Question 1

An expansion path shows

Accepted Answer

A) the level of sales necessary for a firm if it wants to expand. 
B) the level of long-run average cost at different scales of operation. 
C) the least-cost combination of inputs for each level of output. 
D) the returns to scale at each level of output. 
A) the level of sales necessary for a firm if it wants to expand. 
B) the level of long-run average cost at different scales of operation. 
C) the least-cost combination of inputs for each level of output. 
D) the returns to scale at each level of output.

Question 2

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output,what is the marginal product of the 12th worker?

Accepted Answer

A) 0.16 
B) 3 
C) 4.67 
D) 36 
A) 0.16 
B) 3 
C) 4.67 
D) 36

Question 3

Explain how the listed events (a-d)would affect the following at Hilton Hotels.
i.Marginal cost
ii.Average variable cost
iii.Average fixed cost
iv.Average total cost
a.Hilton decides on an across-the-board 5 percent increase in executive salaries.
b.Hilton decides to eliminate all print advertising.
c.Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers.
d.The federal government starts to levy a $5 room tax on all hotel rooms.

Accepted Answer

a.Average fixed cost and average total c

Question 4

Figure 11-10  
-Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Accepted Answer

A) In the short run,its average cost falls from $47 to $41,and in the long run,average cost falls even further to $37. 
B) In the short run,its average cost rises from $47 to $55,and in the long run,average cost falls to $41. 
C) In the short run,its average cost falls from $47 to $37,and in the long run,average cost rises to $41. 
D) In the short run,its average cost rises from $47 to $55,and in the long run,average cost falls to $37. 
A) In the short run,its average cost falls from $47 to $41,and in the long run,average cost falls even further to $37. 
B) In the short run,its average cost rises from $47 to $55,and in the long run,average cost falls to $41. 
C) In the short run,its average cost falls from $47 to $37,and in the long run,average cost rises to $41. 
D) In the short run,its average cost rises from $47 to $55,and in the long run,average cost falls to $37.

Question 5

Figure 11-2  
-Refer to Figure 11-2.The curve labeled "E" is

Accepted Answer

A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve. 
A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve.

Question 6

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

Accepted Answer

A) 2 chairs. 
B) 3 chairs. 
C) 4 chairs. 
D) 38 chairs. 
A) 2 chairs. 
B) 3 chairs. 
C) 4 chairs. 
D) 38 chairs.

Question 7

Figure 11-2  
-Refer to Figure 11-2.The curve labeled "F" is

Accepted Answer

A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve. 
A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve.

Question 8

Which of the following is a fixed cost?

Accepted Answer

A) payment to hire a security worker to guard the gate to the factory around the clock 
B) wages to hire assembly line workers 
C) payments to an electric utility 
D) costs of raw materials 
A) payment to hire a security worker to guard the gate to the factory around the clock 
B) wages to hire assembly line workers 
C) payments to an electric utility 
D) costs of raw materials

Question 9

To improve package delivery,one change UPS made involved taking better account of weather forecasts to avoid delays in flying packages.This is an example of

Accepted Answer

A) positive technological change. 
B) increasing marginal returns. 
C) a reduction in fixed costs. 
D) diseconomies of scale. 
A) positive technological change. 
B) increasing marginal returns. 
C) a reduction in fixed costs. 
D) diseconomies of scale.

Question 10

Which of the following statements is true?

Accepted Answer

A) An explicit cost is an actual cost;an implicit cost is a theoretical cost. 
B) Economic costs include both explicit costs and implicit costs. 
C) An explicit cost is more important,dollar for dollar,than an implicit cost. 
D) Explicit costs are accounting costs,not economic costs;implicit costs are economic costs,not accounting costs. 
A) An explicit cost is an actual cost;an implicit cost is a theoretical cost. 
B) Economic costs include both explicit costs and implicit costs. 
C) An explicit cost is more important,dollar for dollar,than an implicit cost. 
D) Explicit costs are accounting costs,not economic costs;implicit costs are economic costs,not accounting costs.

Question 11

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

Accepted Answer

A) $1,680 
B) $72 
C) $14 
D) $12.3 
A) $1,680 
B) $72 
C) $14 
D) $12.3

Question 12

Figure 11-6 contains information about the short run cost structure of a firm.
-Refer to Figure 11-6.In the figure above which letter represents the average fixed cost curve?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 13

Which of the following describes how output changes in the short run? Because of specialization and the division of labor,as more workers are hired

Accepted Answer

A) output will first increase at an increasing rate,then output will increase at a decreasing rate. 
B) output will first decrease at an increasing rate,then increase at a decreasing rate. 
C) the marginal product of labor will first decrease,then increase at a decreasing rate. 
D) the marginal product of labor will first be negative and then will be positive. 
A) output will first increase at an increasing rate,then output will increase at a decreasing rate. 
B) output will first decrease at an increasing rate,then increase at a decreasing rate. 
C) the marginal product of labor will first decrease,then increase at a decreasing rate. 
D) the marginal product of labor will first be negative and then will be positive.

