question
A firm decides to stop hiring more workers when marginal cost starts to rise because the manager says that at diminishing marginal product, output is falling with each additional input. Is the manager correct or incorrect?
Correct: Diminishing marginal product means that adding additional workers lowers output.
Incorrect: When marginal cost starts to rise, the firm is not experiencing diminishing marginal product.
Incorrect: Diminishing marginal product does not mean output is falling when additional workers are hired.
Correct: Increasing marginal cost means profits are falling.
Correct: Diminishing marginal product means that adding additional workers lowers output.
Incorrect: When marginal cost starts to rise, the firm is not experiencing diminishing marginal product.
Incorrect: Diminishing marginal product does not mean output is falling when additional workers are hired.
Correct: Increasing marginal cost means profits are falling.
answer
Incorrect: Diminishing marginal product does not mean output is falling when additional workers are hired.
question
Advanced Frank's Fajitas can produce 45 fajitas per hour with five workers and one grill. One more worker will increase output by 6 fajitas per hour. If one more worker is hired, the average variable cost of production at Frank's Fajitas will:
Increase
Decrease.
Stay the same.
Be indeterminant until you know the wage rate.
Increase
Decrease.
Stay the same.
Be indeterminant until you know the wage rate.
answer
Increase
Explanation:
Average product of labor is decreasing. TP/L was 9, now it is 8.5. Average variable cost = variable cost/output = (wage*L)/TP. Average cost was wage/9. Now it is wage/8.5.
Explanation:
Average product of labor is decreasing. TP/L was 9, now it is 8.5. Average variable cost = variable cost/output = (wage*L)/TP. Average cost was wage/9. Now it is wage/8.5.
question
Advanced Frank's Fajitas can produce 45 fajitas per hour with five workers and one grill. One more worker will increase output by 6 fajitas per hour. If the wage rate is $9 per hour, the marginal cost of increasing fajita production to 51 fajitas per hour at Frank's Fajitas is:
$1.50
$3.00
$4.50
$9.00
$1.50
$3.00
$4.50
$9.00
answer
$1.50
Explanation
the change in output is 6 fajitas. The change in total cost is $9.00. MC is the change in total cost divided by the change in output: $9.00/6 = $1.50.
Explanation
the change in output is 6 fajitas. The change in total cost is $9.00. MC is the change in total cost divided by the change in output: $9.00/6 = $1.50.
question
A change in technology that (once implemented) makes each unit of labor more productive is likely to ______________ the marginal cost of production at each level of output (assuming all wages remain the same).
Decrease
Increase
Not impact
First decrease then increase
Decrease
Increase
Not impact
First decrease then increase
answer
Decrease
Explanation
a technological change that increases the productivity of labor will allow each unit of labor to produce more, making changes in output less expensive.
Explanation
a technological change that increases the productivity of labor will allow each unit of labor to produce more, making changes in output less expensive.
question
There is a cost function such that marginal cost is always less than average cost. What must be true about average cost?
Average cost is increasing.
Average cost is decreasing.
Not enough information to say.
Average cost is increasing.
Average cost is decreasing.
Not enough information to say.
answer
Average cost is decreasing.
question
The marginal product curve is maximized at a quantity of 230 and the average product curve is maximized at a quantity of 250. Where do the marginal and average product curves intersect?
Less than 230.
230
Between 230 and 250.
250
Less than 230.
230
Between 230 and 250.
250
answer
250
question
Average cost is 100 when a firm produces 10 units. Average cost is 120 when they produce 11 units. What is the marginal cost?
answer
20
question
If the average cost is always falling, which of the following must be true?
Marginal cost is below the average cost.
Diminishing marginal returns.
Marginal cost is above the average cost.
Marginal cost is below the average cost.
Diminishing marginal returns.
Marginal cost is above the average cost.
answer
Marginal cost is below the average cost.
question
Consider a graph that depicts the total cost function and the fixed cost. What is the difference between the total and the fixed costs?
Average Variable Cost
Average Fixed Cost
Variable Cost
Fixed Cost
Average Variable Cost
Average Fixed Cost
Variable Cost
Fixed Cost
answer
Variable Cost
question
A firm has a fixed rent cost of $1,000 each month. They spend $2,000 on labor and produce 100 units. If the rent goes up to $1200, how much is the change in the average variable cost?
answer
0.0
question
A firm produces 100 units with 10 people and 121 units with 11 people. The average product of the 11th person is ______ units.
answer
11
question
Consider the table, which represents the short-run relationship between the number of units of labor hired and the amount of output produced while holding the amount of capital fixed. The average product of the second worker hired is:
labor input - total output
0-0
1-20
2-38
3-54
4-66
38 units of output
18 units of output
19 units of output
58 units of output
labor input - total output
0-0
1-20
2-38
3-54
4-66
38 units of output
18 units of output
19 units of output
58 units of output
answer
19 units of output
Explanation
divide Total Output by the number of workers: 38/2 = 19
Explanation
divide Total Output by the number of workers: 38/2 = 19
question
A shock to technology doubles output for every employee hired. What happens to marginal product of labor?
Increases.
Decreases.
Does not change.
Not enough information.
Increases.
Decreases.
Does not change.
Not enough information.
answer
Increases.
question
A toxic work environment lowers the productivity of all workers. What happens to the average costs?
Average cost increases.
Average cost decreases.
Average cost stays constant.
Not enough information to say.
Average cost increases.
Average cost decreases.
Average cost stays constant.
Not enough information to say.
answer
Average cost increases.
question
If a firm is producing in an area of diminishing marginal returns, its average product must be:
decreasing
increasing
it could be either increasing or decreasing
constant
decreasing
increasing
it could be either increasing or decreasing
constant
answer
it could be either increasing or decreasing
question
A firm with only fixed costs will have which of the following average cost relationships? As production increases, average total cost will:
remain the same
decrease
increase
decrease and then increase
increase and then decrease
remain the same
decrease
increase
decrease and then increase
increase and then decrease
answer
decrease
question
A firm's marginal product will be at a maximum at which of the following levels of output?
less than the quantity where average cost is a minimum.
greater than the quantity where marginal cost is a minimum.
greater than the quantity where average cost is a minimum.
less than the quantity where marginal cost is a minimum.
less than the quantity where average cost is a minimum.
greater than the quantity where marginal cost is a minimum.
greater than the quantity where average cost is a minimum.
less than the quantity where marginal cost is a minimum.
answer
less than the quantity where average cost is a minimum.
question
If the marginal productivity of labor is rising at a certain level of output (while all other inputs remain unchanged), marginal cost must be:
Falling at that level of output.
Rising at that level of output.
Unrelated to marginal productivity.
Staying the same at that level of output.
Falling at that level of output.
Rising at that level of output.
Unrelated to marginal productivity.
Staying the same at that level of output.
answer
Falling at that level of output.
question
At output equal to 100 the marginal cost is 20 and the average cost 18. At output equal to 101 the marginal cost is 22. At output equal to 101 average cost will:
Fall below 18
Rise above 18
Stay at 18
It cannot be determined with the information given
Fall below 18
Rise above 18
Stay at 18
It cannot be determined with the information given
answer
Rise above 18
question
The observation that increases in output get smaller as more of one input is added to production is called:
The law of supply and demand.
The law of diminishing marginal returns.
The law of diminishing output.
The law of increasing marginal productivity.
The law of supply and demand.
The law of diminishing marginal returns.
The law of diminishing output.
The law of increasing marginal productivity.
answer
The law of diminishing marginal returns.
question
In the short run, input decisions are ______________. In the long run, input decisions are ______________.
Constrained, constrained
Unconstrained, unconstrained
Constrained, unconstrained
Unconstrained, constrained
Constrained, constrained
Unconstrained, unconstrained
Constrained, unconstrained
Unconstrained, constrained
answer
Constrained, unconstrained
Explanation
in the short run, variable inputs can be changed, but not fixed inputs. In the long run, all inputs are variable.
Explanation
in the short run, variable inputs can be changed, but not fixed inputs. In the long run, all inputs are variable.
question
The law of diminishing marginal returns means that when one uses more and more of an input:
Output will necessarily decrease.
Output will eventually increase at a decreasing rate.
Costs will necessarily decrease.
Costs will eventually increase at a decreasing rate.
Output will necessarily decrease.
Output will eventually increase at a decreasing rate.
Costs will necessarily decrease.
Costs will eventually increase at a decreasing rate.
answer
Output will eventually increase at a decreasing rate.
question
If the rent on factory space (a fixed input) increases, at all levels of output:
Total costs will increase, average total costs will increase, average variable costs will increase, and marginal costs will increase in the short run.
Total costs will increase, average total costs will increase, average variable costs will increase, and marginal costs will remain the same in the short run.
Total costs will increase, average total costs will increase, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Total costs will increase, average total costs will remain the same, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Total costs will increase, average total costs will increase, average variable costs will increase, and marginal costs will increase in the short run.
Total costs will increase, average total costs will increase, average variable costs will increase, and marginal costs will remain the same in the short run.
Total costs will increase, average total costs will increase, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Total costs will increase, average total costs will remain the same, average variable costs will remain the same, and marginal costs will remain the same in the short run.
answer
Total costs will increase, average total costs will increase, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Explanation
a change in fixed costs will influence total costs but not variable or marginal costs.
Explanation
a change in fixed costs will influence total costs but not variable or marginal costs.
question
A change in technology that (once implemented) makes each unit of labor more productive is likely to ______________ the marginal cost of production at each level of output (assuming all wages remain the same).
Decrease
Increase
Not impact
First decrease then increase
Decrease
Increase
Not impact
First decrease then increase
answer
Decrease
Explanation
a technological change that increases the productivity of labor will allow each unit of labor to produce more, making changes in output less expensive.
Explanation
a technological change that increases the productivity of labor will allow each unit of labor to produce more, making changes in output less expensive.
question
In this table, the marginal cost of producing the 300th unit of output is:
output-total cost-variable cost
0-$5000-0
100-$5700-$700
200-$6300-$1300
300-$7100-$2100
400-$8000-$3000
$800
$16.67
$8
$23.67
output-total cost-variable cost
0-$5000-0
100-$5700-$700
200-$6300-$1300
300-$7100-$2100
400-$8000-$3000
$800
$16.67
$8
$23.67
answer
$8
Explanation
marginal cost is the change in total cost/change in output = $800/100 = $8.00. It can also be calculated as the change in variable cost/change in output (because fixed costs will not change).
Explanation
marginal cost is the change in total cost/change in output = $800/100 = $8.00. It can also be calculated as the change in variable cost/change in output (because fixed costs will not change).
question
If marginal productivity of labor is falling, by hiring another unit of labor (all else held the same) we know that:
Average productivity must be falling.
Marginal cost must be falling.
Marginal cost must be rising.
Average cost must be falling.
Average productivity must be falling.
Marginal cost must be falling.
Marginal cost must be rising.
Average cost must be falling.
answer
Marginal cost must be rising.
Explanation
there is an inverse relationship between marginal productivity and marginal cost. Note: a is not correct because we would have to know where marginal productivity is relative to average productivity to know is average productivity will rise or fall.
Explanation
there is an inverse relationship between marginal productivity and marginal cost. Note: a is not correct because we would have to know where marginal productivity is relative to average productivity to know is average productivity will rise or fall.
question
Frank's Fajitas can produce 45 fajitas per hour with five workers and one grill. The average product of labor at Frank's Fajitas is:
7 fajitas per hour.
45 fajitas per hour.
7.5 fajitas per hour.
9 fajitas per hour.
7 fajitas per hour.
45 fajitas per hour.
7.5 fajitas per hour.
9 fajitas per hour.
answer
9 fajitas per hour.
Explanation
Average product of labor is calculated by dividing total output by the labor used: 45/5 = 9
Explanation
Average product of labor is calculated by dividing total output by the labor used: 45/5 = 9
question
Consider the table, which represents the short-run relationship between the number of units of labor hired, the total units of output, and the total cost of production. The average total cost of producing 20 units of output is:
labor input-total output-total cost
0-0-$500
1-20-$700
2-38-$900
4-66-$1300
$700
$20
$35
$10
labor input-total output-total cost
0-0-$500
1-20-$700
2-38-$900
4-66-$1300
$700
$20
$35
$10
answer
$35
Explanation
average total cost is total cost divided by output -- $700/20 = $35.
Explanation
average total cost is total cost divided by output -- $700/20 = $35.
question
Consider the table, which represents the short-run relationship between the number of units of labor hired and the amount of output produced while holding the amount of capital fixed. The marginal product of the third worker hired is:
labor input-total output
0-0
1-20
2-38 3-54
4-66
54 units of output
16 units of output
18 units of output
112 units of output
labor input-total output
0-0
1-20
2-38 3-54
4-66
54 units of output
16 units of output
18 units of output
112 units of output
answer
16 units of output
Explanation
divide the change in Total Output by the change in the number of workers: (54-38)/(3-2) = 16/1
Explanation
divide the change in Total Output by the change in the number of workers: (54-38)/(3-2) = 16/1
question
The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost.
increasing; increasing
increasing; decreasing
decreasing; decreasing
decreasing; increasing
increasing; increasing
increasing; decreasing
decreasing; decreasing
decreasing; increasing
answer
decreasing; increasing
Explanation:
The law of diminishing marginal returns states that if every other input is held constant, increases in the variable input will eventually result in smaller increases in output. Thus, marginal product eventually decreases. A decreasing marginal product means that a given change in input produces smaller additions to output. Thus, the cost of those additional units of output, the marginal cost, must increase.
Explanation:
The law of diminishing marginal returns states that if every other input is held constant, increases in the variable input will eventually result in smaller increases in output. Thus, marginal product eventually decreases. A decreasing marginal product means that a given change in input produces smaller additions to output. Thus, the cost of those additional units of output, the marginal cost, must increase.
question
Will a change in fixed costs change total cost?
Yes
No
Yes
No
answer
Yes
Explanation:
Fixed cost is part of total cost; thus, the latter will change when fixed cost changes.
Explanation:
Fixed cost is part of total cost; thus, the latter will change when fixed cost changes.
question
Will a change in fixed costs change total variable cost?
Yes
No
Yes
No
answer
No
Explanation:
Changes in fixed costs do not change total variable costs. A change in the cost of variable inputs will change total variable costs.
Explanation:
Changes in fixed costs do not change total variable costs. A change in the cost of variable inputs will change total variable costs.
question
Will a change in fixed costs change average cost?
Yes
No
Yes
No
answer
Yes
Explanation:
A change in fixed costs changes average costs because average cost is total fixed cost plus total variable cost divided by amount of output. Thus, average cost will also change as fixed cost changes.
Explanation:
A change in fixed costs changes average costs because average cost is total fixed cost plus total variable cost divided by amount of output. Thus, average cost will also change as fixed cost changes.
question
Will a change in fixed costs change marginal cost?
Yes
No
Yes
No
answer
No
Explanation: A change in fixed costs will only change total costs and average costs. Marginal cost is affected only by changes in variable costs.
Explanation: A change in fixed costs will only change total costs and average costs. Marginal cost is affected only by changes in variable costs.
question
Marginal cost is the slope of ___________.
The average cost curve
The average product curve
The total cost curve
The marginal product curve
The average cost curve
The average product curve
The total cost curve
The marginal product curve
answer
The total cost curve
Explanation: The slope of the total cost curve is the change in total cost divided by the change in total product and thus is equal to the increase in total cost caused by an increase of one unit of output. That is the definition of marginal cost.
Explanation: The slope of the total cost curve is the change in total cost divided by the change in total product and thus is equal to the increase in total cost caused by an increase of one unit of output. That is the definition of marginal cost.
question
With increasing marginal cost, if marginal cost is equal to average cost, average cost at this point must be ______________.
increasing
decreasing
at its minimum point
at its maximum point
increasing
decreasing
at its minimum point
at its maximum point
answer
at its minimum point
Explanation:
Because the marginal cost is equal to average cost, an increase in output will add an amount to total cost that is exactly equal to the average cost. Thus, the average will be at its minimum point.
Explanation:
Because the marginal cost is equal to average cost, an increase in output will add an amount to total cost that is exactly equal to the average cost. Thus, the average will be at its minimum point.
question
If average product is increasing as the variable input increases, which of the following is true?
Average cost must be increasing
Marginal cost must be increasing
Marginal cost must be decreasing
Average cost must be decreasing
Average cost must be increasing
Marginal cost must be increasing
Marginal cost must be decreasing
Average cost must be decreasing
answer
Average cost must be decreasing
Explanation: a is incorrect - If on average each unit of the variable input produces more units of output average cost must be falling. b is incorrect - If marginal product is also increasing (which is possible) then marginal cost would be falling. c is also incorrect. It is possible for marginal product to be falling (but still above average product). If marginal product is falling then marginal cost would be rising. d is correct. If the average product is increasing, fewer resources are needed to expand output by one unit of output. Thus, average cost must be falling.
Explanation: a is incorrect - If on average each unit of the variable input produces more units of output average cost must be falling. b is incorrect - If marginal product is also increasing (which is possible) then marginal cost would be falling. c is also incorrect. It is possible for marginal product to be falling (but still above average product). If marginal product is falling then marginal cost would be rising. d is correct. If the average product is increasing, fewer resources are needed to expand output by one unit of output. Thus, average cost must be falling.
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
15000
Explanation: Average cost is the total fixed plus the total variable cost divided by the number produced. Thus, average cost equals $15,000.
Calculations:
(20000+10000)/2=15000
Explanation: Average cost is the total fixed plus the total variable cost divided by the number produced. Thus, average cost equals $15,000.
Calculations:
(20000+10000)/2=15000
question
Given the previous question, 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
16000.0
Explanation:
The average cost would be total cost ($15,000 + $15,000 + $18,000) divided by the number of automobiles produced (3). Average cost is $16,000. The lesson to remember is that if marginal cost is greater than the average cost, the average cost will increase.
Explanation:
The average cost would be total cost ($15,000 + $15,000 + $18,000) divided by the number of automobiles produced (3). Average cost is $16,000. The lesson to remember is that if marginal cost is greater than the average cost, the average cost will increase.
question
If the cost of that additional automobile is $12,000, what is the new average? $____________.
answer
14000.0
Explanation:
The average cost would be total cost ($15,000 + $15,000 + $12,000) divided by the number of automobiles produced (3). Average cost is $14,000. The lesson to remember is that if marginal cost is less than the average cost, the average cost will decrease.
Explanation:
The average cost would be total cost ($15,000 + $15,000 + $12,000) divided by the number of automobiles produced (3). Average cost is $14,000. The lesson to remember is that if marginal cost is less than the average cost, the average cost will decrease.
question
Which of the following most likely represents a short-run business decision?
Jane is trying to decide whether to start a second franchise of her business.
Aaron hires two additional workers to help cover the holiday rush at his shop.
Xiang lists his delivery truck for sale in hopes of raising money to buy a new one.
Ellen applies for a loan to finance an expansion of her plumbing business.
Jane is trying to decide whether to start a second franchise of her business.
Aaron hires two additional workers to help cover the holiday rush at his shop.
Xiang lists his delivery truck for sale in hopes of raising money to buy a new one.
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
Explanation: Short run decisions typically can be carried out quickly while other factors will take more time to change.
Explanation: Short run decisions typically can be carried out quickly while other factors will take more time to change.
question
In the table below, what is the marginal product of the third worker?
TABLE
# of workers-output-marginal product
1-75-
-60
2-135-
- ???
3-190-
-40
4-230-
40 units
50 units
55 units
60 units
TABLE
# of workers-output-marginal product
1-75-
-60
2-135-
- ???
3-190-
-40
4-230-
40 units
50 units
55 units
60 units
answer
55 units
Explanation:
The change in output caused by adding the third worker is (190-135) = 55 units.
Explanation:
The change in output caused by adding the third worker is (190-135) = 55 units.
question
Which of the following is a cause of diminishing marginal productivity?
In the long run, labor gets tired as more labor gets added to the production process.
In the short run, labor runs out of available capital as more labor gets added to the production process.
In the long run, capital depreciates as more capital gets added to the production process.
In the short run, capital gets more expensive as you add more capital to the production process.
In the long run, labor gets tired as more labor gets added to the production process.
In the short run, labor runs out of available capital as more labor gets added to the production process.
In the long run, capital depreciates as more capital gets added to the production process.
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.
Explanation:
As more of the variable input (labor in this case) is added to the fixed amount of the fixed input (capital in this case), the fixed input becomes scarce (or crowded), which makes the variable input less productive at the margin.
Explanation:
As more of the variable input (labor in this case) is added to the fixed amount of the fixed input (capital in this case), the fixed input becomes scarce (or crowded), which makes the variable input less productive at the margin.
question
The production of 75 sofas per week requires 15 workers. The average product of each worker is ______________ sofas per week.
5
15
75
225
5
15
75
225
answer
5
Explanation:
75/15 = 5
Explanation:
75/15 = 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.
12
8
10
96
12
8
10
96
answer
96
Explanation
X/8 = 12, therefore 8*12 = X = 96
Explanation
X/8 = 12, therefore 8*12 = X = 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 ______________.
equal the marginal product of labor
fall
rise
stay the same
equal the marginal product of labor
fall
rise
stay the same
answer
fall
Explanation:
MP < AP therefore AP is falling.
Explanation:
MP < AP therefore AP is falling.
question
Fill in the missing value for A from the table below
TABLE
# of workers-output-average product-marginal product
0-0- / - /
-100
1-100-100-
- A
2-180-90-
-60
3-B-80-
-40
4-280-C-
-20
5-300-60
110
100
90
80
TABLE
# of workers-output-average product-marginal product
0-0- / - /
-100
1-100-100-
- A
2-180-90-
-60
3-B-80-
-40
4-280-C-
-20
5-300-60
110
100
90
80
answer
80
Explanation:
Change in output = 180-100 = 80. Change in labor =1. 80/1 = 80.
Explanation:
Change in output = 180-100 = 80. Change in labor =1. 80/1 = 80.
question
Fill in the missing value for B from the table below.
TABLE
# of workers-output-average product-marginal product
0-0- / - /
-100
1-100-100-
- A
2-180-90-
-60
3-B-80-
-40
4-280-C-
-20
5-300-60
230
240
320
270
TABLE
# of workers-output-average product-marginal product
0-0- / - /
-100
1-100-100-
- A
2-180-90-
-60
3-B-80-
-40
4-280-C-
-20
5-300-60
230
240
320
270
answer
240
Explanation:
Output at L = 3 = output at L=2 + MP: 180 + 60 = 240 (or Q = APL = 803 = 240).
Explanation:
Output at L = 3 = output at L=2 + MP: 180 + 60 = 240 (or Q = APL = 803 = 240).
question
Fill in the missing value for C from the table below.
TABLE
# of workers-output-average product-marginal product
0-0- / - /
-100
1-100-100-
- A
2-180-90-
-60
3-B-80-
-40
4-280-C-
-20
5-300-60
70
75
65
60
TABLE
# of workers-output-average product-marginal product
0-0- / - /
-100
1-100-100-
- A
2-180-90-
-60
3-B-80-
-40
4-280-C-
-20
5-300-60
70
75
65
60
answer
70
Explanation:
AP = output /L = 280/4 = 70.
Explanation:
AP = output /L = 280/4 = 70.
