Econ CH 11
When a cherry orchard in Oregon adds a worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is: $19. $40. $4,000. $24,000.
$40
Suppose Cyd knows the average total cost of producing 9 scones is $5, while the average total cost of producing 10 scones is $5.20. What is the marginal cost of the tenth scone? $5.20 $7.00 $5.00 $0.20
$7.00
A farm can produce 1,000 bushels of wheat per year with two workers or 1,300 bushels of wheat per year with four workers. The marginal product of the fourth worker is _____ bushels. A. 150 B. 1,300 C. 300 D. 100
A
A firm's marginal cost is: A. the ratio of the change in total cost to the change in the quantity of output. B. the slope of the average fixed cost curve. C. the change in total cost divided by the change in labor input. D. total cost divided by output.
A
Diminishing returns are a reason: A. the marginal cost curve is upward-sloping. B. the marginal cost curve is downward-sloping. C. fixed costs remain constant. D. the average fixed cost curve is downward-sloping.
A
You own a deli. Which of the following is a decision most likely to be made in the LONG run at your deli? A. You renovate the second floor of your building to increase the size of the dining room. B. You order more soft drinks for next week. C. You advertise for part-time workers. D. You order more breadsticks.
A
Diminishing marginal returns means that: A. the firm is maximizing profit. B. each additional unit of an input will decrease output. C. each additional unit of an input will increase output by larger and larger amounts. D. each additional unit of an input will increase output, but by smaller and smaller amounts.
D
If a firm has to increase output suddenly to meet an increase in demand, its average total cost will decrease in the short run until it has time to add physical capital. False True
FALSE
The slope of the total product curve is equal to the average product of labor. True False
FALSE
Economies of scale most often occur in industries whose initial fixed cost of plant and equipment is low. True False
False
Austin's total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers and pays each worker $8 an hour. The marginal product of the twentieth worker is 12 iced cupcakes an hour. What is the marginal cost of the last cupcake produced by the last worker Austin hired? $0.26 $0.66 $8.00 $3.81
$0.66
At quantities greater than the long-run minimum cost per unit of output, the long-run average total cost curve is _____ of the corresponding short-run average total cost curve. a. to the right of the minimum b. to the left of the minimum c. tangent to the minimum d. tangent to the maximum
a
Decreasing and increasing returns to scale account for the shape of the: a. long-run average total cost curve. b. marginal cost curve in both the short run and the long run. c. short-run average total cost curve. d. short-run average variable cost curve.
a
When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 60, and when she hires four workers, total product is 75. The slope of the marginal product curve when two to four workers are hired is: A. upward. B. downward. C. horizontal. D. vertical.
a
You run a business producing picture frames. This month your total cost of production is $10,000, your variable cost of production is $6,000, and you produce 3,000 picture frames. It follows that average _____ cost is _____. a. variable; $2 b. fixed; $1 c. total; $1 d. total; $3
a
Average total cost is the ratio of _____ cost to _____. a. marginal; amount of variable input b. total; quantity of output c. total; amount of variable input d. total; marginal cost
b
In the long run: a) all factors are fixed. b) all factors are variable. c) production choices are more limited than in the short run. d) production is always greater than zero.
b
In the short run, the average total cost curve slopes upward because of: a. diseconomies of scale. b. diminishing returns. c. economies of scale. d. increasing returns.
b
The _____ curve shows the quantities of output that can be obtained from different quantities of a variable input, assuming other inputs are fixed. a. marginal input b. total input c. average total quantity d. total product
b
The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will: A. increase at an increasing rate. B. decrease. C. increase at a decreasing rate. D. not change.
b
The total product curve: a) will be downward-sloping if there are diminishing returns to the variable input. b) will become flatter as output increases if there are diminishing returns to the variable input. c) shows the relation between output and the quantity of a variable input for varying levels of the fixed input. d) will become horizontal when the marginal product of the variable input is constant.
b
You run a business producing picture frames. This month your total cost of production is $10,000, your variable cost of production is $6,000, and you produce 3,000 picture frames. It follows that average _____ cost is _____. a. total; $3 b. total; $1 c. variable; $2 d. fixed; $1
c
Diminishing returns to an input occur: a. when all inputs are fixed. b. only when there are no fixed inputs. c. when all inputs are variable. d. when some inputs are fixed and some are variable.
