question
The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost.
A. Increasing; increasing
B. Increasing; decreasing
C. Decreasing; decreasing
D. Decreasing; increasing
A. Increasing; increasing
B. Increasing; decreasing
C. Decreasing; decreasing
D. Decreasing; increasing
answer
Decreasing; increasing
question
Will a change in fixed costs change total fixed cost?
A. Yes
B. No
A. Yes
B. No
answer
Yes
question
Will a change in fixed costs change total variable cost?
A. Yes
B. No
A. Yes
B. No
answer
No
question
Will a change in the cost of variable inputs change total variable costs?
A. Yes
B. No
A. Yes
B. No
answer
Yes
question
Will a change in fixed costs change average cost?
A. Yes
B. No
A. Yes
B. No
answer
Yes
question
Will a change in fixed costs change marginal cost?
A. Yes
B. No
A. Yes
B. No
answer
Yes
question
Marginal cost is the slope of _______.
A. The average cost curve
B. The average product curve
C. The total cost curve
D. The marginal product curve
A. The average cost curve
B. The average product curve
C. The total cost curve
D. The marginal product curve
answer
The total cost curve
question
If marginal cost is equal to average cost, average cost at this point must be ______________.
A. Increasing
B. Decreasing
C. At its minimum point
D. At its maximum point
A. Increasing
B. Decreasing
C. At its minimum point
D. At its maximum point
answer
At its minimum point
question
If average product is increasing as the variable input increases, which of the following is true?
A. Average cost must be increasing
B. Marginal cost must be increasing
C. Marginal cost must be decreasing
D. Average cost must be decreasing
A. Average cost must be increasing
B. Marginal cost must be increasing
C. Marginal cost must be decreasing
D. Average cost must be decreasing
answer
Average cost must be decreasing
question
Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is ______________.
answer
$15,000
question
Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is $15,000.
Given the previous two questions, suppose that we now increase production by one automobile per hour. If the cost of that additional automobile is $18,000, what is the new average?
Given the previous two questions, suppose that we now increase production by one automobile per hour. If the cost of that additional automobile is $18,000, what is the new average?
answer
$16,000
question
Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is $15,000.
If the cost of that additional automobile is $12,000, what is the new average?
If the cost of that additional automobile is $12,000, what is the new average?
answer
$14,000
question
In your own words, explain why a firm may face diminishing marginal returns to labor as the amount of labor used increases.
answer
If more labor is brought into production they may face diminishing marginal returns to labor because workers will have less capital to work with.
question
Explain in your own words why average product can increase even when the marginal product decreases, as long as marginal product is still above the average product.
answer
Average product can still increase even when the marginal product decreases because marginal product draws average product towards itself as long as marginal product is still above the average product. If marginal product is greater than average product, the average product is rising. This is true regardless of the direction of change for marginal product.
question
Match the input to its correct category ______.
1. Cow
2. Robotic drill press
3. Computer software
4. Lawyer
5. Fresh water
6. Tractor Trailer
Land, Capital, Labor?
1. Cow
2. Robotic drill press
3. Computer software
4. Lawyer
5. Fresh water
6. Tractor Trailer
Land, Capital, Labor?
answer
1. Land
2. Capital
3. Capital
4. Labor
5. Land
6. Capital
2. Capital
3. Capital
4. Labor
5. Land
6. Capital
question
Which of the following most likely represents a short-run business decision?
A. Jane is trying to decide whether to start a second franchise of her business.
B. Aaron hires two additional workers to help cover the holiday rush at his shop.
C. Xiang lists his delivery truck for sale in hopes of raising money to buy a new one.
D. Ellen applies for a loan to finance an expansion of her plumbing business.
A. Jane is trying to decide whether to start a second franchise of her business.
B. Aaron hires two additional workers to help cover the holiday rush at his shop.
C. Xiang lists his delivery truck for sale in hopes of raising money to buy a new one.
D. Ellen applies for a loan to finance an expansion of her plumbing business.
answer
Aaron hires two additional workers to help cover the holiday rush at his shop.
question
In the table below, what is the marginal product of the third worker?
# of workers: Output: Marginal Product:
1 75
2 135 60
3 190 ????
4 230 40
A. 40 units
B. 50 units
C. 55 units
D. 60 units
# of workers: Output: Marginal Product:
1 75
2 135 60
3 190 ????