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 _____.
$100,000
$200,000
$50,000
$10,000
$100,000
$200,000
$50,000
$10,000
answer
$100,000
Explanation:
Fixed cost represents the cost per period for the fixed input. The amount paid is unrelated to the amount produced because the quantity of the fixed input does not change.
Explanation:
Fixed cost represents the cost per period for the fixed input. The amount paid is unrelated to the amount produced because the quantity of the fixed input does not change.
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.
capital; capital
either labor or capital; both labor and capital
both labor and capital; either labor or capital
labor; labor
capital; capital
either labor or capital; both labor and capital
both labor and capital; either labor or capital
labor; labor
answer
either labor or capital; both labor and capital
Explanation:
The short run is defined by there being at least one input that cannot be altered. It does not matter which one is fixed. In the long run, all inputs can be changed.
Explanation:
The short run is defined by there being at least one input that cannot be altered. It does not matter which one is fixed. In the long run, all inputs can be changed.
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?
200 candy canes
400 candy canes
40,000 candy canes
It depends on the level of output.
200 candy canes
400 candy canes
40,000 candy canes
It depends on the level of output.
answer
40000 candy canes
Explanation:
200 candy canes*200 elves= 40000 candy canes
Explanation:
200 candy canes*200 elves= 40000 candy canes
question
Variable cost ______________ while fixed cost ______________ as output ______________ in the short run.
rises; falls; decreases
rises; stays the same; decreases
rises; stays the same; increases
falls; falls; decreases
rises; falls; decreases
rises; stays the same; decreases
rises; stays the same; increases
falls; falls; decreases
answer
rises; stays the same; increases
Explanation:
The use of a variable input increases as output increases. Therefore, its total cost increases as output increases (you have to buy more). Fixed cost stays the same no matter what the level of output in the short run.
Explanation:
The use of a variable input increases as output increases. Therefore, its total cost increases as output increases (you have to buy more). Fixed cost stays the same no matter what the level of output in the short run.
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 _______.
$6,000
$13,000
$20
$21.67
$6,000
$13,000
$20
$21.67
answer
$13,000
Explanation:
$1,000 + $12,000 = $13,000
Explanation:
$1,000 + $12,000 = $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 ______.
$29,000
$33,000
$29.00
$22.75
$29,000
$33,000
$29.00
$22.75
answer
$33,000
Explanation:
$45,500 - $12,500 = $33,000
Explanation:
$45,500 - $12,500 = $33,000
question
Using the table below, calculate the marginal cost of the 4th, 6th, and 8th units of output.
TABLE
output-fixed cost- variable cost-marginal cost
0-1000-/-/
-100
2-1000-200-
-A
4-1000-380-
-B
6-1000-600
-C
8-1000-850-
-150
10-1000-1150
TABLE
output-fixed cost- variable cost-marginal cost
0-1000-/-/
-100
2-1000-200-
-A
4-1000-380-
-B
6-1000-600
-C
8-1000-850-
-150
10-1000-1150
answer
A=90, B=110, C=125
Explanation:
MC = change in total cost / change in output. For example for A change in total cost = (1380-1200=180), change in output = (4-2=2) MC=180/2=90.
Explanation:
MC = change in total cost / change in output. For example for A change in total cost = (1380-1200=180), change in output = (4-2=2) MC=180/2=90.
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 _____.
$1,265.00
$15.00
$23.00
$3.00
$1,265.00
$15.00
$23.00
$3.00
answer
$3.00
Explanation:
MC=Change in total cost/change in output=$15/(55-50) = $15/5 = $3
Explanation:
MC=Change in total cost/change in output=$15/(55-50) = $15/5 = $3
question
Using the information from the table below, what is the marginal product of the 4th worker?
TABLE
# of workers-output-average product-marginal product
0-0-/-/
-75
1-75-75
-60
2-135-67.5-
-??
3-190-63.3-
-??
4-235-58.8-
-??
5-270-54
TABLE
# of workers-output-average product-marginal product
0-0-/-/
-75
1-75-75
-60
2-135-67.5-
-??
