Econ Exam 1 - ch. 11

What does the term "spreading the overhead" refer to? a. reducing average fixed cost by selling more output b. reducing average total cost by selling more output. c. reducing average variable cost by selling more output d. reducing total cost by selling more output

a. reducing average fixed cost by selling more output

What cost measure is equal to AFC + AVC? a. total cost b. average total cost c. marginal cost d. total variable cost

b. average total cost

Refer to the graph below. In moving along the curve from point A to point B, which of the following is more likely to occur? a. specialization b. diminishing returns c. division of labor d. none of the above

b. diminishing returns

Refer to the graph below. How much is the value of total fixed cost? a. $2,400 b. $3,400 c. $5,800 d. None of the above; total fixed cost cannot be computed using this graph.

a. $2,400

Refer to the table below. What is the marginal cost of producing the 640th pizza? a. $43.33 b. $650.00 c. $4050.00 d. $4700.00

a. $43.33

Refer to the table below. What is the average total cost of producing 550 pizzas? a. $5.00 b. $6.48 c. $13.00 d. $26.00

a. $5.00

Which of the following statements is correct? a. In the long run, all costs are variable. b. In the long run, all costs are fixed. c. In the long run, there are no fixed or variable costs. d. In the long run, at least one input remains fixed.

a. In the long run, all costs are variable.

If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees? a. They are part of fixed cost. b. They are part of variable cost. c. They are an implicit cost. d. They are not considered a part of the cost of production.

a. They are part of fixed cost.

Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity? a. opportunity cost b. explicit cost c. total cost d. variable cost

a. opportunity cost

Refer to the graph below. From the origin up until point A, a. output increases at an increasing rate. b. output increases at a decreasing rate. c. output increases at a constant rate. d. the effect of diminishing returns is greater than the effect of specialization.

a. output increases at an increasing rate.

The processes a firm uses to turn inputs into outputs of goods and services is. a. technology b. technological change c. the short run d. the production function

a. technology

Refer to the graphs below. Which graph is representative of a typical average total cost curve? a. A b. B c. C d. D

b. B

Refer to the graph below. Based on the relationship between average total cost and marginal cost, which of the curves below appears to be average total cost? a. Curve 1 b. Curve 2 c. Both curves appear to be average cost curves. d. neither curve

b. Curve 2

Refer to the graph below. Based on the relationship between marginal product and average product, which curve appears to be average product? a. Curve 1 b. Curve 2 c. Both curves appear to be average product curves. d. neither curve

b. Curve 2

Refer to the graph below. At any level of output, what is the vertical distance between Curve 2 and Curve 3 equal to? a. Curve 1 b. Curve 4 c. total cost d. marginal cost

b. Curve 4

Refer to the graph below. For a certain output range (or quantity of pizzas produced per day), marginal cost is greater than average cost. What is this output range? a. from zero to about 525 pizzas per day b. the output range greater than about 525 pizzas per day c. the entire output range, from zero to about 640 pizzas per day d. exactly 640 pizzas per day

b. the output range greater than about 525 pizzas per day

Which costs are affected by the level of output produced? a. fixed costs b. variable costs c. all costs d. sunk costs

b. variable costs

Refer to the table below. What is the marginal cost of producing the 200th pizza? a. $0.00 b. $2.60 c. $3.25 d. $650.00

c. $3.25

Refer to the graph below. What does Curve 4 represent? a. average variable cost b. average total cost c. average fixed cost d. marginal cost

c. average fixed cost

The following cost measures reach their minimum points when they are equal to the value of marginal cost, except one. Which cost measure is the exception? a. average variable cost b. average total cost c. average fixed cost d. There is no exception; all three measures above reach their minimum values when they are equal to the value of marginal cost.

c. average fixed cost

Which of the following refers to the total output produced by a firm divided by the quantity of workers? a. average total cost b. marginal cost c. average product of labor d. marginal product of labor

c. average product of labor

Which of the following are sometimes called accounting costs? a. economic costs b. implicit costs c. explicit costs d. total variable costs

c. explicit costs

What is the additional output that a firm produces as a result of hiring one more worker called? a. the production function b. average total cost c. marginal product of labor d. average product of labor

c. marginal product of labor

Which of the following is true? i.Total cost = fixed cost + variable cost ii.Total cost = explicit costs + implicit costs iii.Economic cost = accounting cost + implicit costs a. i only b. ii only c. i and ii only d. i, ii, and iii

d. i, ii, and iii

What do we obtain by dividing the fixed cost by the quantity of output produced? a. total variable cost b. average fixed cost c. total cost d. average variable cost

b. average fixed cost

Refer to the table below. Which of the following costs are implicit costs? a. the foregone salary and interest b. the lease payments c. the payments for paper, wages, and electricity d. all of the above

a. the foregone salary and interest

Which of the following statements about the relationship between marginal product of labor and average product of labor is correct? a. Whenever the marginal product of labor is less than the average product of labor, the average product of labor must be increasing. b. Whenever the marginal product of labor is greater than the average product of labor, the average product of labor must be increasing. c. Whenever the marginal product of labor is greater than the average product of labor, the marginal product of labor must be decreasing. d. Whenever the marginal product of labor is less than the average product of labor, the marginal product of labor must be decreasing.

b. Whenever the marginal product of labor is greater than the average product of labor, the average product of labor must be increasing.

The term used to describe a change in the ability of a firm to produce a given level of output with a given level of inputs is called___. a. technology b. technological change c. the long run d. the production function

b. technological change

What happens to the difference between average variable cost and average total cost as the level of output increases? a. the difference increases b. the difference decreases c. the difference remains the same d. the difference first increases then decreases

b. the difference decreases

What is the production function? a. the representation of the firm's costs b. the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs c. the total cost divided by the quantity of output produced d. all of the above

b. the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs

Refer to the table below. When do diminishing returns in the production of pizzas start? a. when the second worker is hired b. when the third worker is hired c. when the fourth worker is hired d. when the fifth worker is hired

b. when the third worker is hired

What is the short run? a. a period of time during which a firm can vary all of its inputs b. a period of time during which a firm can adopt a new technology c. a period of time during which a firm can increase or decrease the size of its physical plant d. a period of time during which at least one of the firm's inputs is fixed

d. a period of time during which at least one of the firm's inputs is fixed

Fill in the blanks. When graphing a conventional short-run production function, we place____ on the horizontal axis and ____on the vertical axis. a. output; the variable input b. the variable input; the fixed input c. the fixed input; the variable input d. the variable input; output

d. the variable input; output