Question 1

If marginal product is negative, then

Accepted Answer

A)   total product is rising.
B)   total product is falling.
C)   marginal cost is falling.
D)   average profit is rising.

Question 2

When marginal product is rising

Accepted Answer

A)   total product is falling.
B)   marginal cost is falling.
C)   marginal cost is rising.
D)   average fixed cost is rising.

Question 3

As the amount of a variable input increases, while all other inputs are held constant, total product will

Accepted Answer

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

Question 4

Constant returns to scale are illustrated by

Accepted Answer

A)   a downward sloping long-run average cost curve.
B)   a horizontal long-run average cost curve.
C)   an upward sloping long-run average cost curve.
D)   a long-run average cost curve that is shaped like an upside down U.

Question 5

The long run is defined as the time period in which

Accepted Answer

A)   the firm can vary only one input.
B)   the firm can make positive economic profits.
C)   all factors of production can be altered.
D)   the firm can alter its rate of production.

Question 6

When long-run average costs decline as output increases, the firm is experiencing

Accepted Answer

A)   negative returns to scale.
B)   diseconomies of scale.
C)   constant returns to scale.
D)   economies of scale.

Question 7

When increasing its output results in falling costs, a firm that can adjust all inputs is experiencing

Accepted Answer

A)   diseconomies of scale.
B)   economies of scale.
C)   loss.
D)   capital gains.

Question 8

-Refer to the above table. At an output of 2 units, average total costs are

Accepted Answer

A)   $61.
B)   $122.
C)   $16.
D)   $45.

Question 9

What is the law of diminishing marginal product?

Accepted Answer

The law of diminishing marginal product ...

Question 10

-Refer to the above figure. Average total costs are represented by curve

Accepted Answer

A)   1.
B)   2.
C)   3.
D)   4.

Question 11

An increase in output would result in a rise in long-run average costs when there are

Accepted Answer

A)   economies of scale.
B)   diseconomies to scale.
C)   constant returns to scale.
D)   the law of diminishing marginal product.

Question 12

A fixed resource is one that

Accepted Answer

A)   is physically tied to a specific location.
B)   costs more than the average daily revenue of the firm.
C)   cannot be varied in the short run.
D)   can be disposed of only if the firm goes out of business.

Question 13

Marginal product is

Accepted Answer

A)   the change in total output from using an additional unit of one variable input, holding other inputs constant.
B)   the change in total output from using an additional unit of all variable inputs.
C)   the total output divided by the number of units of the variable input.
D)   the change in total output divided by the number of units of the variable input, holding constant all other inputs.

Question 14

-Using the above table, the AFC, the AVC, and the ATC when output is 1 unit are

Accepted Answer

A)   $10, $10, and $20, respectively.
B)   $5, $10, and $15, respectively.
C)   $0, $10, and $10, respectively.
D)   $5, $10, and $5, respectively.

Question 15

In economics, a fixed cost is a cost that

Accepted Answer

A)   is present only in the short run.
B)   goes up as the level of output goes up.
C)   goes down as the level of output goes up.
D)   does not vary with the level of output.

Question 16

What happens at a firm's point of saturation?

Accepted Answer

A)   For the first time, hiring an additional worker decreases total product.
B)   Workers cannot take on any additional tasks without working overtime hours.
C)   The market for a firm's output has been saturated and sales fall to zero.
D)   The firm's total costs exceed its revenues.

Question 17

If a firm can vary all of its factors of production, it is operating in

Accepted Answer

A)   the long run.
B)   the immediate run.
C)   equilibrium.
D)   the short run.

Question 18

-Refer to the above table. At an output of 3 units, average variable costs are

Accepted Answer

A)   $42.
B)   $30.
C)   $44.
D)   $14.

Question 19

Which of the following statement is correct?

Accepted Answer

A)   When Marginal Product is greater than Average Product, Average Product is increasing.
B)   When Marginal Product is greater than Average Product, Average Product is decreasing.
C)   When Marginal Product is greater than Average Product, Average Product is equal to Total Product.
D)   When Marginal Product is greater than Average Product, Total Product is increasing at a decreasing rate.

Question 20

The amount of calendar time associated with the long run

Accepted Answer

A)   is less than five years.
B)   is greater than one year.
C)   is between one and five years.
D)   varies by industry.

Exam 22: The Firm: Cost and Output Determination

-Refer to the above table. At an output of 3 units, average variable costs are

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When long-run average costs decline as output increases, the firm is experiencing

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-Refer to the above table. At an output of 2 units, average total costs are

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When marginal product is rising

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As the amount of a variable input increases, while all other inputs are held constant, total product will

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An increase in output would result in a rise in long-run average costs when there are

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What is the law of diminishing marginal product?

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If marginal product is negative, then

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In economics, a fixed cost is a cost that

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Which of the following statement is correct?

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If a firm can vary all of its factors of production, it is operating in

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The amount of calendar time associated with the long run

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-Using the above table, the AFC, the AVC, and the ATC when output is 1 unit are

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What happens at a firm's point of saturation?

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A fixed resource is one that

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Constant returns to scale are illustrated by

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-Refer to the above figure. Average total costs are represented by curve

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When increasing its output results in falling costs, a firm that can adjust all inputs is experiencing

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Marginal product is

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The long run is defined as the time period in which

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The law of diminishing marginal product ...
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