Relationship between marginal product-average product

Question

Question 1. A firm's production function is the relationship between:

• the inputs employed by the firm and the resulting costs of production.
• the demand for a firm's output and the quantity it is able to produce with available resources.
• the firm's production costs and the amount of revenue it receives from the sale of its output.
• the factors of production and the resulting outputs of the production process.

Question 2: Consider the production function for bottled water. All of the following would be considered variable inputs except:

• the electricity used to power the machine used to fill the bottles.
• the machine used to fill each bottle.
• the plastic bottles.
• the water the bottles are filled with.

Question 3: Which of the following is true in the short run, but not in the long run?

• The firm is free to vary all of its inputs.
• The firm's decisions are planning decisions.
• The firm makes decisions by attempting to predict future demand and technological developments.
• The firm is "stuck" with the existing amount of capital.

Question 4: Which of the following inputs is most likely to be "fixed" in the short run?

• Capital.
• Labor.
• Raw Material.
• Energy.

Question 5: Assume a factory that currently employs 25 workers is considering adding another 5 workers to its payroll. Economists would classify this as:

• a long-run decision.
• a short-run decision.
• neither a short-run nor a long-run decision.
• both a short-run and a long-run decision.

Question 6: Total product is defined as the total quantity of output a firm can produce:

• with a given quantity of fixed inputs.
• when it is operating at capacity.
• with a given quantity of fixed and variable inputs.
• with a given quantity of variable inputs.

Question 7: The amount of output produced with an additional unit of variable input is referred to as:

• marginal product.
• total product.
• average variable product.
• average fixed product.

Question 8: The amount of output produced per unit of variable input is referred to as:

• total product.
• marginal product.
• average variable product.
• average fixed product.

Question 9: When total product reaches its maximum:

• marginal product equals 0.
• average product equals zero.
• marginal product and average product are also at their maximum values.
• marginal product equals average product.

Question 10: All else constant, an increase in productivity has the effect of causing:

• both the marginal and average product of labor to increase.
• the marginal product of labor to increase and the average product of labor to decrease.
• the marginal product of labor to increase and no effect on the average product of labor.
• the average product of labor to increase and no effect on the marginal product of labor.

Question 11: Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)?

• If MP is less than AP, then AP is increasing.
• The AP curve intersects the MP curve at minimum MP.
• The MP curve intersects the AP curve at maximum AP.
• If MP is greater than AP, then AP is falling.

Question 12: Diminishing returns occur when:

• the size of the plant is increased in the long run.
• the quantity of the fixed input is increased and returns to the variable input fall.
• units of a variable input are added to a fixed input and total product falls.
• units of a variable input are added to a fixed input and marginal product falls.

Question 13: Which of the following statements is correct?

• Between 1979 and 1998, Chrysler and Ford eliminated the productivity gap between all of their production facilities and their Japanese counterparts.
• The increase in productivity Japanese manufacturers experienced in the early 1980s was the result primarily of long-run changes in management focusing on inventory systems and plant layout.
• Workers employed by General Motors are approximately twice as productive as their Japanese counterparts.
• Auto workers in the United States are less productive than their Japanese counterparts primarily due to the higher wages U.S. workers receive.

Question 14: Recent data on productivity gains in the United States strongly suggest that a significant share of those gains is attributable to:

• improvements in information technology.
• improvements in education and training.
• increased demand for goods and services.
• substantial reductions in labor costs.

Question 15: Which of the following is an example of an "implicit cost"?

• The interest payment made by the firm for funds borrowed from a bank.
• The payment of rent by the firm for the building in which it is housed.
• The payment of wages by the firm.
• Interest that could have been earned on retained earnings used by the firm to finance expansion.

Question 16: Which of the following is an example of an "explicit cost"?

• The wages a proprietor could have made by working as an employee of a large firm.
• The normal profit earned by a firm.
• The payment of wages by the firm.
• The income that could have been earned in alternative uses by the resources owned by the firm.

Question 17: Which of the following statements regarding historic costs is false?

• Historic costs vary depending on the method of depreciation a firm uses.
• Historic costs represent what the firm paid for an input when it was purchased.
• Using historic costs can cause true economic profit to be under or over stated.
• Historic costs may not be a good indicator of the current opportunity cost of a piece of capital.

Question 18: Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that:

• the total economic costs are $100,000.
• the individual is earning an economic profit of $25,000.
• implicit costs are $25,000.
• the firm is incurring an economic loss.

Question 19: In the short run, if a firm chooses to produce no output (i.e., shut down) its total costs of production will equal:

• 0.
• its marginal fixed costs
• its total variable costs
• its total fixed costs.

Question 20: The upward-sloping part of the short-run marginal cost function is due to:

• the change in total product rising as units of a variable input are added to a fixed input.
• the upward-sloping part of the production function.
• marginal product falling as units of a variable input are added to a fixed input.
• marginal product rising as units of a variable input are added to a fixed input.