4 230 40
A. 40 units
B. 50 units
C. 55 units
D. 60 units
answer
55 units
question
Which of the following is a cause of diminishing marginal productivity?
A. In the long run, labor gets tired as more labor gets added to the production process.
B. In the short run, labor runs out of available capital as more labor gets added to the production process.
C. In the long run, capital depreciates as more capital gets added to the production process.
D. In the short run, capital gets more expensive as you add more capital to the production process.
A. In the long run, labor gets tired as more labor gets added to the production process.
B. In the short run, labor runs out of available capital as more labor gets added to the production process.
C. In the long run, capital depreciates as more capital gets added to the production process.
D. In the short run, capital gets more expensive as you add more capital to the production process.
answer
In the short run, labor runs out of available capital as more labor gets added to the production process.
question
The production of 75 sofas per week requires 15 workers. The average product of each worker is ______________ sofas per week.
A. 5
B. 15
C. 75
D. 225
A. 5
B. 15
C. 75
D. 225
answer
5
question
If the average product of labor is 12 units of output per worker per day when eight workers are hired, eight workers will be able to produce ______________ units per day.
A. 12
B. 8
C. 10
D. 96
A. 12
B. 8
C. 10
D. 96
answer
96
question
Currently, the marginal product of labor is 32 units per week. The average product of labor at the current level of output is 48 units per week. If the employer hires one more worker, the marginal product of labor will be 30 units per week. The average product of labor will ______________.
A. Equal the marginal product of labor
B. Fall
C. Rise
D. Stay the same
A. Equal the marginal product of labor
B. Fall
C. Rise
D. Stay the same
answer
Fall
question
If the fixed cost of producing 50 units of output is $100,000 per year, the fixed cost of producing 100 units of output per year is _____.
A. $100,000
B. $200,000
C. $50,000
D. $10,000
A. $100,000
B. $200,000
C. $50,000
D. $10,000
answer
$100,000
question
In a model with only labor and capital as inputs, in the short run the amount of ______________ is fixed, while in the long run the amount of ______________ is variable.
A. Capital, capital
B. Either labor or capital, both labor and capital
C. Both labor and capital, either labor or capital
D. Labor, labor
A. Capital, capital
B. Either labor or capital, both labor and capital
C. Both labor and capital, either labor or capital
D. Labor, labor
answer
Either labor or capital, both labor and capital
question
Santa Claus's only variable input is labor. The wage he must pay is 200 candy canes per week. What is Santa's total weekly variable cost if he hires 200 elves?
A. 200 candy canes
B. 400 candy canes
C. 40,000 candy canes
D. It depends on the level of output.
A. 200 candy canes
B. 400 candy canes
C. 40,000 candy canes
D. It depends on the level of output.
answer
40,000 candy canes
question
Variable cost ______________ while fixed cost ______________ as output ______________ in the short run.
A. Rises, falls, decreases
B. Rises, stays the same, decreases
C. Rises, stays the same, increases
D. Falls, falls, decreases
A. Rises, falls, decreases
B. Rises, stays the same, decreases
C. Rises, stays the same, increases
D. Falls, falls, decreases
answer
Rises, stays the same, increases
question
At 600 units of output, total fixed cost is equal to $1,000 and total variable cost is equal to $12,000. Total cost is equal to _______.
A. $6,000
B. $13,000
C. $20
D. $21.67
A. $6,000
B. $13,000
C. $20
D. $21.67
answer
$13,000
question
At 2,000 units of output, the variable cost of production is $12,500 per week. Total cost of producing 2,000 units per week is $45,500. The fixed cost of producing 2,000 units of output per week is equal to ______.
A. $29,000
B. $33,000
C. $29.00
D. $22.75
A. $29,000
B. $33,000
C. $29.00
D. $22.75
answer
$33,000
question
Peter can produce 50 lunches per hour for $1,250. If he hires one more cook for $15 an hour, he can produce 55 lunches per hour. The marginal cost of expanding hourly lunch production from 50 to 55 is _____.
A. $1,265.00
B. $15.00
C. $23.00
D. $3.00
A. $1,265.00
B. $15.00
C. $23.00
D. $3.00
answer
$3.00
question
The fixed cost of producing surfboards is $5,000 per month. The variable cost for producing 15 surfboards is $36,000 per month. The average cost of producing 15 surfboards in a month is ______.
