Questions:
Question 1
In the table below, what are the marginal costs of the fourth unit of output?
a. $10,000
b. $20,000
c. $30,000
d. $40,000
Question 2
If a firm gets so large that management of employees and other resources becomes a costly problem, it will be experiencing
a. diseconomies of scale.
b. diminishing marginal product.
c. constant returns to scale.
d. economies of scale.
Question 3
When El Torito Restaurant is deciding how many waiters to hire for a holiday weekend, it is making a ________ decision.
a. plant-size
b. long-run
c. short-run
d. fixed-input
Question 4
In the long run, a firm can change
a. nothing.
b. only one input, such as plant size.
c. all inputs.
d. None of these are correct.
Question 5
In the above table, what is the marginal cost to produce the 2nd unit of output?
a. $30
b. $60
c. $55
d. $20
Question 6
The observation that beyond some point, successive increases in a variable factor of production added to a fixed factor of production lead to smaller and smaller increases in output is
a. the law of marginal utility.
b. the law of averages.
c. the law of diminishing marginal product.
d. the law of opportunity costs.
Question 7
In the above table, the marginal product of the second worker is
a. 68.
b. 98.
c. 38.
d. It cannot be determined.
Question 8
If a firm is experiencing diseconomies of scale, then
a. proportional increases in all inputs result in proportional increases in output.
b. the long-run average cost curve is rising as output expands.
c. the long-run average cost curve is decreasing as output expands.
d. the firm should expand the size of its operation.
Question 9
A basic distinction between the long run and the short run is that
a. if a firm produces no output in the long run, it still incurs a cost.
b. in the long run, some inputs are fixed, while in the short run, all inputs are variable.
c. in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
d. the opportunity costs of production are lower in the short run than in the long run.
Question 10
In the above figure, for any output level less than Q2, this firm experiences
a. economies of scale.
b. diseconomies of scale.
c. constant economies of scale.
d. decreasing long run average costs.
Question 11
Production functions indicate the relationship between
a. factor costs and output prices.
b. factor inputs and the quantity of output.
c. the value of inputs and average costs.
d. factor inputs and factor prices.
Question 12
The shape of the short-run average total cost curve is a result of
a. economies of scale.
b. diseconomies of scale.
c. the law of diminishing marginal product.
d. falling profits.
Question 13
Suppose that a firm is currently producing 500 units of output. At this level of output, VC = $1,000 and FC = $2,500. What is the firms ATC?
a. $2
b. $5
c. $7
d. $10
Question 14
In the above table, diminishing marginal product occurs after employing the
a. fourth worker.
b. third worker.
c. second worker.
d. first worker.
Question 15
Which of the following would be a fixed input to an automobile firm?
a. Steel
b. A factory in Detroit
c. Car batteries
d. Engineers
Question 16
When total product is increasing at a decreasing rate, marginal product is
a. positive and increasing.
b. positive and decreasing.
c. constant.
d. negative.
Question 17
If a farmer seeks to buy one-hundred more acres for her kiwi fruit farm, she is making a
a. long-run decision.
b. short-run decision.
c. immediate-run decision.
d. variable-input decision.
Question 18
A decrease in the long-run average costs resulting from increasing output is referred to as
a. diseconomies of scale.
b. constant return to scale.
c. a scale invariant process.
d. economies of scale.
Question 19
Using the above table, we see that when output is 4 units, average total cost equals
a. $24.00.
b. $14.00.
c. $3.50.
d. $6.00.
Question 20
The planning curve is the
a. long-run average cost curve.
b. production function.
c. short-run marginal cost curve.
d. short-run average cost curve.
Question 21
Marginal costs are defined as
a. the change in total costs due to a one-unit change in production.
b. costs that are viewed as marginal; of little or small importance.
c. costs that represent a change, but one that cannot be measured correctly.
d. the change in the decisions that are made by households and firms.
Question 22
At an output at which MC is greater than ATC
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.
Question 23
The lowest rate of output per unit of time at which long-run average costs for a firm are at a minimum defines
a. maximum efficient scale.
b. minimum efficient scale.
c. allowable efficient scale.
d. short-run efficient scale.
Question 24
Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each other's way and fewer dinners are served. This is an example of
a. diminishing marginal product.
b. diminishing marginal utility.
c. diminishing marginal workforce.
d. diminishing marginal inputs.
Question 25
Which of the following is true with respect to specialization?
a. Adam Smith in The Wealth of Nations referred to specialization and division of labor.
b. With a given set of resources, specialization results in higher output.
c. Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization.
d. All of these are correct.