accepted Answer

A) Opportunity cost = explicit cost - implicit cost. 
B) Total cost = fixed cost + implicit cost. 
C) Total cost = fixed cost + variable cost. 
D) Variable cost = wages + salaries + benefits. 
A) Opportunity cost = explicit cost - implicit cost. 
B) Total cost = fixed cost + implicit cost. 
C) Total cost = fixed cost + variable cost. 
D) Variable cost = wages + salaries + benefits.

Question 19

Figure 11-18  
-Refer to Figure 11-18.Starting from point E,a movement along the isocost to point F

Accepted Answer

A) decreases the total cost of production but not output. 
B) increases the total cost of production and decreases output. 
C) decreases both the total cost of production and output. 
D) decreases output but not the total cost of production. 
A) decreases the total cost of production but not output. 
B) increases the total cost of production and decreases output. 
C) decreases both the total cost of production and output. 
D) decreases output but not the total cost of production.

Question 20

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

Exam 11: Technology,production,and Costs

After Suzie,owner of Suzie's Sweet Shop,hires her 8th worker the average product of labor declines.Which of the following statements must be true?

Figure 11-15 -Refer to Figure 11-15.Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

The average total cost of production

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Average fixed cost is equal to

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35,what is the firm's average fixed cost at that level of output?

Describe how UPS has used positive technological change to improve its package handling and delivery schedule.

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.For what quantity of labor does production start to display diminishing returns?

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

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Which of the following statements is true?

The basic activity of a firm is

If,when a firm doubles all its inputs,its average cost of production decreases,then production displays

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

Which of the following statements is true?

Figure 11-18 -Refer to Figure 11-18.Starting from point E,a movement along the isocost to point F

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

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

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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