AP Microeconomics- Unit 3

Which of the following provides an example of the law of diminishing returns?

As more of variable input- for example, labor is used with a fixed number of machines-output increases but at a diminishing rate

In the short run, assume demising marginal product of labor sets in with the hiring of the second worker. Which of the following will remain constant as firm produces more output?

Total fixed cost

Which of the following statements about short-run costs is true?

Total fixed cost plus total variable cost equals total cost

Which of the following explains the difference between short-run and long-run costs

All costs are variable in the long run but not in the short run

Assume a firm doubles its usage of each input, resulting in a doubling of the firm's output. Which of the following describes this result?

Constant returns to scale

The graph above shows a firms long-run average total cost curve (LRATC). Which of the following statements is true as the firm increases its scales of production?

For output levels above Q1, the firm experiences diseconomies of scale

Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?

If accounting profits are less than opportunity costs there will be economic losses

Assume the short-run marginal cost curve initially falls, and then rises as quantity of output increases. Which of the following must be true?

Initially the marginal product of labor increases but eventually marginal product of labor decreases

Assume the marginal product of labor first rises, reaches a maximum and then falls. If the average product of labor is falling, which of the following is true?

The marginal product of labor must be falling

Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true?

Total product is maximized when marginal product is zero