Essentials of Economics (Schiller) - Chapter 5

The law of diminishing returns implies that at some output level: A) Average total costs must diminish. C) Marginal costs must rise. B) Total costs must fall. D) Marginal costs must fall.

C.

The sum of fixed cost and variable cost at any rate of output is equal to: A) Average total cost. B) Total profit. C) Total cost. D) Marginal cost.

C.

What is the total variable cost when output is 100 units in Figure 5.2? A) $100. B) $2,500. C) $10,000. D) $10,400.

C.

With which unit of labor do diminishing marginal returns first appear in Table 5.1? A) The first. B) The second. C) The third. D) The fourth.

C.

True or False? - In the short run, when output is zero, total costs are zero.

False.

The law of diminishing returns can explain why: A) Marginal cost eventually increases in the short run as more output is produced. B) The demand curve is typically downward sloping. C) The average fixed-cost curve declines as long as output increases. D) Marginal cost decreases as more output is produced.

A.

What is the marginal physical product of the fourth unit of labor in Table 5.1? A) 6. B) 8. C) 9. D) 10.

A.

A production function: A) Shows the cost of producing any level of output. B) Is a technological relationship between factors of production and output. C) Is a technological relationship that expresses the least-cost method of purchasing inputs. D) Shows the minimum amount of output that can be obtained from a given set of inputs.

B.

If an additional unit of labor costs $10, and this additional unit of labor has an MPP of 5 units of output, the marginal cost is: A) $0.50. B) $2.00. C) $5.00. D) $50.00.

B.

In defining costs, economists recognize: A) Explicit and implicit costs while accountants recognize only implicit costs. B) Explicit and implicit costs while accountants recognize only explicit costs. C) Only explicit costs while accountants recognize only implicit costs. D) Only explicit costs while accountants recognize explicit and implicit costs.

B.

Marginal cost can best be approximated by the formula: A) Total cost ÷ Output. B) Change in total cost ÷ Change in output. C) Change in total cost ÷ Change in input. D) Total cost ÷ Input cost.

B.

The decision to enter or exit an industry is the: A) Production decision. C) Corporate decision. B) Investment decision. D) Industrial decision.

B.

The tendency for total costs to rise more slowly at first and then to increase more quickly results in: A) Diminishing returns initially and then increasing returns. B) Falling marginal costs initially and then rising marginal costs. C) Negative marginal costs initially and then positive marginal costs. D) Rising average costs initially and then falling average costs.

B.

What is the marginal physical product of the first unit of labor in Table 5.1? A) 0. B) 8. C) 12. D) 20.

B.

What is the marginal physical product of the third unit of labor in Table 5.1? A) 8. B) 10. C) 12. D) 20.

B.

What is the total cost of 100 units in Figure 5.2? A) $10,000. B) $14,800. C) $17,280. D) $17,760.

B.

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

C.

The change in total output that results from increasing an input by 1 unit is: A) The opportunity cost of the output. B) The average total cost. C) The marginal physical product of the input. D) The total product from the input.

C.

The factors of production include: A) Money. B) Profit. C) Land, labor, capital, and entrepreneurship. D) All of the above.

C.

Average total cost: A) Varies with the rate of output. C) Is total cost divided by total output. B) Is a U-shaped curve. D) All of the above.

D.

Improvements in technology: A) Shift the production function upward. B) Shift the marginal cost curve downward. C) Shift the average total cost curve downward. D) All of the above.

D.

The limits to the production of any good are reflected in the: A) Law of demand. C) Demand curve. B) Capacity curve. D) Production function.

D.

The quantity of resources actually needed to produce a given output depends on the: A) Level of production technology. C) Organization of the production process. B) Quality of the resources used. D) All of the above.

D.

What is the marginal cost of the 120th unit of output in Figure 5.2? A) $1.20. B) $24.00. C) $120.00. D) $144.00.

D.

What is the total fixed cost in Figure 5.2? A) $8. B) $1,200. C) $2,500. D) $4,800.

D.