ECON 8 FINAL

19. Refer to the diagram to the right. The average product of the 4th worker A. is 17. B. is 11. C. is 68. D. cannot be determined.

A.

2. The law of diminishing marginal returns states A. that at some​ point, adding more of a variable input to a given amount of a fixed​ input, will cause the marginal product of the variable input to decline. B. that in the presence of a fixed​ factor, at some point average product of labor starts to fall as more and more variable inputs are added. C. that at some​ point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. D. average total costs of production initially falls and after some points starts to rise at a decreasing rate as output increases.

A.

24. Refer to the diagram to the right. Diminishing returns to labor set in A. after L1. B. after L2. C. after L3. D. immediately.

A.

26. Golda Rush quit her job as a manager for Home Depot to start her own hair dressing​ salon, Goldilocks. She gave up a salary of​ $40,000 per​ year, invested her savings of​ $30,000 (which was earning 5 percent​interest) and borrowed​ $10,000 from a close​ friend, agreeing to pay 5 percent interest per year. In her first​year, Golda spent​ $18,000 to rent a​ salon, hired a​ part-time assistant for​ $12,000 and incurred another​$15,000 in expenses on equipment and hairdressing material. Based on this​ information, what is the amount of her explicit​ costs? A. $45,000 B. $45,500 C. $47,000 D. $87,000

A.

31. Refer to the table to the right which shows the technology of production at the​ Matsuko's Mushroom Farm for the month of May. What is the marginal product of the 4th​ worker? A. 5 pounds B. 50 pounds C. 137 pounds D. 12.5 pounds

A.

34. Refer to the table to the right which shows cost data for Lotus​ Lanterns, a producer of whimsical night lights. What is the average total cost of production when the firm produces 120​ lanterns? A. $14 B. $1,680 C. $72 D. $12.3

A.

35. Which of the following is a reason why a firm would experience diseconomies of​ scale? A. As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants. B. As the size of the firm​ increases, it must operate in other countries where differences in​ language, customs, and laws increase its average costs. C. To finance an increase in the size of its plant a firm must borrow more money or sell more shares of stock. D. As the size of the firm​ increases, it becomes more difficult to find markets where it​ doesn't already have operations.

A.

38. ​If, when a firm doubles all its​ inputs, its average cost of production​ decreases, then production displays A. economies of scale. B. diseconomies of scale. C. diminishing returns. D. declining fixed costs.

A.

11. Refer to the table to the right which shows the technology of production at the​ Matsuko's Mushroom Farm for the month of May. What is the average product of labor when the farm hires 5​ workers? A. 4 pounds B. 10.8 bushels C. 54 pounds D. 38.2 pounds

B.

13. Refer to the table to the right which shows cost data for Lotus​ Lanterns, a producer of whimsical night lights. What is the marginal cost per unit of production when the firm produces 100​ lanterns? A. $8.1 B. $32 C. $320 D. $11.1

B.

15. Refer to the diagram to the right. The curve labeled ​"E" is A. the output supply curve. B. the marginal product curve. C. the total product curve. D. the average product curve.

B.

17. Refer to the diagram to the right. Identify the minimum efficient scale of production. A. Qa B. Qb C. Qc D. Qd

B.

20. If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6​units, then the average product of 12 workers is A. 54 units. B. 5 units. C. 60 units. D. 48 units.

B.

25. The basic activity of a firm is A. to compete with other firms that produce similar products. B. to use inputs to produce outputs of goods and services. C. to provide jobs for its employees. D. to set the prices of its products as high as possible.

B.

28. Refer to the table to the right which shows the technology of production at the​ Matsuko's Mushroom Farm for the month of May. Diminishing marginal returns sets in when the​________ worker is hired. A. 2nd B. 3rd C. 4th D. None of the​ above. the production function displays increasing marginal returns.

B.

3. The figure to the right shows the cost structure for a firm. When the output level is 100 units average fixed cost is A. $10. B. $8. C. $5. D. This cannot be determined from the diagram.

B.

36. Refer to the diagram to the right. The marginal product of the 3rd worker is A. 19. B. 15. C. 11. D. 57.

B.

7. Average fixed costs of production A. graphs as a U−shaped curve. B. falls as long as output is increased. C. remain constant. D. will rise at a fixed rate as more is produced.

B.

9. A firm has successfully adopted a positive technological change when A. it can pay its workers less yet increase its output. B. it can produce more output using the same inputs. C. it sees an increase in worker productivity. D. it produces less pollution in its production process.

B.

18. The production function shows A. the technology used to produce output. B. the incremental output gained by improving the production process. C. the total cost of producing a given quantity of output. D. the maximum output that can be produced from each possible quantity of inputs.

D.

Economic cost of production differ from accounting costs in that A. accounting cost includes expenditures for hired resources while economic cost does not. B. economic cost adds the opportunity cost of a firm using its own resources while accounting cost does not. C. accounting costs are always larger than economic cost. D. economic cost includes expenditures for hired resources while accounting cost does not.

B.

21. When a firm produces​ 50,000 units of​ output, its total cost equals​ $6.5 million. When it increases its production to​ 70,000 units of​ output, its total cost increased to​ $9.4 million. Within this​ range, the marginal cost of an additional unit of output is A. $134.29. B. $135. C. $145. D. $41.43.

