Question 1

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

Accepted Answer

A) True 
 B)False

Question 2

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 3

An avocado orchard employs five full-time workers.Currently,the average product of labor is 120 pounds of avocados per day.The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados.The average product of the six workers will now be

Accepted Answer

A) more than 120 pounds. 
B) less than 120 pounds. 
C) equal to 120 pounds. 
D) greater than the marginal product of labor. 
A) more than 120 pounds. 
B) less than 120 pounds. 
C) equal to 120 pounds. 
D) greater than the marginal product of labor.

Question 4

Consider a firm that uses two inputs,labor and capital,to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Accepted Answer

A) The law of diminishing returns: for a given decline in capital,decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor,which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital,increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes;therefore,a firm must replace decreases in capital with increases in labor. 
A) The law of diminishing returns: for a given decline in capital,decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor,which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital,increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes;therefore,a firm must replace decreases in capital with increases in labor.

Question 5

If a firm is experiencing diseconomies of scale,its long-run average cost curve is increasing.

Accepted Answer

A) True 
 B)False

Question 6

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 11-1.What is the marginal product of the 4th worker?

Accepted Answer

A) 137 pounds 
B) 50 pounds 
C) 12.5 pounds 
D) 5 pounds 
A) 137 pounds 
B) 50 pounds 
C) 12.5 pounds 
D) 5 pounds

Question 7

Consider a manufacturing operation that uses specialized machinery and labor to produce its output.In this case,the input that is not fixed in the short run is labor.

Accepted Answer

A) True 
 B)False

Question 8

$$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Lanterns }
\end{array} & \begin{array} { c } 
\text { Fixed Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Average Total } \
\text { Cost (dollars) }
\end{array} \
\hline 75 & 200 & 170 & 370 & 4.93 \
\hline 80 & 200 & 230 & 430 & 5.36 \
\hline 90 & 200 & & & 7.67 \
\hline 100 & 200 & 810 & & \
\hline 115 & 200 & & & 11.8 \
\hline 117 & 200 & 1264 & 1464 & 12.5 \
\hline 120 & 200 & 1480 & & \
\hline
\end{array}$$ Table 11-7 shows cost data for Lotus Lanterns,a producer of whimsical night lights.
-Refer to Table 11-7.What is the marginal cost per unit of production when the firm produces 100 lanterns?

Accepted Answer

A) $420 
B) $32 
C) $11.1 
D) $8.1 
A) $420 
B) $32 
C) $11.1 
D) $8.1

Question 9

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Accepted Answer

A) Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B) Model A cars made at the River Rouge plant failed to earn Ford a profit.Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C) Model A cars made at the River Rouge plant failed to earn a profit.Ford reduced the average cost of the Model A by cutting its employees' wages. 
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike. 
A) Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B) Model A cars made at the River Rouge plant failed to earn Ford a profit.Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C) Model A cars made at the River Rouge plant failed to earn a profit.Ford reduced the average cost of the Model A by cutting its employees' wages. 
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.

Question 10

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 11

Which of the following costs will not change as output changes?

Accepted Answer

A) marginal cost 
B) total variable cost 
C) average variable cost 
D) average fixed cost 
E) total fixed cost 
A) marginal cost 
B) total variable cost 
C) average variable cost 
D) average fixed cost 
E) total fixed cost

Question 12

Which of the following is not a reason why firms experience economies of scale?

Accepted Answer

A) Technology can make it possible to increase production with a smaller increase in at least one input. 
B) Workers and managers can become more specialized,enabling them to be more productive. 
C) Larger firms may be able to purchase inputs at lower costs than smaller competitors. 
D) As output increases,the managers can begin to have difficulty coordinating the operations of their firms. 
A) Technology can make it possible to increase production with a smaller increase in at least one input. 
B) Workers and managers can become more specialized,enabling them to be more productive. 
C) Larger firms may be able to purchase inputs at lower costs than smaller competitors. 
D) As output increases,the managers can begin to have difficulty coordinating the operations of their firms.

Question 13

Describe the relationship between marginal cost and average total cost.

Accepted Answer

If marginal cost for a given output is b

Question 14

The explicit cost of production is also called

Accepted Answer

A) variable cost. 
B) accounting cost. 
C) direct cost. 
D) overhead cost. 
A) variable cost. 
B) accounting cost. 
C) direct cost. 
D) overhead cost.

Question 15

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.The minimum efficient scale of output is reached at what rate of output?

Accepted Answer

A) 10,000 workers 
B) 5,000 picture frames 
C) 20,000 picture frames 
D) 10,000 picture frames 
A) 10,000 workers 
B) 5,000 picture frames 
C) 20,000 picture frames 
D) 10,000 picture frames

Question 16

Which of the following is an example of positive technological change?

Accepted Answer

A) A firm offers workers a higher wage to work on weekends and at night.As a result,the firm is able to increase its weekly production of surf boards. 
B) A firm buys an additional machine that it uses to make surf boards.As a result,the firm is able to increase its weekly production of surf boards. 
C) A firm conducts a new advertising campaign.As a result,the demand for the firm's surf boards increases. 
D) A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day. 
A) A firm offers workers a higher wage to work on weekends and at night.As a result,the firm is able to increase its weekly production of surf boards. 
B) A firm buys an additional machine that it uses to make surf boards.As a result,the firm is able to increase its weekly production of surf boards. 
C) A firm conducts a new advertising campaign.As a result,the demand for the firm's surf boards increases. 
D) A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.

Question 17

Marginal cost is the

Accepted Answer

A) change in average cost when an additional unit of output is produced. 
B) the additional output when total cost is increased by one dollar. 
C) additional cost of producing an additional unit of output. 
D) change in the price of inputs if a firm buys more inputs to produce an additional unit of output. 
A) change in average cost when an additional unit of output is produced. 
B) the additional output when total cost is increased by one dollar. 
C) additional cost of producing an additional unit of output. 
D) change in the price of inputs if a firm buys more inputs to produce an additional unit of output.

Question 18

If production displays constant returns to scale,then all economies of scale have been exhausted.

Accepted Answer

A) True 
 B)False

Question 19

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

Accepted Answer

Consider a variable input such as labor.

Question 20

All of the following statements are true of the minimum efficient scale except one.Which one?

Accepted Answer

A) All possible economies of scale have been exhausted. 
B) The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C) Any increase in the scale of operation will encounter either constant returns to scale or diseconomies of scale. 
D) An increase in the output level will increase profit. 
A) All possible economies of scale have been exhausted. 
B) The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C) Any increase in the scale of operation will encounter either constant returns to scale or diseconomies of scale. 
D) An increase in the output level will increase profit.

Exam 11: Technology,production,and Costs

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

The law of diminishing marginal returns

An avocado orchard employs five full-time workers.Currently,the average product of labor is 120 pounds of avocados per day.The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados.The average product of the six workers will now be

Consider a firm that uses two inputs,labor and capital,to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

If a firm is experiencing diseconomies of scale,its long-run average cost curve is increasing.

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.What is the marginal product of the 4th worker?

Consider a manufacturing operation that uses specialized machinery and labor to produce its output.In this case,the input that is not fixed in the short run is labor.

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

The marginal rate of technical substitution is

Which of the following costs will not change as output changes?

Which of the following is not a reason why firms experience economies of scale?

Describe the relationship between marginal cost and average total cost.

The explicit cost of production is also called

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.The minimum efficient scale of output is reached at what rate of output?

Which of the following is an example of positive technological change?

Marginal cost is the

If production displays constant returns to scale,then all economies of scale have been exhausted.

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

All of the following statements are true of the minimum efficient scale except one.Which one?

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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