d
If an increase in output results in a decrease in average total cost, the corresponding marginal cost is: a. equal to average total cost. b. greater than average total cost. c. negative. d. less than average total cost.
d
In the long run: a) all inputs are fixed. b) at least one input is variable and one input is fixed. c) inputs are neither variable nor fixed. d) all inputs are variable.
d
The U shape of the long-run average total cost curve is primarily due to: a. technological change. b. increasing and then diminishing returns. c. diminishing returns. d. economies and diseconomies of scale.
d
Farmers in the United States grow about three times as much wheat per acre as do farmers in Western Europe. False True
false
If a firm has to increase output suddenly to meet an increase in demand, its average total cost will decrease in the short run until it has time to add physical capital. False True
false
In the short run, the average total cost curve reaches its minimum point at a lower level of output than the short-run marginal cost curve reaches its minimum. True False
false
When a firm has to increase its output, average total costs will decrease in the short run and then increase in the long run after the firm has time to add physical capital. False True
false
When the long-run average total cost curve is downward-sloping as output increases, the firm has diseconomies of scale. False True
false
When diseconomies of scale occur: A. average variable cost declines. B. average total cost declines. C. marginal cost declines. D. long-run average cost rises.
D
In the long run, when a firm adds physical capital, workers become more productive, so variable costs increase. True False
False
The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a ______ average _____ cost. a. spreading; lower; fixed b. diminishing returns; lower; variable c. spreading; higher; fixed d. diminishing returns; higher; variable
a
The long run is a planning period: a. over which a firm can consider all inputs as variable. b. of at least five years. c. of more than six months. d. of 6 months to 5 years.
a
A factor of production whose quantity can be changed during the SHORT run is a(n) _____ factor of production. a. marginal b. incremental c. variable d. fixed
c
The costs associated with variable inputs are _____, and the costs associated with _____ inputs are _____. a. fixed; fixed; variable b. fixed; fixed; fixed c. variable; fixed; fixed d. variable; fixed; variable
c
The marginal cost curve intersects the average variable cost curve at: a. no point; the curves don't intersect. b. its maximum. c. its lowest point. d. its end point.
c
The term diminishing returns refers to: a) a decrease in total output due to the firm hiring uneducated workers. b) a reduction in profits caused by increasing output beyond the optimal point. c) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant. d) a falling interest rate that can be expected as one's investment in a single asset increases.
c
When marginal cost is below average variable cost, average variable cost must be: a. rising. b. above average total cost. c. falling. d. below average fixed cost.
c
A firm always operates at some point on its long-run average total cost curve in both the long run and the short run. False True
false
A firm always operates at some point on its long-run average total cost curve in both the long run and the short run. True False
false
At the long-run quantity of output, where the long-run average total cost curve is at its lowest point, it is tangent to the _____ of the corresponding short-run average total cost curve. A. right of the minimum B. minimum C. left of the minimum D. maximum
B
Diminishing marginal returns occur when: A. the marginal product of a variable factor is increasing at a decreasing rate. B. each additional unit of a variable factor adds less to total output than the previous unit. C. total product decreases. D. each additional unit of a variable factor adds more to total output than the previous unit.
B
The _____ cost curve continually declines as more output is produced in the short run. A. average variable B. average fixed C. average total D. marginal
B
When marginal cost is above average variable cost, average variable cost must be: A. greater than average total cost. B. increasing. C. at its maximum. D. at its minimum.
B
Firms choose their level of fixed cost in the long run based on the amount of output that they expect to produce. True False
true
If a firm has to increase output suddenly to meet an increase in demand, its average total cost will increase in the short run until it has time to add physical capital. True False
true
If output increases, a firm will move along its short-run average total cost curve in the short run until it has time to adjust its fixed cost. False True
true
When a firm adds physical capital, its variable cost will decrease in the long run. False True
true
When a firm adds physical capital, labor will become more productive in the short run. True False
true
When long-run average total cost is constant as output increases, the firm has constant returns to scale. False True
true
When the long-run average total cost curve is upward-sloping as output increases, the firm has diseconomies of scale. True False
true
In the long run, all costs are: marginal. variable. constant. fixed.
variable
With one input fixed, a firm will find that as it attempts to produce more, the total product curve increases at a decreasing rate and its marginal product curve is: A. constant and horizontal at the marginal product axis. B. constant and vertical at the quantity axis. C. downward-sloping. D. upward-sloping.
C