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Exam 5: Production Technology and Cost

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Question 51

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When a firm is experiencing diminishing returns:

A) average cost is always increasing.
B) average cost is always decreasing.
C) marginal costs are always less than average costs.
D) none of the above

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Question 52

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The short-run average total cost curve is U-shaped because average fixed costs _______ and average variable costs _______ eventually as quantity produced increases.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

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Question 53

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Which of the following statements is incorrect?

In the short run, the marginal cost of the first unit of output is $20, the average variable cost of producing three units of output is $16, and the marginal cost of producing the second unit of output is $16. What is the marginal cost of producing the third unit of output?

Marginal product is defined as the change in _______ resulting from a one-unit increase in _______.

$\begin{array}{|c|c|c|c|c|c|c|}\hline \text { Number of Figs } & V C & M C & A V C & F C & T C & A T C \\\hline 0 & & & & 100 & & \\\hline 1 & 90 & 90 & & & & \\\hline 2 & & & & & & 135 \\\hline 3 & & & 80 & & & \\\hline 4 & & & & & 400 & \\\hline\end{array}$ Table 5.4 -Table 5.4 presents the cost schedule for Davidʹs Figs. If David produces four figs, Davidʹs average total costs are:

Can a firm experience diminishing returns in the long run?

$\begin{array} { | c | c | } \hline \text { Dutput } & \text { Total Cost } \\\hline 0 & 15 \\\hline 1 & 25 \\\hline 2 & 33 \\\hline 3 & 40 \\\hline 4 & 48 \\\hline 5 & 58 \\\hline 6 & 70 \\\hline\end{array}$ Table 5.5 -Refer to Table 5.5. The marginal cost of the third unit of output is:

Average fixed cost is defined as:

You observe that at your current production of rutabaga, the average total cost of producing rutabaga is $1 and the marginal cost of producing rutabaga is $2. What should always happen if you increase rutabaga production?

If the marginal cost of producing the next unit of output is less than the average total cost, then:

When at least one factor of production is fixed, firms require more and more workers to produce each additional unit of output. This describes:

Suppose that Gigantic Company is increasing in size. As Gigantic Company grows, they are able to buy inputs in bulk, resulting in lower input prices. It is likely that continued growth will result in:

When the firm increases output and the costs rise disproportionately slower, then the long -run average cost curve is _______ and the firm is experiencing _______.

In the short run, the firmʹs total cost equals:

$\begin{array}{|c|c|}\hline \begin{array}{c}\text { Number of } \\\text { workers }\end{array} & \text { Units of output } \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 55 \\\hline 3 & 95 \\\hline 4 & 125 \\\hline 5 & 150 \\\hline\end{array}$ Table 5.2 -Refer to Table 5.2, which gives a firmʹs production function. Assume that all non -labor inputs are fixed. The marginal product of the fifth worker is:

Total cost of production is the sum of total variable cost and total fixed cost. If the total fixed cost alone increases,

When marginal costs are increasing:

A U-shaped long-run average cost curve implies that a firm faces only diseconomies of scale.

Suppose that in 2010 MBI Corp. produced 100 million units of a good at an average cost of $6, and in 2011 MBI Corp. expanded its plant capacity and produced 200 million units at an average cost of $6.20. In this range, one can conclude that MBI Corp. is experiencing: