Exam 4 Test 2

10) The short run is a period of time in which A) the quantity of at least one factor of production is fixed. B) the amount of output is fixed. C) nothing the firm does can be altered. D) prices and wages are fixed.

a

12) An example of a variable factor of production in the short run is A) an employee. B) land. C) capital equipment. D) a building.

a

13) Using the table above, what is the marginal product of the 5th worker hired at Decent Donuts? A) 22 dozen donuts per day B) 86 dozen donuts per day C) 17.2 dozen donuts per day D) 64 dozen donuts per day

a

15) The marginal product of labor is equal to the A) increase in the total product that results from hiring one more worker with all other inputs remaining the same. B) total product divided by the total number of workers hired. C) slope of the marginal product of labor curve. D) None of the above answers are correct.

a

20) Which of the following statements is TRUE? A) When marginal product is less than average product, average product is decreasing. B) When marginal product is less than average product, average product is increasing. C) When marginal product is rising, average product is decreasing. D) When marginal product is falling, average product is decreasing.

a

28) A firm's average total cost is $80, its fixed cost is $1000, and its output is 100 units. Its average variable cost A) is more than $60. B) is less than $40. C) is between $40 and $60. D) cannot be determined without more information.

a

29) In the above figure, the marginal cost curve is curve A) A. B) B. C) C. D) D.

a

31) The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes? A) $300 B) $500 C) $200 D) $400

a

34) As output increases, total cost ________, total fixed cost ________, and total variable cost ________. A) increases; does not change; increases B) does not change; increases; increases C) increases; increases; does not change D) increases; increases; increases

a

35) Use the data in the table above and suppose that labor is the only variable factor of production. When 122 dozen donuts are produced at Decent Donuts, the MC curve A) has a positive slope. B) shows the effect of increasing marginal returns. C) Both answers A and B are correct. D) Neither answer A nor B is correct.

a

39) In the above figure, the long-run average cost curve exhibits diseconomies of scale A) between 20 and 25 units per hour. B) between 10 and 20 units per hour. C) between 5 and 10 units per hour. D) along the entire curve.

a

43) Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant 1 and hires 3 workers. What is the firm's average fixed cost? A) $11.00 B) $4.33 C) $8.40 D) $19.40

a

45) In the short run A) no firm experiences economies of scale. B) all inputs are variable. C) all firms experience increasing returns to scale. D) some firms experience economies of scale.

a

11) The long run is a period of time in which A) all factors of production are fixed. B) all factors of production are variable. C) some but not all factors of production are fixed. D) some but not all factors of production are variable.

b

19) The average product of labor is equal to the A) total number of workers hired divided by the total product. B) total product divided by the total number of workers hired. C) slope of the marginal product of labor curve. D) Both answers B and C are correct.

b

30) If as output increases average product increases, then ________. A) average total cost decreases B) average variable cost decreases C) marginal cost decreases D) average fixed cost decreases

b

32) The table above gives production information for Bob's Baseball Cap Company. Bob's total cost when zero caps are produced is $200 and workers cost $10 per hour. The total fixed cost of producing 10 baseball hats per hour is A) $22. B) $200. C) $400. D) More information is needed to answer the question.

b

4) After constructing a new factory, the cost of building the factory is a A) variable cost. B) sunk cost. C) past cost. D) None of the above answers are correct

b

42) Electric utility companies have built larger and larger electric generating stations and, as a result, the long-run average cost of producing each kilowatt hour decreased. This is an example of A) increasing returns to cost. B) economies of scale. C) constant returns to cost. D) diseconomies of scale.

b

7) In the long run, a firm can vary A) its labor but not its capital. B) both its labor and its capital. C) neither its labor nor its capital. D) its capital but not its labor.

b

9) A period of time in which the quantity of all factors of production used by a firm can be varied is called the A) market period. B) long run. C) variable run. D) short run.

b

18) In the above table, the marginal product of the 7th worker is 6. What is the total product when 7 workers are employed? A) 68 B) 72 C) 70 D) 76

c

2) The short run is a time frame in which A) all factors of production are fixed. B) at least one factor of production can be varied. C) at least one factor of production is fixed. D) all factors of production can be varied.

c

24) The above table shows the short-run total product schedule for the campus book store. At what levels of books sold per hour will the marginal product of labor be greater than the average product of labor? A) 73 books sold per hour B) 40 books sold per hour C) Both A and B are correct. D) Neither A nor B is correct.

c

27) The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles. What is the average total cost of producing 4,500 frijoles? A) $9000 B) $225 C) $2 D) More information is needed to determine the answer

c

3) The long run is distinguished from the short run because only in the long run A) the firm no longer maximizes its profit. B) factor of production prices can vary. C) the quantities of all factors of production can be varied. D) output prices can vary.

c

36) In the above figure, the total fixed cost curve is curve A) A. B) B. C) C. D) none of the curves in the figure.

c

38) Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. When Silvio's uses 2 ovens and hires the 3rd worker, the marginal product of labor is ________ the average product of labor, and therefore the average product of labor ________. A) less than; decreases B) greater than; increases C) less than; increases D) greater than; decreases

c

40) When a firm is experiencing economies of scale A) the MP curve slopes upward. B) diminishing returns to labor have been suspended. C) the LRAC curve slopes downward. D) the MC curve slopes downward.

c

41) The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 2? A) 0-20 B) 20-25 C) greater than 25 D) 0-25

c

37) The average total cost curves for plants A, B, C, and D are shown in the above figure. It is possible that the long-run average cost curve runs through points A) b, d, and e. B) a, b, and c. C) c and d. D) d, e, and f.

d

1) All the decisions made by people who operate firms have one overriding objective, which is to ________. A) maximize the quantity that the firm sells B) maximize the firm's total revenue C) maximize the firm's market share D) make maximum attainable profit

d

14) If a firm's marginal product of labor is less than its average product of labor, then an increase in the quantity of labor it employs definitely will A) increase its marginal product of labor. B) decrease its total product. C) not change its average product of labor. D) decrease its average product of labor.

d

16) Total product is A) maximum amount of amount of output produced by a given quantity of labor divided by price of the output. B) the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. C) maximum amount of output produced by a given quantity of labor divided by the given quantity of labor employed. D) maximum output that a given quantity of labor can produce.

d

17) Using the data in the above table, if the firm employs 5 workers, total product (measured in units per day) and average product and marginal product of the fifth worker (measured in units per worker) are A) 25, 5.75, and 4 respectively. B) 23, 5.75, and 4 respectively. C) 23, 5.00, and 4 respectively. D) 25, 5.00, and 2 respectively

d

21) In the above table, the marginal product of the third worker is A) 1. B) 2. C) 3. D) 4.

d

22) The above table shows the total product of producing baseball hats. The average product of 3 workers is equal to A) 12.78 baseball hats. B) 1.67 baseball hats. C) 18.00 baseball hats. D) 6.00 baseball hats.

d

23) When the total product curve is drawn in a figure that measures employment along the horizontal axis, it is a graph that shows the A) minimum output attainable for each quantity of labor employed. B) minimum cost of producing a given amount of output using different techniques. C) maximum profit attainable for each unit of output sold per unit of labor employed. D) maximum output attainable for each quantity of labor employed.

d

25) Cindy's Sweaters' production function is shown in the above table. Cindy rents two knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. What is the marginal cost of the 19th sweater? A) $8.00 B) $10.00 C) $40.00 D) $20.00

d

26) The above table shows some cost data for Tracey's Tents. What is the average total cost when output is 3? A) $30 B) $50 C) $120 D) $40

d

33) The output at which average variable cost is a minimum is ________ than the output at which ________ is a minimum. A) less than; marginal cost B) the same as; marginal cost C) the same as; average total cost D) less than; average total cost

d

44) Diseconomies of scale definitely means that as the firm increases its output, its A) short-run average total cost increases. B) long-run average total cost decreases. C) short-run average total cost decreases. D) long-run average total cost increases.

d

5) Economists define the short run as a period of time so short that A) the amount of output cannot be changed at all. B) only one factor of production can be varied. C) the amount of output cannot be changed except under diminishing marginal returns. D) at least one factor of production cannot be varied.

d

6) In the short run A) some firms experience increasing returns to scale. B) all factors of production are fixed. C) all factors of production are variable. D) the size of the plant is fixed.

d

8) A cost that has already been made and cannot be recovered is called a A) marginal cost. B) fixed cost. C) variable cost. D) sunk cost.

d