question
The short run is a time frame in which
A) the firm is not able to hire more workers.
B) the amount of output produced is fixed.
C) at least one factor of production is fixed.
D) there is not enough time to make all of the decisions necessary to maximize profit.
E) there is a shortage of most factors of production.
A) the firm is not able to hire more workers.
B) the amount of output produced is fixed.
C) at least one factor of production is fixed.
D) there is not enough time to make all of the decisions necessary to maximize profit.
E) there is a shortage of most factors of production.
answer
C
question
The long run refers to a time period
A) in which labour is variable, but plant is fixed.
B) when there is at least one variable factor of production.
C) in which all factors of production are variable.
D) of one year or less.
E) of at least 5 years.
A) in which labour is variable, but plant is fixed.
B) when there is at least one variable factor of production.
C) in which all factors of production are variable.
D) of one year or less.
E) of at least 5 years.
answer
C
question
The total product curve is a graph that shows the
A) maximum output that can be produced as technology advances.
B) minimum cost of producing a given amount of output using a given technology.
C) change in total product for a given change in marginal product.
D) maximum profit from each unit of output sold.
E) maximum output that a given quantity of labour can produce.
A) maximum output that can be produced as technology advances.
B) minimum cost of producing a given amount of output using a given technology.
C) change in total product for a given change in marginal product.
D) maximum profit from each unit of output sold.
E) maximum output that a given quantity of labour can produce.
answer
E
question
Refer to Figure 11.2.1 which illustrates Tania's total product curve. Which one of the following statements is false?
A) All the points below the curve are attainable.
B) All the points on the curve are attainable.
C) The cost of producing at point B equals the cost of producing at point C.
D) All the points below the curve are inefficient.
E) All the points above the curve are unattainable.
A) All the points below the curve are attainable.
B) All the points on the curve are attainable.
C) The cost of producing at point B equals the cost of producing at point C.
D) All the points below the curve are inefficient.
E) All the points above the curve are unattainable.
answer
C
question
Refer to Figure 11.2.1 which illustrates Tania's total product curve. Which one of the following statements is true?
A) The points below the curve are attainable and inefficient.
B) The points below the curve are inefficient and unattainable.
C) The points above the curve are attainable and inefficient.
D) The points on the curve are efficient and unattainable.
E) Marginal product is equal at every point on the total product curve.
A) The points below the curve are attainable and inefficient.
B) The points below the curve are inefficient and unattainable.
C) The points above the curve are attainable and inefficient.
D) The points on the curve are efficient and unattainable.
E) Marginal product is equal at every point on the total product curve.
answer
A
question
Refer to Figure 11.2.1 which illustrates Tania's total product curve. Marginal product of labour reaches its maximum when the number of workers increases from
A) zero to 1.
B) 1 to 2.
C) 2 to 3.
D) 3 to 4.
E) 4 to 5.
A) zero to 1.
B) 1 to 2.
C) 2 to 3.
D) 3 to 4.
E) 4 to 5.
answer
B
question
Refer to Table 11.2.1 which gives Tania's total product schedule. The average product when the firm hires two workers is
A) 9 teapots per worker.
B) 3 teapots per worker.
C) 6 teapots per worker.
D) 7 teapots per worker.
E) 12 teapots per worker.
A) 9 teapots per worker.
B) 3 teapots per worker.
C) 6 teapots per worker.
D) 7 teapots per worker.
E) 12 teapots per worker.
answer
C
question
Which of the following are correct? According to the law of diminishing returns,
(1) marginal product eventually rises.
(2) marginal product eventually falls.
(3) marginal cost eventually rises.
(4) marginal cost eventually falls.
A) (1) and (3)
B) (1) and (4)
C) (2) and (3)
D) (2) and (4)
E) (4)
(1) marginal product eventually rises.
(2) marginal product eventually falls.
(3) marginal cost eventually rises.
(4) marginal cost eventually falls.
A) (1) and (3)
B) (1) and (4)
C) (2) and (3)
D) (2) and (4)
E) (4)
answer
C
question
Refer to Figure 11.3.2, which illustrates short-run average and marginal cost curves. Which one of the following statements is false?
A) The vertical gap between curves B and C is equal to average fixed cost.
B) The vertical gap between curves B and C is equal to average variable cost.
