chapter 21 microeconomics practice questions

Diminishing returns occur because

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

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

Marginal cost is less than average total cost. MC<ATC

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

Using the fewest resources to produce a good or service

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 if the input

Labor productivity will increase in response to

an increase in the amount of physical capital per worker

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

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.

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

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

fixed cost

which of the following is a factor of production for the little biscuit bread company? flour bread productivity money

flour

a production function shows

how a firm production increases as it adds more labor

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

is always downward sloping

the change in total cost from producing one additional unit of output is

marginal cost

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

marginal physical product

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

the effect of diminishing returns

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

the output maximizes the total amount of profit

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

the restraunt will suffer due to the crowded amount of employees working

If the marginal cost curve is rising,

the total cost is also rising

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

total cost

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

variable cost