Pharmacoeconomics Chapter 5 Practice Questions

If the first, second, third and forth worker employed by the firm add 15, 21, 12 and 8 units of total product respectively, we can conclude that: A. The marginal product of all four workers is 14. B. The total product of two workers is 42. C. after the second worker marginal product declines. D. adding a forth worker will cause total product to decline.

C. after the second worker marginal product declines.

If an additional unit of labor costs $30 and has an MPP of 50 units of output, the marginal cost is: A. $0.60. B. $1.66. C. $15.00. D. $1500.00.

A. $0.60.

MPP: is A. Inversely associated with marginal cost B. Positively associated with marginal cost

A. Inversely associated with marginal cost MPP= additional output/additonal input MC= additional cost/additional output

When do you think the profit of making a particular product for a specific manufacturer in the short run is going to be maximized? A. Marginal cost= marginal revenue B. Marginal cost > marginal revenue C. Marginal cost < marginal revenue

A. Marginal cost= marginal revenue

The maximum output that can be produced from a set of inputs is measured by: A. The production function. B. The demand schedule. C. Fixed costs. D. Marginal costs.

A. The production function.

Long-run choices imply that all factors are variable. A. True B. False

A. True

Marginal physical product is the change in total output associated with an additional unit of input. A. True B. False

A. True

We know that the marginal cost is going down first, but will go up, what do you think the pattern for the average total cost (total cost/ total output)? A. Will go down first then go up B. Will stay about the same C. its hard to predict

A. Will go down first then go up

Do you think based on the data, the incremental output per additional labor has experienced: A. increase first, then decrease B. Always increased C. Always decreased D. Decreased first, then increase

A. increase first, then decrease

How intensively to use existing plant and equipment is a long-run investment decision. A. True B. False

B. False

There are no fixed costs in the long run, what does this mean? A. In the long run, fixed costs=0 B. In the long run, everything (fixed and variable resource) is subject to change.

B. In the long run, everything (fixed and variable resource) is subject to change.

The change of ___ precedes the change of ___ A. Average total cost, marginal cost B. Marginal Cost, average total cost

B. Marginal Cost, average total cost

When the ATC= marginal revenue (MR, the price in a free market), profit= A. Positive, but not maximum B. Zero C. Negative

B. Zero

Rising marginal costs result from:  A. Rising marginal physical product. B. Falling prices of variable inputs. C. Falling marginal physical product.  D. Rising prices of fixed inputs.

C. Falling marginal physical product.  MPP AND MC ARE INVERSELY RELATED!!!!!!!

The reason the average total cost curve declines initially is because of:  A. Falling average fixed cost. B. Falling average variable costs. C. Falling marginal cost. D. Both A and B.

D. Both A and B.

Which of the following statements concerning the relationship between total product (TP) and marginal physical product (MPP) is not correct?  A. TP will continue to rise even though MPP is falling but greater than zero. B. TP is increasing at an increasing rate if MPP is increasing. C. TP will fall if MPP is negative. D. TP will fall if MPP is falling

D. TP will fall if MPP is falling