Chapter 21 - The Costs of Production Practice Questions
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