ECON ch. 9 & 10

According to the law of diminishing marginal product, the marginal product of a variable input must eventually begin to fall because: a. at least one input is being held fixed. b. none of the other inputs are fixed. c. all of the other inputs are fixed. d. the most productive units of the variable input are used first.

a

Based on the cost data, the marginal cost of the 3rd unit of output is equal to: (table 10.6) a. $40 b. $60 c. $100 d. $260

a

Based on the graph, average total cost is equal to ___ when output is 300 units and ___ when output is 500 units. (graph 10.7) a. $7.50; $7 b. $5.50; $5 c. $7.50; $5.50 d. $7; $5

a

Based on the graph, total variable cost is equal to ___ when output is 300 units and ___ when output is 500 units.(graph 10.7) a. $1,500; $2,750 b. $2,750; $1,500 c. $2,250; 3,500 d. $3,500; $2,250

a

Based on the graph, average fixed cost is equal to ___ when output is 300 units and ___ when output is 500 units. (graph 10.7) a. $7.50; $7 b. $5.50; $5 c. $2.50; $1.50 d. $7; $5

c

Based on the graph, the firm experiences _ as output is increased from 20,000 to 50,000. (graph 10.9) a. diminishing marginal product b. economies of scale c. constant returns to scale d. diseconomies of scale

c

Based on the graph, total cost is equal to ___ when output is 300 units and ___ when output is 500 units.(graph 10.7) a. $1,500; $2,750 b. $2,750; $1,500 c. $2,250; 3,500 d. $3,500; $2,250

c

Based on the graph, total fixed cost is equal to: (graph 10.7) a. $300 b. $500 c. $750 d. $1,500

c

Based on the production function data, diminishing marginal product (diminishing returns) sets in with the addition of the ___ worker. (table 10.1) a. third b. fourth c. fifth d. sixth

c

Based on the production function data, if the marginal product of the 3rd worker is 7, then the total number of units of output produced when 3 workers are hired is __. (table 10.3) a. 7 b. 25 c. 17 d. impossible to determine from the information given

c

Based on the production function data, the marginal product of the fifth worker is __, and average product is ____ when five workers are hired. (table 10.1) a. 14; 12 b. 12; 14 c. 12; 9.6 d. 14; 9.6

c

Based on the production function data, when 4 workers are hired, the average product of labor is: (table 10.2) a. 4 b. 5 c. 6 d. 24

c

If a firm's Total Revenue function is linear with slope equal to 5, this means that: a. marginal revenue is equal to $5 and price is less than $5. b. price is equal to $5 and marginal revenue is less than $5. c. marginal revenue and price are both equal to $5. d. the firm must lower the price in order to sell additional units.

c

Jane was a partner at a law firm earning $200,000 per year. She left the firm to open herown law practice. In the first year of business, Jane generated revenues of $350,000 and incurred explicit costs of $100,000. Jane's economic profit from her first year in her own practice is therefore equal to: a. -$50,000. b. $150,000. c. $50,000. d. $250,000.

c

The downward-sloping portion of a LRAC curve implies: a. diseconomies of scale exist over that range of the curve. b. constant returns to scale exist over that range of the curve. c. economies of scale exist over that range of the curve. d. decreasing returns to scale exist over that range of the curve.

c

Based on the cost data, this firm has total fixed costs of: (table 10.5) a. $0 b. $10 c. $13 d. $15

b

Smaller firms generally enjoy economies of scale as they expand because: a. they are able to spread capital overhead costs when more output is produced. b. average cost tends to increase as more output is produced. c. at least one input is held fixed as the firm expands. d. worker productivity falls due to monitoring and communication problems.

a

Suppose Frank left his $50,000 per year job to start his own consulting business. In his first year, Frank was hired by 6 clients that paid $10,000 each for his services. Frank spent $2,500 on a new laptop and printer and had $1,000 in other business-related expenses in his first year. In his first year, Frank had an accounting profit of ____ and an economic profit of ____. a. $56,500; $6,500 b. $56,500; $56,500 c. $60,000; $6,500 d. $60,000; $56,500

a

When a firm uses additional inputs to increase output, these inputs are: a. variable b. fixed c. free d. too expensive

a

Based on the data in the chart, long-run average cost: (table 10.8) a. increases from $25 per unit to $40 per unit when the firm moves from Scale 1 to Scale 2, reflecting economies of scale. b. decreases from $50 per unit to $40 per unit when the firm moves from Scale 1 to Scale 2, reflecting economies of scale. c. increases from $25 per unit to $40 per unit when the firm moves from Scale 1 to Scale 2, reflecting diseconomies of scale. d. decreases from $50 per unit to $40 per unit when the firm moves from Scale 1 to Scale 2, reflecting diseconomies of scale.

