Question 1

"In economics, the short run commonly refers to a period within one year and the long run is a period longer than one year." Do you agree or disagree? Explain your answer.

Accepted Answer

Disagree. The time period of the short r...

Question 2

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.E) A) and B)
F) None of the above

Question 3

-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.E) None of the above
F) All of the above

Question 4

Which equation is used by a manager when considering total cost?

Accepted Answer

A)  total costs (T
C)  = consumption (
C)  + investment (I) + government (G) 
B)  total costs (T
C)  = average fixed costs (AF
C)  + number of workers
C)  total costs (T
C)  = average total costs (AT
C)  
D)  total costs (T
C)  = total fixed costs (TF
C)  + total variable costs (TV
C)  E) B) and C)
F) A) and C)

Question 5

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first three workers?

Accepted Answer

A)  65 cookies
B)  30 cookies
C)  17.5 cookies
D)  21.67 cookiesE) B) and C)
F) C) and D)

Question 6

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 2 to 3?

Accepted Answer

A)  21
B)  17
C)  63
D)  189E) A) and B)
F) A) and C)

Question 7

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

Accepted Answer

A)  $25.00.
B)  $2.00.
C)  $3.00.
D)  $5.00.E) A) and D)
F) None of the above

Question 8

When a firm is at its minimum efficient scale of operation, it produces the

Accepted Answer

A)  maximum rate of output at which long-run average cost is minimized.
B)  minimum rate of output at which long-run average cost is minimized.
C)  maximum rate of output consistent with lowest long-run marginal cost.
D)  minimum rate of output consistent with lowest long-run marginal cost.E) B) and C)
F) All of the above

Question 9

-The distance between the TC and the TVC curve

Accepted Answer

A)  is constant.
B)  decreases as output increases.
C)  increases as output increases.
D)  is the MC curve.E) None of the above
F) B) and C)

Question 10

-The law of diminishing marginal product indicates that

Accepted Answer

A)  average product will eventually decrease.
B)  marginal product will eventually decrease.
C)  total product will eventually decrease.
D)  resources are inefficient.E) A) and B)
F) B) and C)

Question 11

When total product is increasing at a decreasing rate, marginal product is

Accepted Answer

A)  positive and increasing.
B)  positive and decreasing.
C)  constant.
D)  negative.E) None of the above
F) A) and D)

Question 12

-The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the

Accepted Answer

A)  law of diminishing marginal product.
B)  streamlining production function.
C)  consumer equilibrium.
D)  theory of increasing marginal utility.E) A) and B)
F) None of the above

Question 13

At an output at which MC is greater than ATC

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 downward sloping.E) A) and C)
F) None of the above

Question 14

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 technologyE) None of the above
F) A) and B)

Question 15

In the above table, when output is 8 units, average total costs are

Accepted Answer

A)  $4.75.
B)  $3.50.
C)  $38.
D)  $28.E) A) and B)
F) A) and C)

Question 16

-In the above figure, if this firm produces output level Q2, it has average total costs of

Accepted Answer

A)  OF.
B)  OE.
C)  OC.
D)  OD.E) B) and D)
F) None of the above

Question 17

An increase in output would result in no change in long-run average costs when there are

Accepted Answer

A)  economies of scale.
B)  diseconomies to scale.
C)  constant returns to scale.
D)  diminishing marginal product.E) A) and D)
F) B) and C)

Question 18

Which of the following would NOT be a short-run decision for the firm?

Accepted Answer

A)  Recall workers who were previously laid-off
B)  Have labor work two hours overtime each day in order to expand output
C)  Build another wing on the plant in order to add a new assembly line
D)  Place an order with a supplier for additional raw materialsE) B) and C)
F) C) and D)

Question 19

A firm has the following production relationship between labor and output, for a fixed capital stock. 
-According to the above table, what is the marginal product of the 4th unit of labor?

Accepted Answer

A)  3
B)  5
C)  6
D)  7E) A) and B)
F) All of the above

Question 20

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n) ________ decision.

Accepted Answer

A)  immediate-run
B)  long-run
C)  short-run
D)  variable-inputE) A) and B)
F) A) and C)

Exam 22: The Firm: Cost and Output Determination

If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n) ________ decision.

Correct AnswerverifiedShow Answer

-Refer to the above table. What does the marginal product equal when the quantity of labor goes from 2 to 3?

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

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"In economics, the short run commonly refers to a period within one year and the long run is a period longer than one year." Do you agree or disagree? Explain your answer.

Correct AnswerverifiedDisagree. The time period of the short r...View AnswerShow Answer

-The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the

Correct AnswerverifiedShow Answer

Which of the following would NOT be a short-run decision for the firm?

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In the above table, when output is 8 units, average total costs are

Correct AnswerverifiedShow Answer

-The law of diminishing marginal product indicates that

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-In the above figure, if this firm produces output level Q2, it has average total costs of

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

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An increase in output would result in no change in long-run average costs when there are

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At an output at which MC is greater than ATC

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

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When a firm is at its minimum efficient scale of operation, it produces the

Correct AnswerverifiedShow Answer

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first three workers?

Correct AnswerverifiedShow Answer

-The distance between the TC and the TVC curve

Correct AnswerverifiedShow Answer

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the marginal product of the 4th unit of labor?

Correct AnswerverifiedShow Answer

Constant returns to scale are illustrated by

Correct AnswerverifiedShow Answer

Which equation is used by a manager when considering total cost?

Correct AnswerverifiedShow Answer

When total product is increasing at a decreasing rate, marginal product is

Correct AnswerverifiedShow Answer

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Disagree. The time period of the short r...
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