Micro ch. 7

Which of the following is a factor of production for the little biscuit bread company? A. Flour B. Bread C. Productivity D. Money

A. Flour

Average total cost is important to a business because A. It tells the firm what the profit per unit produced is. B. It always declines as more output is produced. C. It tells the firm what its fixed costs are. D. It is an indicator of the production function.

A. It tells the firm what the profit per unit produced is.

Intel's chief executive says the company might expand the technology it is using in its planned $2.5 billion chip-manufacturing factory in China if the U.S. government allows it, underscoring the technology giant's ambitions in the world's fourth-biggest economy. The Intel executive is making a A. Long-run decision, and therefore an investment decision. B. Long-run decision, and therefore a production decision. C. Decision that would definitely increase costs. D. Decision that would cause ATC to increase.

A. Long-run decision, and therefore an investment decision.

Marginal cost A. Rises as a direct result of diminishing returns. B. Falls whenever marginal physical product decreases. C. Falls in the short run because some resources are fixed. D. Rises whenever marginal revenue product rises.

A. Rises as a direct result of diminishing returns.

Marginal cost is equal to A. The change in total costs divided by the change in quantity produced. B. The change in fixed costs as more units are produced. C. Total cost divided by quantity produced. D. Average total cost multiplied by quantity produced.

A. The change in total costs divided by the change in quantity produced.

The short-run production function shows how output changes when A. The quantity of labor changes. B. The quantity of land changes. C. Technology changes. D. The fixed inputs change.

A. The quantity of labor changes.

The In The News article "Ford Pumps $400 Million into Kansas City Plant" says that A. This investment by Ford is a long-run production decision, and the company plans to enjoy economies of scale. B. The $400 million investment is a short-run production decision. C. The $400 million investment will be a variable expense. D. The new plant will likely result in diseconomies of scale.

A. This investment by Ford is a long-run production decision, and the company plans to enjoy economies of scale.

Changes in short-run total costs result from changes in A. Variable costs. B. Fixed costs. C. Profit. D. The price elasticity of demand.

A. Variable costs.

If an additional unit of labor costs $20 and has a MPP of 15 units of output, the marginal cost is A. $0.75 B. $1.33 C. $30.00 D.$300.00

B. $1.33

At 30 units of output in Table 21.2, the total variable cost is A. $30 B. $40 C. $50 D. $80

B. $40

The marginal physical product of the third unit of labor in Figure 21.1 is

B. 12.0 units per day.

Technological changes that increase productivity shift the A. Production function downward. B. Average total cost curve downward. C. Marginal cost curve upward. D. Marginal physical product curve downward.

B. Average total cost curve downward.

One In the News article titled "Funeral Giant Moves In on Small Rivals" reports that profit for a Houston-based funeral giant is 31 cents on every dollar versus a profit of 12 cents for the funeral industry in general. Such profits are most likely the result of A. Constant returns to scale. B. Economies of scale. C. Higher minimum average costs. D. A downward shift in the production function.

B. Economies of scale.

Sam's surf shop has total costs of $2,000 when it is not producing any surfboards. This means that A. Variable costs are $2000. B. Fixed costs are $2,000. C. The shop is very inefficient in its production. D. Fixed costs are zero.

B. Fixed costs are $2,000.

Marginal cost A. Is the change in total output from hiring one more factor of production B. Is the change in total cost from producing one additional unit of output C. Falls when there are diminishing returns D. Is the change in total cost when hiring one more factor of production

B. 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? 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

If the marginal physical product (MPP) is falling, then the A. Marginal cost of each unit of output is falling. B. Marginal cost of each unit of output is rising. C. Total cost of each unit of output is falling. D. Total cost of each unit of output is rising.

B. Marginal cost of each unit of output is rising.

Profit is A. The difference between total cost and variable cost. B. The difference between total revenue and total cost. C. Earned at all points along the production function. D. Possible only with technical efficiency.

B. The difference between total revenue and total cost.

The sum of fixed cost and variable cost at any rate of output is A. Total variable cost B. Total cost C. Average total cost D. Average marginal cost

B. Total cost

When a firm produces at a technically efficient output level, it is A. Producing the output at the minimum MC curve. B. Using the fewest resources to produce a good or service. C. Producing the output where the AVC curve is at a minimum. D. Producing the best combination of goods and services.

