Chapter 11 Microeconomics Test

Which of the following is an example of positive technological change?

a. a firm buys an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards
b. a firm's workers participate in a training program designed to increase the number of surf boards they can produce per day
c. a firm offers workers a higher wage to work on weekends and at night. As a result, the firm is able to increase its weekly production of surf boards.
d. A firm conducts a new advertising campaign. As a result, the demand for the firm's surf boards increases

A firm has successfully adopted a positive technological change when

a. it can pay its workers less yet increase its output
b. it sees an increase in worker productivity
c. it can produce more output using the same inputs
d. it produces less pollution in its production process

Implicit costs can be defined as

a. accounting profit minus explicit cost
b. the non-monetary opportunity cost of using the firm's own resources
c. the deferred cost of production
d. total cost minus fixed costs

Red Stone Creamery currently hires 5 workers. When it added a 6th​ worker, its output actually fell. Which of the following statements is​ true?

a. the marginal product of the sixth worker must be negative
b. the total product becomes negative
c. the sixth worker is not as skilled as the fifth worker
d. the average product of the sixth worker is negative

Average fixed costs of production

a. remains constant
b. graphs as a U-shaped curve
c. falls as long as output is increased
d. will rise at a fixed rate as more is produced

If another worker adds 9 units of output to a group of workers who had an average product of 7​ units, then the average product of labor

a. will decrease
b. will increase
c. will remain the same
d. cannot be determined

If four workers can produce 18 chairs a day and five can produce 20 chairs a​ day, the marginal product of the fifth worker is

a. 38 chairs
b. 4 chairs
c. 2 chairs
d. 3 chairs

Economic cost of production differ from accounting costs in that

a. economic cost adds the opportunity cost of a firm using its own resources while accounting cost does not
b. accounting costs are always larger than economic cost
c. economic cost includes expenditures for hired resources while accounting does not
d. accounting cost includes expenditures for hired resources while economic cost does not

The long run average cost curve shows

a. the lowest average cost of producing every level of output in the long run
b. where the most profitable level of output occurs
c. the average cost of producing where diminishing returns are not present
d. the plant size or scale that the firm should build

The production function shows

a. the technology used to produce output
b. the incremental output gained by improving the production process
c. the total cost of producing a given quantity of output
d. the maximum output that can be produced from a set of inputs

Which of the following is an implicit cost of​ production?

a. rent that could have been earned on a building owned and used by the firm
b. interest paid on a loan to a bank
c. wages paid to labor plus the cost of carrying benefits for workers
d. the utility bill paid to water, electricity, and natural gas companies

The explicit cost of production is also called

a. direct cost
b. overhead cost
c. accounting cost
d. variable cost

A characteristic of the long run is

a. there are both fixed and variable inputs
b. all inputs can be varied
c. there are fixed inputs
d. plant capacity cannot be increased or decreased

The marginal product of labor is defined as

a. the additional sales revenue that results when one more worker is hired
b. the cost of hiring one more worker
c. the additional output that results when one more worker is hired, holding all other resources constant
d. the additional number of workers required to produce one more unit of output

Marginal cost is equal to the

a. change in total cost divided by the change in output
b. change in average total costs divided by the change in output
c. change in average product divided by the change in output
d. change in total product divided by the change in output

If a producer is not able to expand its plant capacity​ immediately, it is

a. bankrupt
b. operating in the short run
c. losing money
d. operating in the long run

If the marginal cost curve is below the average variable cost​ curve, then

a. marginal cost must be decreasing
b. average variable cost could be either increasing or decreasing
c. average variable cost is increasing
d. average variable cost is decreasing

Long run costs are U−shaped because

a. of the law of demand
b. of the law of diminishing returns
c. of the law of supply
d. of economies and diseconomies of scale

Which of the following statements is false​?

a. marginal cost will equal average total cost when average total cost is at its lowest point
b. marginal cost will equal average total cost when marginal total cost is at its lowest
c. when marginal cost is greater than average total cost, average total cost will rise
d. when marginal cost is less than average total cost, average total cost will fall

The law of diminishing marginal returns states

a. average total costs of production initially falls and after some points starts to rise at a decreasing rate as output increases
b. that in the presence of a fixed​ factor, at some point average product of labor starts to fall as more and more variable inputs are added
c. that at some​ point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline
d. that at some​ point, adding more of a variable input to a given amount of a fixed​ input, will cause the marginal product of the variable input to decline.

The law of diminishing marginal returns

a. causes average total costs to rise at a decreasing rate as output increases
b. explains why the average total cost and marginal cost curves are U−shaped in the short run
c. causes the difference between average total cost and average variable cost to get smaller as output increases
d. explains why the average total​ cost, average fixed​ cost, and the marginal cost curves are U−shaped in the short run

Which of the following is an example of a​ long-run adjustment?

a. Wal-Mart builds another Supercenter
b. a soybean farmer turns on the irrigation system after a month long dry spell
c. your university offers Saturday morning classes next fall
d. Ford Motor Company lays of 2,000 assembly line workers

​If, when a firm doubles all its​ inputs, its average cost of production​ decreases, then production displays

a. economies of scale
b. diseconomies of scale
c. declining fixed costs
d. diminishing returns