Question 1

Which of the following is correct?

Accepted Answer

A)   TC = TFC + TVC
B)   TC = TFC - TVC
C)   TC = TFC * TVC
D)   TC = TFC / TVC

Question 2

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

Accepted Answer

A)   exploiting the economies of scale available to it.
B)   facing constant returns to scale.
C)   facing diseconomies of scale.
D)   not using the available technology efficiently.

Question 3

As successive equal increases in a variable factor of production are added to fixed factors of production, there will be a point beyond which the extra product that can be attributed to each additional unit of the variable factor of production will decline. This is known as the law of

Accepted Answer

A)   diminishing total product.
B)   diminishing average product.
C)   diminishing marginal product.
D)   decreasing product.

Question 4

Short-run total cost is defined as

Accepted Answer

A)   the sum of marginal cost and total variable cost.
B)   price of labor per unit multiplied by the number of labor units.
C)   total fixed cost plus total variable cost.
D)   total capital cost only.

Question 5

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

Accepted Answer

Given the information on total physical ...

Question 6

-Refer to the above table. What does total product equal when 4 units of labor are used?

Accepted Answer

A)   1328
B)   332
C)   320
D)   960

Question 7

-Use the above figure. The AVC at output 10 is

Accepted Answer

A)   $20.00.
B)   $1.00.
C)   $2.00.
D)   $3.00.

Question 8

What happens to the marginal cost curve when the marginal physical product of labor is rising?

Accepted Answer

A)   It becomes upward sloping.
B)   It becomes vertical.
C)   It becomes downward sloping.
D)   It becomes horizontal.

Question 9

All of the following are most likely to be fixed costs EXCEPT the cost relating to

Accepted Answer

A)   insurance.
B)   taxes.
C)   rent.
D)   packaging.

Question 10

Which of the following changes a firm's production function?

Accepted Answer

A)   Hiring additional workers
B)   Acquiring additional physical capital
C)   Adding a second production facility exactly like its first production site
D)   Adopting new technology

Question 11

-In the above table, when the firm employs 3 workers, the marginal product will be

Accepted Answer

A)   42 snowboards.
B)   30 snowboards.
C)   36.67 snowboards.
D)   208 snowboards.

Question 12

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?

Accepted Answer

A)   $60
B)   $70
C)   $120
D)   $84

Question 13

Suppose there are fixed costs and marginal costs that are constant. Then we know that

Accepted Answer

A)   average total costs are also constant.
B)   average variable costs decrease continuously as output increases, and lie above the marginal cost curve.
C)   average total costs decrease continuously as output increases, and lie above the average variable cost curve, which also is decreasing continuously.
D)   average total costs decrease continuously as output increases, and lie above the average variable cost curve, which is constant.

Question 14

As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

Accepted Answer

A)   increase continuously.
B)   decrease continuously.
C)   initially decrease and then increase.
D)   initially increase and then decrease.

Question 15

-Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?

Accepted Answer

A)   After 1 unit
B)   After 2 units
C)   After 3 units
D)   After 6 units

Question 16

-Using the above table, the marginal product of the 2nd worker is

Accepted Answer

A)   12.
B)   14.
C)   15.
D)   13.

Question 17

-Use the above figure. The AVC at output 5 is

Accepted Answer

A)   $35.00.
B)   $2.00.
C)   $3.00.
D)   $5.00.

Question 18

At an output at which ATC is greater than MC,

Accepted Answer

A)   the ATC curve is downward sloping.
B)   the ATC curve is upward sloping.
C)   the AFC curve is upward sloping.
D)   the AVC curve is upward sloping.

Question 19

Costs that do not vary with output are

Accepted Answer

A)   total costs.
B)   variable costs.
C)   fixed costs.
D)   marginal costs.

Question 20

A negative value for the marginal physical product would indicate that

Accepted Answer

A)   the company has not yet reached the point of saturation.
B)   total output increased by a significant amount.
C)   total output decreased when the extra unit of the variable input was added.
D)   total output increased, but the increase was very small.

Exam 22: The Firm: Cost and Output Determination

All of the following are most likely to be fixed costs EXCEPT the cost relating to

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At an output at which ATC is greater than MC,

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Which of the following changes a firm's production function?

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As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will

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What happens to the marginal cost curve when the marginal physical product of labor is rising?

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Which of the following is correct?

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-Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?

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-Use the above figure. The AVC at output 5 is

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As successive equal increases in a variable factor of production are added to fixed factors of production, there will be a point beyond which the extra product that can be attributed to each additional unit of the variable factor of production will decline. This is known as the law of

Correct AnswerverifiedShow Answer

-Using the above table, the marginal product of the 2nd worker is

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Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

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Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

Correct AnswerverifiedGiven the information on total physical ...View AnswerShow Answer

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?

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Suppose there are fixed costs and marginal costs that are constant. Then we know that

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-Use the above figure. The AVC at output 10 is

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-In the above table, when the firm employs 3 workers, the marginal product will be

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-Refer to the above table. What does total product equal when 4 units of labor are used?

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A negative value for the marginal physical product would indicate that

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Short-run total cost is defined as

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Costs that do not vary with output are

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Given the information on total physical ...
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