b

Based on the graph, average variable cost is equal to ___ when output is 300 units and ___ when output is 500 units. (graph 10.7) a. $7; $7.50 b. $5; $5.50 c. $5.50; $7.50 d. $5; $7

b

Based on the graph, the firm experiences _ as output is increased from 0 to 20,000. (graph 10.9) a. diminishing marginal product b. economies of scale c. constant returns to scale d. diseconomies of scale

b

Based on the graph, the minimum efficient scale for this firm is ___ units of output. (graph 10.9) a. 0 b. 20,000 c. between 20,000 and 50,000 d. 50,000

b

Based on the production function data, when 2 workers are hired, the average product of labor is __. (table 10.3) a. 6 b. 5 c. 4 d. 10

b

Economic theory divides decisions into those made in the: a. short run, when all inputs are fixed, and the long run, when all inputs are variable. b. short run, when at least one input is fixed, and the long run, when all inputs are variable. c. short run, when all inputs are variable, and the long run, when all inputs are fixed. d. short run, when at least one input is variable, and the long run, when all inputs are fixed.

b

Firms experience economies of scale when: a. long-run average cost increases as output increases. b. long-run average cost decreases as output increases. c. doubling inputs will less than double output. d. constant returns to scale are present.

b

The typical long-run average cost (LRAC) curve is: a. hill-shaped due to economies and diseconomies of scale. b. U-shaped due to economies and diseconomies of scale. c. hill-shaped due to the law of diminishing marginal returns. d. U-shaped due to the law of diminishing marginal returns.

b

Which equation is not accurate? a. TFC + TVC = TC b. ATC + AVC = AFC c. AFC = TFC/Q d. ATC x Q = TC

b

Based on the cost data, average fixed cost: (table 10.6) a. is constant at all levels of output. b. increases as output increases. c. is equal to $40 when output is 4 units. d. is equal to $80 when output is 5 units.

c

Based on the cost data, the marginal cost of the 2nd unit of output is __. (table 10.5) a. $0 b. $1 c. $2 d. $3

c

Based on the cost data, this firm has total fixed costs equal to: (table 10.4) a. $0 b. $40 c. $45 d. $85

c

Based on the data in the chart, long-run average cost: (table 10.8) a. increases from $40 per unit to $50 per unit when the firm moves from Scale 3 to Scale 4, reflecting economies of scale. b. decreases from $50 per unit to $40 per unit when the firm moves from Scale3 to Scale 4, reflecting economies of scale. c. increases from $40 per unit to $50 per unit when the firm moves from Scale 3 to Scale 4, reflecting diseconomies of scale. d. decreases from $50 per unit to $40 per unit when the firm moves from Scale 3 to Scale 4, reflecting diseconomies of scale.

c

A firm that is deciding how many workers to hire in order to produce the profit-maximizing level of output in its current factory space is: a. a short-run profit-maximizer but not a long-run profit-maximizer. b. a long-run profit-maximizer but not a short-run profit-maximizer. c. making a long-run decision. d. making a short-run decision.

d

Based on the cost data, average variable cost when 4 units of output are produced is __. (table 10.5) a. $4 b. $5 c. $10 d. $2.50

d

Based on the cost data, if the marginal cost of the 4th unit of output is $60, total cost is ____ and average total cost is ____ when 4 units of output are produced. (table 10.6) a. $280; $60 b. $160; $40 c. $60; $80 d. $320; $80

d

Based on the cost data, if this firm does not produce any output, it: (table 10.6) a. will not have to pay any costs. b. will still have total revenue of $160. c. must be making a long-run decision. d. will still have to pay fixed costs of $160.

d

Based on the cost data, the marginal cost (MC) of the third unit of output is equal to ___. At output equal to 3 units, average total cost (ATC) is equal to ___. (table 10.4) a. $6.67; $45 b. $20; $30 c. $6.67; $30 d. $20; $45

d

Based on the cost data, total cost is equal to: (table 10.4) a. $40 when output is equal to 1 unit. b. $45 when output is equal to 1 unit. c. $45 when output is equal to 3 units. d. $135 when output is equal to 3 units.

d

Based on the graph, the firm experiences _ as output is increased above 50,000. (graph 10.9) a. diminishing marginal product b. economies of scale c. constant returns to scale d. diseconomies of scale

d

Based on the production function data, if the marginal product of the 2nd worker is 6 units of output, total output is equal to _ when 2 workers are hired. (table 10.2) a. 3 b. 5 c. 6 d. 11

d

Suppose Shelly left her $40,000 per year job to start her own painting business. In her first year, Shelly painted 30 houses and was paid $3,000 each for each house. In her first year, Shelly paid her brother $20,000 to help her paint the houses and she paid $6,000 for paint and supplies. In her first year, Shelly had an accounting profit of ____ and an economic profit of ____. a. $90,000; $64,000 b. $52,000; $46,000 c. $46,000; $6,000 d. $64,000; $24,000

d

Suppose a doggie day care business firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers: a. both capital and labor to be fixed. b. both capital and labor to be variable. c. capital to be variable and labor to be fixed. d. labor to be variable and capital to be fixed.

d

Which of the following is most likely to be a fixed input? a. Employees hired to sell movie tickets b. Popcorn and other food supplies c. Employees hired to sell popcorn d. A movie theater

d