C) Line B comes closer to line C as output increases because of a decrease in average fixed cost.
D) Curve D is the marginal cost curve.
E) Average fixed cost decreases with output.
A) The vertical gap between curves B and C is equal to average fixed cost.
B) The vertical gap between curves B and C is equal to average variable cost.
C) Line B comes closer to line C as output increases because of a decrease in average fixed cost.
D) Curve D is the marginal cost curve.
E) Average fixed cost decreases with output.
answer
B
question
Marginal cost equals
A) (TC - TVC)/Q.
B) ΔTC/ΔQ.
C) ΔQ/ΔTVC.
D) ΔTFC/ΔTC.
E) Q/TVC.
A) (TC - TVC)/Q.
B) ΔTC/ΔQ.
C) ΔQ/ΔTVC.
D) ΔTFC/ΔTC.
E) Q/TVC.
answer
B
question
A firm's total fixed cost is $100. If total cost is $200 for one unit of output and $310 for two units, what is the marginal cost of the second unit?
A) $200
B) $310
C) $110
D) $100
E) $210
A) $200
B) $310
C) $110
D) $100
E) $210
answer
C
question
A technological advance will shift
(1) TP, AP, and MP curves up.
(2) TP, AP, and MP down.
(3) TC, ATC, and MC curves up.
(4) TC, ATC, and MC curves down.
A) (1) and (3)
B) (1) and (4)
C) (2) and (3)
D) (2) and (4)
E) none of the above
(1) TP, AP, and MP curves up.
(2) TP, AP, and MP down.
(3) TC, ATC, and MC curves up.
(4) TC, ATC, and MC curves down.
A) (1) and (3)
B) (1) and (4)
C) (2) and (3)
D) (2) and (4)
E) none of the above
answer
B
question
Refer to Figure 11.4.2, which illustrates the short-run average total cost curves for four different plant sizes. Which plant has the lowest average total cost for an output rate of 5 sweaters a day?
A) Plant A
B) Plant B
C) Plant C
D) Plant D
E) none of the above
A) Plant A
B) Plant B
C) Plant C
D) Plant D
E) none of the above
answer
A
question
Refer to Figure 11.4.4, which illustrates the long-run average total cost curve. Which one of the following statements is false?
A) Diseconomies of scale exist at quantities greater than Q2 units of output.
B) Constant returns to scale exist between Q0 and Q1 units of output.
C) Economies of scale exist between 0 and Q0 units of output.
D) Diseconomies of scale exist between 0 and Q1 units of output.
E) Constant returns to scale exist between Q1 and Q2 units of output.
A) Diseconomies of scale exist at quantities greater than Q2 units of output.
B) Constant returns to scale exist between Q0 and Q1 units of output.
C) Economies of scale exist between 0 and Q0 units of output.
D) Diseconomies of scale exist between 0 and Q1 units of output.
E) Constant returns to scale exist between Q1 and Q2 units of output.
answer
D
question
The above (incomplete) table provides information about the relationships between labor and various product measures. The total product that can be produced with 6 units of labor is
A) 19.
B) 20.
C) 22
D) More information is needed to answer the question.
E) None of the above answers is correct.
A) 19.
B) 20.
C) 22
D) More information is needed to answer the question.
E) None of the above answers is correct.
answer
B
question
What factors of production can a firm change in the short run? In the long run?
answer
In the short run, the firm can change its variable factors of production, such as labour. The firm cannot change its fixed factors of production, such as capital stock. The factors of production the firm cannot change are called its "plant". In the long run, the firm can change all of its factors of production. Indeed, the long run is defined as the period of time long enough so that the firm can change all of its factors of production.
question
"In the short run, even when output is zero, the firm still has some variable costs it must pay." Is the statement correct or incorrect? Briefly explain your answer.
answer
The statement is incorrect. When output is zero, there are no variable costs because there are no variable factors being employed. However, in the short run there might be fixed factors of production, in which case the firm would still have some fixed costs it must pay.
question
What does a firm's short-run total product curve show and what is its significance?
answer
A short run total product curve shows the way the maximum output increases when the input of a variable factor of production (such as labour) increases, holding all other factors of production fixed. Its significance is that it shows the productivity of the variable factor of production as output increased. The latter, in turn, is an important determinant of a firm's short run costs.
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