Econ 102 Quiz Week 8 - Production and Costs, Econ Exam 3 Chapter 11 Practice/Graded Homework Problems, Chapter 11 Quiz

The table above gives the production function for Andrew's Garage. If labor is the variable input and number of cars serviced is the output, what is the marginal product of labor when the number of workers rises from 3 to 4?

6

Which of the following occurs in the long run?

A new movie theater is built

Which of the following cost concepts is correctly defined?

ATC = AVC + AFC

Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker equals 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will equal:

The answer cannot be determined with the information available.

The table above gives the production function for Andrew's Garage. If labor is the variable input and number of cars serviced is the output, which of the following statements is true?

There are diminishing returns to labor.

Which of the following equations is true?

Total Cost = Fixed Cost + Variable Cost Correct

Which of the following statements is false?

When the marginal product of labor is upward-sloping, the marginal cost curve is upward-sloping.

The term diminishing returns refers to:

a decrease in the extra output due to the use of an additional unit of a variable input, when more and more of the variable input is used and all other things are held constant.

In the short run, an example of a fixed cost is:

a property tax.

If you drop a course after the refund date, the tuition that you have paid and cannot recover is:

a sunk cost.

A total product curve indicates the relationship between:

a variable input and output.

The level of inputs will determine a firm's:

ability to produce outputs.

Staci's Sign Shoppe makes signs for businesses. Staci is currently producing 210 signs per week with 3 employees. Staci hires an additional worker and total output per week rises to 328. At four workers, marginal product is _____________ the average product, so average product is ______________.

above; rising

Diminishing marginal returns occur when:

an additional variable factor adds less to total output than the previous unit.

There are diminishing returns to an input when:

an increase in the quantity of the input used, holding other factors constant, leads to a decline in its marginal product.

If ATC is equal to MC, then one is operating:

at the minimum point of ATC.

Which of the following will continually decrease as output increases?

average fixed cost

Cindy operates Birds-R-Us, a small store manufacturing and selling 100 bird feeders per month. Cindy's monthly total fixed costs are $500, and her monthly total variable costs are $1,000. If for some reason Cindy's fixed cost increased to $4,000, then her:

average fixed costs would increase.

Maria has a business printing t-shirts selling 200 t-shirts per month. Her monthly total fixed costs are $400, and her monthly total variable costs are $1,000. If for some reason Maria's fixed cost increased to $1,000, then her:

average fixed costs would increase.

If marginal cost is equal to average total cost, then:

average total cost is at its minimum.

If marginal cost is less than average total cost, then:

average total cost is decreasing.

Total cost divided by the quantity of output produced is:

average total cost.

Cindy operates Birds-R-Us, a small store manufacturing and selling 100 bird feeders per month. Cindy's monthly total fixed costs are $500, and her monthly total variable costs are $2,500. If for some reason Cindy's fixed cost fell to $400, then her:

average total costs would decrease.

Cindy operates Birds-R-Us, a small store manufacturing and selling 200 bird feeders per month. Cindy's monthly total fixed costs are $800, and her monthly total variable costs are $1,500. If for some reason Cindy's variable cost decreased to $1,000, then her:

average variable costs would decrease.

Money spent by a firm to bribe a corrupt foreign minister of commerce, who then is imprisoned, is a(n):

b. sunk cost.

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2 where Q is the quantity of dogs groomed. Janet notices that as she grooms more dogs her total cost curve:

becomes steeper.

A variable cost:

depends on the quantity of output produced.

When an additional unit of a variable input adds less to total product than the previous unit, the firm must be experiencing:

diminishing marginal returns.

When AVC eventually increases as output increases, this is referred to as the ________ effect.

diminishing returns

The average total cost curve in the short run slopes upward due to:

diminishing returns.

The long-run average cost curve will be upward sloping when the firm is experiencing:

diseconomies of scale.

A fixed cost is a cost that:

does not vary with quantity produced.

With one input fixed, a firm will find that as it attempts to produce more, the total product curve will increase at a decreasing rate and its marginal product curve will be:

downward-sloping.

Diminishing marginal returns means that:

each additional unit of an input used will increase output, but by smaller and smaller amounts.

Profits that are in excess of both implicit and explicit costs are called _____.

economic profits

A firm that is able to more efficiently utilize by-products as it increases production in the long run is an example of:

economies of scale.

For large beer breweries, it is common for long-run average total cost to decline as output increases. This indicates that many breweries achieve:

economies of scale.

When marginal cost is below average variable cost, average variable cost must be:

falling.

An input whose quantity is fixed for a period of time is known as a:

fixed input

When marginal cost is above average variable cost, average variable cost must be:

greater than average fixed cost.

At 36 units of labor, a firm finds that both average product of labor and marginal product of labor equal 42. We can conclude that the average product curve at 36 units of labor is:

horizontal.

Marginal cost is the:

increase in total cost when one more unit of output is produced.

Krista operates a dry-cleaning business in Tampa that incurs $900 per month in fixed costs. Last month her total output equaled 3,000 pounds of clothes. This month her total output fell to 2,700 pounds. This means her average fixed cost ________ by a little more than ________.

increased; 3.33 cents

Mingma hired another cashier to work in her clothing store, and her sales more than doubled. Hiring the second worker resulted in

increasing marginal returns

A manufacturing company that benefits from lower costs per unit as it grows is an example of a firm experiencing:

increasing returns to scale.

When an increase in the firm's output reduces its long-run average total cost, it experiences:

increasing returns to scale. economies of scale.

The marginal cost curve intersects the average variable cost curve at:

its lowest point.