A. $333.33
B. $2,733.33
C. $2,400.00
D. $41,000.00
A. $333.33
B. $2,733.33
C. $2,400.00
D. $41,000.00
answer
$2,733.33
question
Samantha is evaluating whether to increase production at her book bindery. If she hires one more worker, she can increase output by 50 books per week. A book binder's weekly wage is $250. Samantha's marginal cost of increasing output by 50 books per week is ________.
A. $0.20
B. $0.50
C. $5.00
D. $2.00
A. $0.20
B. $0.50
C. $5.00
D. $2.00
answer
$5.00
question
Using the information in the question above, if Samantha's average cost to bind books is $2.50 before hiring the additional book binder, her average cost to bind books will ______________ if she hires the additional worker.
A. Depend on her level of output
B. Stay the same
C. Decrease
D. Increase
A. Depend on her level of output
B. Stay the same
C. Decrease
D. Increase
answer
Increase
question
A production function can best be described as which of the following?
A. A graphical depiction of what can and cannot be produced with a given amount of inputs
B. The quantity of inputs required to produce each unit of output in a given amount of time
C. The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time
D. The quantity of outputs created by a given quantity of inputs in a given amount of time
A. A graphical depiction of what can and cannot be produced with a given amount of inputs
B. The quantity of inputs required to produce each unit of output in a given amount of time
C. The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time
D. The quantity of outputs created by a given quantity of inputs in a given amount of time
answer
The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time
question
Marcus has four employees. The four employees produce 55 floral arrangements in a day. Marcus hires a fifth employee. The five employees produce 60 floral arrangements in a day. The fifth employee's marginal product is __________.
A. 60 floral arrangements in a day
B. 5 floral arrangements in a day
C. 11 ¾ floral arrangements in a day
D. 12 floral arrangements in a day
A. 60 floral arrangements in a day
B. 5 floral arrangements in a day
C. 11 ¾ floral arrangements in a day
D. 12 floral arrangements in a day
answer
5 floral arrangements in a day
question
What does diminishing marginal productivity mean?
A. As you increase the amount of a variable input, its average product eventually gets smaller.
B. As you increase the amount of a variable input, its marginal product eventually gets smaller.
C. As you increase the amount of a fixed input, its marginal product eventually gets smaller.
D. As you increase the amount of a variable input, total output eventually declines.
A. As you increase the amount of a variable input, its average product eventually gets smaller.
B. As you increase the amount of a variable input, its marginal product eventually gets smaller.
C. As you increase the amount of a fixed input, its marginal product eventually gets smaller.
D. As you increase the amount of a variable input, total output eventually declines.
answer
As you increase the amount of a variable input, its marginal product eventually gets smaller.
question
The amount of total output produced divided by the amount of labor hired holding all other inputs at the same level.
answer
Average product of labor
question
Currently, the marginal product of labor is 45 units per week. The average product of labor at the current level of output is 32 units per week. If the employer hires one more worker, the marginal product of labor will be 47 units per week. The average product of labor will ______________.
A. Equal the marginal product of labor
B. Fall
C. Rise
D. Stay the same
A. Equal the marginal product of labor
B. Fall
C. Rise
D. Stay the same
answer
Rise
question
Diminishing marginal returns means that marginal product will eventually ______________ and the total product function will ______________ as production increases.
A. Increase; not change
B. Decrease; not change
C. Increase; decrease
D. Decrease; decrease
E. Not change; not change
A. Increase; not change
B. Decrease; not change
C. Increase; decrease
D. Decrease; decrease
E. Not change; not change
answer
Decrease; not change
question
The slope of a firm's production function will ______ as the amount of a variable input used increases if the input experiences diminishing marginal productivity.
A. Not change
B. Be indeterminate depending on the amount of the variable input used
C. Increase
D. Decrease
A. Not change
B. Be indeterminate depending on the amount of the variable input used
C. Increase
D. Decrease
answer
Decrease
question
If the quantity of an input is fixed in the short run, its total cost will ______________ as output increases.
A. Increase
B. Decrease
C. Stay the same
D. Rise then fall
A. Increase
B. Decrease
C. Stay the same
D. Rise then fall
answer
Stay the same
question
If the quantity of an input is variable in the short run, its total cost will ______________ as output increases.
A. Increase
B. Decrease
C. Stay the same
D. Rise then fall
A. Increase
B. Decrease
C. Stay the same
D. Rise then fall
answer
Increase
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