Question 1

Minneapolis business Rogue Chocolatier sells specialty chocolate bars with a high cocoa content. Rogue can produce 15 chocolate bars per day with one employee, 29 with 2, 35 with 3 and 40 with 4 employees. Which statement is TRUE?

Accepted Answer

A)  Rogue's marginal product curve decreases continually. 
B)  Rogue's marginal product curve initially increases and then decreases. 
C)  Rogue's total product curve increases at an increasing rate. 
D)  Rogue's marginal product curve decreases initially and then increases.

Question 2

If wages a firm pays it workers increase, then

Accepted Answer

A)  the firm's long-run average cost curve shifts upward. 
B)  the firm moves rightward along its long-run average cost curve to where it has diseconomies of scale. 
C)  the firm's long-run average cost curve does not shift and there is no movement along the long-run average cost curve. 
D)  the firm moves rightward along its long-run average cost curve but not necessarily to where it has diseconomies of scale.

Question 3

Cost schedule
 
-Using the data in the above table, the average fixed cost of producing 9 units per day is

Accepted Answer

A)  $2.22. 
B)  $5.00. 
C)  $5.55. 
D)  $20.00.

Question 4

When the marginal product of labor is greater than the average product of labor, the

Accepted Answer

A)  marginal product of labor must be increasing as labor increases. 
B)  average product of labor must be increasing as labor increases. 
C)  total product must be increasing at an increasing rate as labor increases. 
D)  None of the above answers is correct.

Question 5

-In the above figure, an unattainable point is

Accepted Answer

A)  a. 
B)  e. 
C)  g. 
D)  f.

Question 6

When a firm is experiencing economies of scale

Accepted Answer

A)  the MP curve slopes upward. 
B)  the LRAC curve slopes downward. 
C)  diminishing returns to labor have been suspended. 
D)  the MC curve slopes downward.

Question 7

Diminishing marginal returns occur when

Accepted Answer

A)  the average product of the variable input eventually diminishes. 
B)  the marginal product of an additional worker is less than the marginal product of the previous worker hired. 
C)  the firm hires cheap, less-skilled workers in place of expensive, high-skilled workers. 
D)  total product diminishes.

Question 8

-Some of the cost curves for Ike's Ice Cream Kitchen are given in the above figure. At which of the following levels of output will AFC be the lowest?

Accepted Answer

A)  at 0 gallons 
B)  at 10 gallons 
C)  at 40 gallons 
D)  at 70 gallons

Question 9

-The above table shows the short-run total product schedule for the campus book store. Which employee has the highest marginal product (MP)?

Accepted Answer

A)  the 10th employee 
B)  the 5th employee 
C)  the 4th employee 
D)  the 1st employee

Question 10

-Sandra's Sweaters' production function is shown in the above table. Sandra rents three knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. If Sandra produces 18 sweaters per day, what is her average total cost?

Accepted Answer

A)  $5.00 
B)  $6.67 
C)  $9.44 
D)  $10.00

Question 11

Which of the following statements is TRUE?

Accepted Answer

A)  The marginal and average product curves intersect at the maximum level of output. 
B)  At every output level the marginal product curve lies above the average product curve. 
C)  The marginal product and average product curves intersect when average product is at its maximum. 
D)  The marginal product curve always has a positive slope.

Question 12

-The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles. What is the total fixed cost of producing 4,500 frijoles?

Accepted Answer

A)  $1000 
B)  $8000 
C)  $9000 
D)  More information is needed to determine the answer.

Question 13

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's total variable cost?

Accepted Answer

A)  $2,400 
B)  $2,000 
C)  $1,600 
D)  $800

Question 14

What is the difference between diminishing marginal returns and diseconomies of scale?

Accepted Answer

The answer of What is the difference between diminishing marginal...

Question 15

Downsizing is the practice of laying off workers in an attempt to decrease average total cost. Can laying off workers decrease average total cost? Is it possible for the firm to downsize and have its average total cost increase? Explain your answer.

Accepted Answer

The answer of Downsizing is the practice of laying off...

Question 16

-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. When Silvio's uses 2 ovens and hires the 3rd worker, the marginal product of labor is ________ the average product of labor, and therefore the average product of labor ________.

Accepted Answer

A)  less than; decreases 
B)  less than; increases 
C)  greater than; decreases 
D)  greater than; increases

Question 17

Total variable cost is the sum of all

Accepted Answer

A)  costs of the firm's fixed factors of production. 
B)  costs associated with the production of goods. 
C)  costs that rise as output increases. 
D)  implicit costs.

Question 18

Cost schedule
 
-In the above table, the average total cost of producing 14 units of output is

Accepted Answer

A)  $5.71. 
B)  $6.75. 
C)  $7.00. 
D)  $7.86.

Question 19

-In the above table, diminishing marginal returns start to occur when the

Accepted Answer

A)  3rd worker is employed. 
B)  4th worker is employed. 
C)  5th worker is employed. 
D)  6th worker is employed.

Question 20

-The above (incomplete) table provides information about the relationships between output and various cost measures. The total fixed cost (TFC) for the firm is

Accepted Answer

A)  zero. 
B)  $45. 
C)  $10. 
D)  None of the above answers is correct.

Exam 11: Output and Costs