C.

22. ​Vipsana's Gyros House sells gyros. The cost of ingredients​ (pita, meat,​ spices, etc.) to make a gyro is​$2.00. Vipsana pays her employees​ $60 per day. She also incurs a fixed cost of​ $120 per day. Calculate​Vipsana's total cost per day when she produces 50 gyros using two​ workers? A. $100 B. $124.40 C. $220 D. $340

C.

23. Which of the following equations is​ correct? A. AVC − ATC​ = AFC B. ATC​ + AVC​ = AFC C. AFC​ + AVC​ = ATC D. AVC​ + ATC​ = AFC

C.

4. If the marginal cost curve is below the average variable cost​ curve, then A. average variable cost is increasing. B. average variable cost could either be increasing or decreasing. C. average variable cost is decreasing. D. marginal cost must be decreasing.

C.

40. Which of the following is not a source of technological advancement for a​ producer? A. higher skill level of managers. B. better trained workers. C. outsourcing some aspect of production. D. more efficient physical capital.

C.

8. Which of the following explains why the marginal cost curve has a U​ shape? A. Initially, the marginal product of labor​ rises, then falls. B. Initially, the marginal product of labor​ falls, then rises. C. Initially, the average product of labor​ rises, then falls. D. Initially, the average cost of production​ rises, then falls.

C.

10. Marginal cost is the A. the additional output when total cost is increased by one dollar. B. change in the price of inputs if a firm buys more inputs to produce an additional unit of output. C. change in average cost when an additional unit of output is produced. D. additional cost of producing an additional unit of output.

D.

12. Golda Rush quit her job as a manager for Home Depot to start her own hair dressing​ salon, Goldilocks. She gave up a salary of​ $40,000 per​ year, invested her savings of​ $30,000 (which was earning 5 percent​interest) and borrowed​ $10,000 from a close​ friend, agreeing to pay 5 percent interest per year. In her first​year, Golda spent​ $18,000 to rent a​ salon, hired a​ part-time assistant for​ $12,000 and incurred another​$15,000 in expenses on equipment and hairdressing material. Based on this​ information, what is the amount of her implicit​ costs? A. $80,000 B. $70,000 C. $42,000 D. $41,500

D.

14. Refer to the table to the right which shows cost data for Lotus​ Lanterns, a producer of whimsical night lights. What is the total variable cost of production when the firm produces 115​ lanterns? A. $956 B. $10.05 C. $1,557 D. $1,157

D.

16. The marginal product of labor is defined as A. the additional sales revenue that results when one more worker is hired. B. the additional number of workers required to produce one more unit of output. C. the cost of hiring one more worker. D. the additional output that results when one more worker is​ hired, holding all other resources constant.

D.

27. Refer to the diagram to the right. The vertical difference between curves F and G measures A. fixed costs. B. sunk costs. C. marginal costs. D. average fixed costs.

D.

29. Refer to the diagram to the right. Identify the curves in the diagram. A.E ​= average fixed cost​ curve, F ​= variable cost​ curve, G ​= total cost​ curve, H​ = marginal cost curve B. E ​= average fixed cost​ curve, F ​= average total cost​ curve, G ​= average variable cost​curve, H​ = marginal cost curve C. E ​= marginal cost​ curve, F ​= total cost​curve, G ​= variable cost​ curve, H​ = average fixed cost curve D. E ​= marginal cost​ curve, F ​= average total cost​ curve, G ​= average variable cost​curve, H​ = average fixed cost curve.

D.

30. Refer to the diagram to the right. Diminishing marginal productivity sets in after A. the 4th worker is hired. B. the 5th worker is hired. C. the 3rd worker is hired. D. the 2nd worker is hired.

D.

32. The average total cost of production A. equals the explicit cost of production. B. is the extra cost required to produce one more unit. C. equals total cost of production multiplied by the level of output. D. equals total cost of production divided by the level of output.

D.

33. Refer to the diagram to the right. The average product of labor declines after L2 because A. the marginal product of labor is positive. B. the marginal product of labor is negative. C. the marginal product of labor is falling. D. the marginal product of labor is below the average product of labor.

D.

37. Which of the following statements best describes the economic short​ run? A. It is a period during which fixed inputs become variable inputs because of depreciation. B. It is a period of one year or less. C. It is a period during which firms are free to vary all of their inputs. D. It is a period during which at least one of the​ firm's inputs is fixed.

D.

39. If production displays economies of​ scale, the long run average cost curve is A. upward sloping. B. above the short run average total cost curve. C. below the long run marginal cost curve. D. downward sloping.

D.

5. The figure to the right shows the cost structure for a firm. When output level is​ 100, what is the total cost of​production? A. $20 B. $1,000 C. $1,200 D. $2,000

D.

6. Which of the following is an implicit cost of​ production? A. wages paid to labor plus the cost of carrying benefits for workers. B. the utility bill paid to​ water, electricity, and natural gas companies. C. interest paid on a loan to a bank. D. rent that could have been earned on a building owned and used by the firm.

D.