Economics final practice 1

A production function shows

How a firm's production increases as it adds more labor.

When the wage rate is $10 per hour and the MPP of a worker is 15 units per hour, the unit labor cost is

$0.67 per unit.

Assuming labor is a variable input, an increase in labor productivity will result in

A downward shift in the MC curve.

Diminishing returns occur because

A firm increases the amount of a variable input without changing a fixed input.

Labor productivity will increase in response to

An increase in the amount of physical capital per worker.

Explicit costs

Are the sum of actual monetary payments made for resources used to produce a good.

When the size of a factory (and all its associated inputs) doubles and, as a result, output more than doubles,

Economies of scale must exist.

As an In and Out Burger restaurant increases the number of employees for a specific restaurant,

Efficiency will suffer as the restaurant becomes too crowded with employees.

In the short run, when a firm produces zero output, total cost equals

Fixed costs.

Which of the following is a factor of production for the Little Biscuit Bread Company?

Flour

Economic cost

Includes both implicit and explicit costs.

The long-run average total cost curve is constructed from the

Lowest average total cost for producing each level of output.

The average total cost (ATC) curve will be negatively sloped so long as

Marginal cost is less than average total cost.

The change in total output associated with one additional unit of input is the

Marginal physical product.

Higher education levels and better management

Shift the long-run ATC curve downward.

The average variable cost curve slopes upward with a higher rate of output in the short run because of

The effect of diminishing returns.

Diseconomies of scale are reflected in

The upward-sloping segment of the long-run average total cost curve.

Economies of scale are reductions in average

Total cost that result from using operations of larger size.

The sum of fixed cost and variable cost at any rate of output is

Total cost.

The vertical difference between the total cost curve and the total fixed cost curve represents

Total variable costs.

When a firm produces at a technically efficient output level, it is

Using the fewest resources to produce a good or service.

At any given rate of output, the difference between total cost and fixed cost is

Variable cost.

Which of the following statements about the relationship between economic costs and accounting costs is true? a. Accounting costs are always less than or equal to economic costs. b. Accounting costs must always equal economic costs. c. Accounting costs are always greater than economic costs. d. Accounting costs are equal to or greater than economic costs.

a. Accounting costs are always less than or equal to economic costs.

Which of the following is the slope of the production function with respect to an input? a. The marginal physical product of the input. b. The average product of the input. c. The unit cost of the input. d. The input price.

a. The marginal physical product of the input.

Marginal cost a. Is the change in total output from hiring one more factor of production. b. Is the change in total cost from producing one additional unit of output. c. Falls when there are diminishing returns. d. Is the change in the total cost when hiring one more factor of production.

b. Is the change in total cost from producing one additional unit of output.

In the short run, which of the following is most likely a variable cost? a. Contractual lease payments. b. Labor and raw materials costs. c. Property taxes. d. Interest payments on borrowed funds.

b. Labor and raw materials costs.

The most desirable rate of output for a firm is the output that a. Minimizes total costs. b. Maximizes total profit. c. Minimizes marginal costs. d. Maximizes total revenue.

b. Maximizes total profit.

Which of the following statements is not true regarding the production function and the production possibilities curve? a. Both the production function and the production possibilities curve maximize the amount of output attainable. b. The production function describes the capacity of a single firm, whereas the production function summarizes the output capacity of the entire economy. c. A production function tells us the maximum amount of output attainable from the use of all resources. d. The production possibilities curve expresses the ability to produce various combinations of goods given the use of all resources.

c. A production function tells us the maximum amount of output attainable from the use of all resources.

Which of the following is most likely a fixed cost? a. Raw materials cost. b. Labor cost. c. Energy cost. d. Property taxes.

d. Property taxes.

In the long run, which of the following is likely to be a variable cost? a. Factory rental but not wage costs. b. Wage costs but not costs for equipment. c. Interest payments on borrowed funds but not utilities. d. Rent, wages, and all other costs are variable in the long run.

d. Rent, wages, and all other costs are variable in the long run.

Which of the following is always downward-sloping? a. The marginal cost curve when it is below the average total cost curve. b. The marginal cost curve when it is above the average total cost curve. c. The average total cost curve when it is below the marginal cost curve. d. The average total cost curve when it is above the marginal cost curve.

d. The average total cost curve when it is above the marginal cost curve.

If the marginal cost curve is rising, which of the following must be true? a. The average total cost curve must be rising. b. The average total cost curve must be below the marginal cost curve. c. The average total cost curve must be above the marginal cost curve. d. Total costs must be rising.

d. Total costs must be rising.