For a restaurant:

labor and food would be variable resources and a building would be a fixed resource in the short run.

The curve that illustrates the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output is the:

long-run average total cost curve.

The curve that shows the additional cost of each additional unit of output is called the:

marginal cost curve.

At quantities above the minimum-cost output:

marginal cost is greater than average total cost and average total cost is rising.

The change in total cost resulting from a one-unit change in quantity is:

marginal cost.

The ________ is the increase in output obtained by hiring an additional worker.

marginal product

When a firm experiences diminishing marginal returns:

marginal product is falling, yet it is still positive.

Suppose the marginal cost curve in the short run first decreases, then reaches a minimum, and then increases. If we are at an output where marginal cost is increasing, then:

marginal product must be decreasing.

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is:

marginal product.

The assumed goal of any firm is to:

maximize profit.

At the long-run quantity of output, where the LRATC curve is at its lowest point, it is tangent to the ________ of the corresponding short-run average total cost curve.

minimum

Suppose a fast-food restaurant currently serves lunch and dinner, and is trying to determine if it should open for breakfast. Which of the following costs is a sunk cost for this business?

monthly rent

When all of a firm's inputs are doubled and this results in the firm's level of production more than doubling, a firm will notice that it is operating:

on the downward-sloping portion of its LRATC curve.

The upward slope of a total product curve shows that:

output increases as more of a variable input is used.

The relationship between a firm's inputs and its quantity of output is known as the:

production function.

Economists explicitly assume that the primary objective of firms is to maximize:

profits.

Most economists assume that firms behave ______ and that their objective is ______.

rationally; profit maximization

As production increases and the fixed cost is divided by larger quantities of output, this leads to lower average fixed cost. This is referred to as the ________ effect.

spreading

A firm's total fixed cost:

stays constant in the short run.

Which of the following curves is not affected by the existence of diminishing returns?

the average fixed cost curve

In the short run, an example of a variable cost is:

the cost of labor

You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input in the production function at your deli?

the dining room where customers eat their meals

In the long run:

the firm considers all factors as variable.

If a firm has $10,000 in variable costs and no fixed cost, then the time period referred to is

the long run

Diminishing returns is a reason why:

the marginal cost curve is upward-sloping.

A firm's marginal cost is:

the slope of the total cost curve. the ratio of the change in total cost to the change in the quantity of output.

The production function provides information about:

the transformation of inputs into outputs.

The diminishing returns of a variable input will account for:

the upward slope of marginal cost.

The sum of fixed and variable costs is:

total cost

Average total cost is:

total cost divided by output.

Marginal cost is the change in:

total cost divided by the change in output. total cost resulting from a one-unit change in output.

Average total cost is the ratio of:

total cost to the quantity of output.

The marginal product of labor is all of the following except:

total product divided by labor.

Profits are equal to the difference between _____ and _____.

total revenue; total costs

Average variable cost is:

total variable cost divided by quantity.

The total cost curve for a snowmobile dealership shows how ________ cost depends on the quantity of ________.

total; output

At 76 units of labor, a firm finds that average product of labor equals 39.6 and marginal product of labor equals 42.9. We can conclude that the average product curve at 76 units of labor is:

upward-sloping.

Average variable cost equals all the following except:

variable cost times output.

Average variable cost is the ratio of:

variable cost to the quantity of output.

A factor of production whose quantity can be changed during a particular period is a(n):

variable factor of production.

The costs associated with variable inputs are ________ costs and the costs associated with ________ inputs are ________costs.

variable; fixed; fixed

Diminishing returns to an input set in:

when some inputs are fixed and some are variable.

Buford Bus Manufacturing installs a new assembly line. As a result, the output produced per worker increases. The marginal cost of output at Buford:

will decrease (the MC curve will shift right).

If two firms are identical in all respects expect that one has more capital than another, the total product curve for the firm with more capital:

will lie above the total product curve for the firm with less capital.

The table shows the cost information for Bonita's pet-sitting service, where quantity of output is the number of clients served per day. Think about the number you would put in the total cost column, and then answer this question. What is the marginal cost of increasing output from 2 clients to 3 clients?

$15

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2 where Q is the quantity of dogs groomed. Given this expression, if Janet grooms five dogs her total costs will be:

$175.

The table shows the cost information for Bonita's pet-sitting service, where quantity of output is the number of clients served per day. What is the average variable cost when 5 clients are served?

$19

Darren runs a barbershop with fixed costs equal to $80 per day and a total output of 70 haircuts per day. What is his weekly total fixed cost if he is open 6 days per week?

$480

If a firm produces 10 units of output and incurs $30 in average variable cost and $35 in average total cost, total fixed cost is:

$50.

The table shows the cost information for Bonita's pet-sitting service, where quantity of output is the number of clients served per day. Think about the number you would put in the total cost column, and then answer this question. What is the average total cost of serving 2 clients?

$56

If Jakob knows the marginal cost of the first sports jersey is $20, the marginal cost of the second sports jersey is $32, and the marginal cost of the third jersey is $40, what is the total variable cost of producing 3 jerseys?

$92

_____ are independent of output.

Fixed costs

Larry owns his own auto repair shop, and employs three mechanics. His total parts and sales volume this year was $322,400. Because he is well known for his repair expertise, he is also paid $5,200 per year by a local radio station to answer auto repair questions on "Ask the Mechanic." His explicit costs for payroll, parts and taxes, mortgage and utilities are 290,160. Larry left a job as an accountant making $40,000 a year to own his own business. Larry's economic profit is

Larry is actually making an economic loss of $2,560.