B. Using the fewest resources to produce a good or service.

Which of the following is least likely to increase productivity? A. Technological advances. B. Increased managerial capabilities. C. A higher wage rate. D. Improved labor skills

C. A higher wage rate.

According to the World View article titled "United States Gains Cost Advantage," during the last decade, unit labor costs in the United States declined: A. And the United States was less competitive in world markets. B. Because productivity advances were small and wage increases were high. C. Because productivity advances were greater than wage increases. D. And cost curves shifted upward.

C. Because productivity advances were greater than wage increases.

As an In and Out Burger restaurant increases the number of employees for a specific restaurant, A. Total production of hamburgers will fall. B. Costs of production will fall. C. Efficiency will suffer as the restaurant becomes too crowded with employees. D. The production function will increase.

C. Efficiency will suffer as the restaurant becomes too crowded with employees.

If a firm could hire all the workers it wanted at a zero wage (i.e., the workers are volunteers), the firm should hire A. Enough workers to produce the output where diminishing returns begin. B. Enough workers to produce the output where worker productivity is the highest. C. Enough workers to produce where the MPP equals zero. D. All the workers that can fit into the factory.

C. Enough workers to produce where the MPP equals zero.

In the short run, when a firm produces zero output, total cost equals A. Zero B. Variable costs C. Fixed costs D. Marginal costs

C. Fixed costs

The creation of the World Wide Web has contributed to all of the following except A. Reduced information costs. B. Reduced transaction costs. C. Increased marginal costs. D. Increased productivity.

C. Increased marginal costs.

Which of the following is most likely a fixed cost? A. The material used to make jackets. B. The labor on an automotive assembly line. C. The rent for a factory. D. The electricity used to run packaging equipment.

C. The rent for a factory.

With which unit of labor do diminishing marginal returns first appear in Table 21.1? A. The first B. The second C. The third D. The fourth

C. The third

In Figure 21.1, diminishing marginal returns first occur with the

C. Third worker.

Greater labor productivity means A. Lower output per labor-hour. B. Higher labor cost per unit of output. C. Lower output per worker. D. Higher output per worker.

D. Higher output per worker.

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 cost 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 costs in the long run

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

The marginal physical product of labor in Figure 21.1 is negative for the

D. Sixth worker.

Average total cost is equal to A. Total cost divided by fixed cost. B. Total cost multiplied by quantity. C. The sum of average variable cost and marginal cost. D. Total cost divided by quantity produced.

D. Total cost divided by quantity produced.

Which of the following costs do not change when output changes in the short run? A. Average variable costs. B. Variable costs. C. Average fixed costs. D. fixed costs.

D. fixed costs

When the wage rate is $10 per hour and the MPP of a worker is 15 units per hour, the unit labor cost is a. $0.67 per unit b. $10.00 per unit c. $15.00 per unit d. $150.00 per unit

a. $0.67 per unit

A production function shows a. How a firm's production increases as it adds more labor b. How a firm's costs of production increase as it produces more goods c. How production changes as its unit costs go up d. How's the total cost increase as labor is added

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

When the size of a factory (and all its associated inputs) doubles and, as a result, output more than doubles, a. the law of diminishing returns must not apply in the smaller factory b. economies of scale must exist c. the short-run ATC curve must be declining d. marginal costs must be declining

b. economies of scale must exist

Higher education levels and better management a. cause MPP to slope downward b. shift the long-run ATC curve downward c. lead to greater diseconomies of scale d. shift the MC curve upward

b. shift the long-run ATC curve downward

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. Production function describes the capacity of a single firm, whereas production function summarized 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 d. Production possibilities curve expresses the ability to produce various combinations of goods given the use of all resources

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

The change in total output associated with one additional unit of input is the a. Opportunity cost of the output b. Average productivity c. Marginal physical product d. Marginal cost

c. Marginal physical product

Economies of scale are reductions in average a. total cost that result from declining average fixed costs b. fixed cost that result from reducing the firm's scale of operations c. total cost that result from using operations of larger size d. fixed cost resulting from improved technology and production efficiency

c. total cost that result from using operations of larger size

Diseconomies of scale are reflected in a. the downward-sloping segment of the long-run average total cost curve b. the downward-sloping segment of the long-run marginal cost curve c. a downward shift or the long-run average total cost curve d. the upward-sloping segment of the long-run average total cost curve

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