Question 14

What is the difference between total cost and variable cost in the long run?

Accepted Answer

In the short run,total cost =

Question 15

If diminishing marginal returns have already set in for Golden Lark Woodworks,and the marginal product of the 6th carpenter is 8 chairs,then the marginal product of the 7th carpenter is

Accepted Answer

A) negative. 
B) less than 8 chairs. 
C) more than 8 chairs. 
D) zero. 
A) negative. 
B) less than 8 chairs. 
C) more than 8 chairs. 
D) zero.

Question 16

Figure 11-2  
-Refer to Figure 11-2.The average product of labor declines after L2 because

Accepted Answer

A) the marginal product of labor is below the average product of labor. 
B) the marginal product of labor is falling. 
C) the marginal product of labor is negative. 
D) the marginal product of labor is positive. 
A) the marginal product of labor is below the average product of labor. 
B) the marginal product of labor is falling. 
C) the marginal product of labor is negative. 
D) the marginal product of labor is positive.

Question 17

The minimum efficient scale is

Accepted Answer

A) the level of output where diminishing returns have not set in yet. 
B) the plant size that yields the most profit. 
C) the level of operation where long-run average costs are lowest. 
D) the smallest output level where the firm finally reaches productive efficiency. 
A) the level of output where diminishing returns have not set in yet. 
B) the plant size that yields the most profit. 
C) the level of operation where long-run average costs are lowest. 
D) the smallest output level where the firm finally reaches productive efficiency.

Question 18

$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (sets) }
\end{array} & \begin{array} { c } 
\text { Long-Run } \
\text { Average Cost }
\end{array} \
\hline 100 & \$ 40 \
\hline 200 & 35 \
\hline 300 & 30 \
\hline 400 & 30 \
\hline 500 & 35 \
\hline
\end{array}$$ Elegant Settings manufactures stainless steel cutlery.Table 11-8 shows the company's cost data.
-Refer to Table 11-8.What is the minimum efficient scale of production?

Accepted Answer

A) 100 units 
B) 200 units 
C) 300 units 
D) 400 units 
A) 100 units 
B) 200 units 
C) 300 units 
D) 400 units

Question 19

Figure 11-13  
-Refer to Figure 11-13.The lines shown in the diagram are isocost lines.Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

Accepted Answer

A) the movement from AF to BF 
B) the movement from BF to AF 
C) the movement from BF to BD 
D) the movement from BF to CE 
A) the movement from AF to BF 
B) the movement from BF to AF 
C) the movement from BF to BD 
D) the movement from BF to CE

Question 20

Which of the following statements is false?

Accepted Answer

A) An explicit cost is a nonmonetary opportunity cost. 
B) In the short run: total cost = fixed cost + variable cost. 
C) Variable costs are costs that change as output changes. 
D) In the long run there are no fixed costs. 
A) An explicit cost is a nonmonetary opportunity cost. 
B) In the short run: total cost = fixed cost + variable cost. 
C) Variable costs are costs that change as output changes. 
D) In the long run there are no fixed costs.

Exam 11: Technology,production,and Costs

An expansion path shows

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output,what is the marginal product of the 12th worker?

Figure 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Figure 11-2 -Refer to Figure 11-2.The curve labeled "E" is

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

Figure 11-2 -Refer to Figure 11-2.The curve labeled "F" is

Which of the following is a fixed cost?

To improve package delivery,one change UPS made involved taking better account of weather forecasts to avoid delays in flying packages.This is an example of

Which of the following statements is true?

Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6.In the figure above which letter represents the average fixed cost curve?

Which of the following describes how output changes in the short run? Because of specialization and the division of labor,as more workers are hired

What is the difference between total cost and variable cost in the long run?

If diminishing marginal returns have already set in for Golden Lark Woodworks,and the marginal product of the 6th carpenter is 8 chairs,then the marginal product of the 7th carpenter is

Figure 11-2 -Refer to Figure 11-2.The average product of labor declines after L2 because

The minimum efficient scale is

Quantity (sets) Long-Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery.Table 11-8 shows the company's cost data. -Refer to Table 11-8.What is the minimum efficient scale of production?

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

Which of the following statements is false?

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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