ECON 300 Exam 2 - myeconlab

The​ firm's average total cost of production is ____ / ____

total cost divided by the​ firm's level of output

A production input that can be varied in both the short run and the long run is called a ____

variable input

What is the long​ run? A. A period of time longer than three years. B. A period of time longer than five years. C. An amount of time needed for a firm to build a new production plant. D. An amount of time needed to make all production inputs variable.

D. An amount of time needed to make all production inputs variable.

The​ firm's total cost of production equals: ____ + _____

fixed costs plus variable costs

Which of the following is an example of the law of diminishing marginal​ returns? A. Holding capital​ constant, when the amount of labor increases from 5 to​ 6, output increases from 20 to 25. Then when labor increases from 6 to​ 7, output increases from 25 to 28. B. When capital and labor both increase by 20​ percent, output increases by only 15 percent. C. Holding capital​ constant, when the amount of labor increases from 7 to​ 8, output increases from 36 to 42. Then when labor increases from 8 to​ 9, output increases from 42 to 50. D. When labor increases by 20 percent and capital decreases by 15​ percent, output remains constant.

A. Holding capital​ constant, when the amount of labor increases from 5 to​ 6, output increases from 20 to 25. Then when labor increases from 6 to​ 7, output increases from 25 to 28.

Which of the following is an example of a sunk​ cost? A. The amount a company originally paid for specialized equipment for a plant. B. The opportunity cost of a company​ owner's time. C. The amount for which a company could rent equipment it owns to another company. D. The amount a company pays for labor to produce its product.

A. The amount a company originally paid for specialized equipment for a plant.

At the point where average variable cost reaches its minimum value A. average variable cost equals marginal cost. B. marginal cost also reaches its minimum value. C. average variable cost equals average total cost. D. marginal cost equals zero.

A. average variable cost equals marginal cost.

If you observe that your average product is just beginning to​ decline, should you hire any more​ workers? What does this situation imply about the marginal product of your last worker​ hired? A. At the point where average product begins to​ decline, marginal product is greater than average product. Since total product begins to decrease at this​ point, it is not advantageous to hire another worker. B. At the point where average product begins to​ decline, marginal product is equal to average product. Since total product begins to decrease at this​ point, it is not advantageous to hire another worker. C. At the point where average product begins to​ decline, marginal product is equal to average product. Since total product continues to​ increase, it may still be advantageous to hire another worker. D. At the point where average product begins to​ decline, marginal product is greater than average product. Since total product continues to​ increase, it may still be advantageous to hire another worker.

C. At the point where average product begins to​ decline, marginal product is equal to average product. Since total product continues to​ increase, it may still be advantageous to hire another worker.

You are an employer seeking to fill a vacant position on an assembly line. Are you more concerned with the average product of labor or the marginal product of labor for the last person​ hired? A. The marginal product of labor because to maximize​ profits, you will want to hire labor up to but not exceeding the point where labor begins to experience diminishing marginal returns. B. The average product of labor because to maximize​ profits, you will want to hire labor up to but not exceeding the point where labor begins to experience diminishing marginal returns. C. The marginal product because it measures the effect the last person hired has on​ output, or total product. This helps determine the revenue generated by hiring an another​ worker, which can be compared with the cost of hiring an another worker. D. The average product of labor because productivity is maximized when average product is maximized. This determines the output where revenue and profit are maximized.

C. The marginal product because it measures the effect the last person hired has on​ output, or total product. This helps determine the revenue generated by hiring an another​ worker, which can be compared with the cost of hiring an another worker.

In the short run when some inputs are​ fixed, marginal cost must eventually rise as a​ firm's output increases because A. the prices the firm pays for​ labor, material and other variable inputs will increase. B. there will eventually be decreasing returns to scale. C. there will eventually be diminishing marginal products for the​ firm's variable inputs. D. All of the above.

C. there will eventually be diminishing marginal products for the​ firm's variable inputs

If the firm wanted to minimize the average total​ cost, would it choose to be very large or very​ small? Explain. A. very small because the total cost of production rises with output. B. very small because the average variableaverage variable cost of production rises with output. C. very large because the average total cost of production falls with output. D. very small because the average total cost of production rises with output. E. very large because the marginalmarginal cost of production falls with output.

C. very large because the average total cost of production falls with output.

The short run is: A. a period of time in which all inputs can be varied. B. a period of time in which no inputs can be varied. C.a period of time during which some inputs can be varied and some cannot. D. less than one year.

C.a period of time during which some inputs can be varied and some cannot.

A production input that can only be varied in the long run is called a ____

fixed input

Suppose a firm must pay an annual​ tax, which is a fixed​ sum, independent of whether it produces any output. How does this tax affect the​ firm's fixed,​ marginal, and average​ costs? With a​ lump-sum tax, the fixed cost of production will ____ ​; the marginal cost of production will ____ ​; and the average cost of production will ____ . Now suppose the firm is charged a tax that is proportional to the number of items it produces.​ Again, how does this tax affect the​ firm's fixed,​ marginal, and average​ costs? With a proportional​ tax, the fixed cost of production will ____ ​; the marginal cost of production will ____ ​; and the average cost of production will ____

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