Chapter 21 - The Costs of Production Practice Questions

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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

Which of the following statements is not true regarding the production function and the production possibilities curve?

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

Which of the following statements about the relationship between economic costs and accounting costs is true?

Accounting costs are always less than or equal to economic costs

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

A production function shows

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

Economic cost

Includes both implicit and explicit costS

Marginal cost

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?

Labor and raw materials 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

The most desirable rate of output for a firm is the output that

Maximizes total profit

Which of the following is most likely a fixed cost?

Property taxes

In the long run, which of the following is likely to be a variable cost?

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

Higher education levels and better management

Shift the long-run ATC curve downward

Which of the following is always downward-sloping?

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

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

The effect of diminishing returns

Which of the following is the slope of the production function with respect to an input?

The marginal physical product of the input

Diseconomies of scale are reflected in

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

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

Total cost

Economies of scale are reductions in average

Total cost that result from using operations of larger size

If the marginal cost curve is rising, which of the following must be true?

Total costs must be rising

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


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