3-190-63.3-
-??
4-235-58.8-
-??
5-270-54
answer
45.00 office chairs
Explanation:
Total output changes by 45 office chairs. Labor input changes by 1 worker. Marginal product is change in output divided by change in input.
Explanation:
Total output changes by 45 office chairs. Labor input changes by 1 worker. Marginal product is change in output divided by change in input.
question
Using the information from the table above, if the monthly wage of an office chair factory worker is $2,160, what is the marginal cost of increasing output from 190 office chairs per month to 235 office chairs per month?
TABLE
# of workers-output-average product-marginal product
0-0-/-/
-75
1-75-75
-60
2-135-67.5-
-??
3-190-63.3-
-??
4-235-58.8-
-??
5-270-54
$48.00
$37.73
$2,160
$8,640.00
TABLE
# of workers-output-average product-marginal product
0-0-/-/
-75
1-75-75
-60
2-135-67.5-
-??
3-190-63.3-
-??
4-235-58.8-
-??
5-270-54
$48.00
$37.73
$2,160
$8,640.00
answer
$48.00
Explanation:
Change in total cost is the cost of 1 more worker ($2,160). Change in output is 45 office chairs. $2,160/45 = $48.00.
Explanation:
Change in total cost is the cost of 1 more worker ($2,160). Change in output is 45 office chairs. $2,160/45 = $48.00.
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 ______.
$333.33
$2,733.33
$2,400.00
$41,000.00
$333.33
$2,733.33
$2,400.00
$41,000.00
answer
$2,733.33
Explanation:
Total cost = $5,000 + $36,000 = $41,000. Average cost = $41,000/15 = $2,733.33.
Explanation:
Total cost = $5,000 + $36,000 = $41,000. Average cost = $41,000/15 = $2,733.33.
question
Using the table below, calculate the average cost of producing 80, 120, and 160 computers per month.
TABLE
output-fixed cost-variable cost-average cost-marginal cost
0-12000-0-/-/
-50.00
40-12000-2000-350.00-
-X
80-12000-3800-A-
-Y
120-12000-6000-B
-Z
160-12000-8500-C
-75.00
200-12000-11500-117.50
A = 150.00 , B = 150.00 , C = 250.00
A = 120.48 , B = 120.50 , C = 128.13
A = 197.50 , B = 150.00 , C = 128.13
A = 197.50 , B = 2,000 , C = 240.00
TABLE
output-fixed cost-variable cost-average cost-marginal cost
0-12000-0-/-/
-50.00
40-12000-2000-350.00-
-X
80-12000-3800-A-
-Y
120-12000-6000-B
-Z
160-12000-8500-C
-75.00
200-12000-11500-117.50
A = 150.00 , B = 150.00 , C = 250.00
A = 120.48 , B = 120.50 , C = 128.13
A = 197.50 , B = 150.00 , C = 128.13
A = 197.50 , B = 2,000 , C = 240.00
answer
A = 197.50 , B = 150.00 , C = 128.13
Explanation:
Average cost = Total cost/ output. For A for example total cost = $12000+$3800=$15800, output = 80 therefore average cost = $15800/80=$197.50
Explanation:
Average cost = Total cost/ output. For A for example total cost = $12000+$3800=$15800, output = 80 therefore average cost = $15800/80=$197.50
question
Using the table below, calculate the marginal cost of producing 80, 120, and 160 computers per month.
TABLE
output-fixed cost-variable cost-average cost-marginal cost
0-12000-0-/-/
-50.00
40-12000-2000-350.00-
-X
80-12000-3800-A-
-Y
120-12000-6000-B
-Z
160-12000-8500-C
-75.00
200-12000-11500-117.50
X = 45.00, Y= 55.00, Z = 62.50
X = 40.00, Y= 60.00, Z = 62.50
X = 18.00, Y= 55.00, Z = 50.00
X = 45.00, Y= 62.50, Z = 55.00
TABLE
output-fixed cost-variable cost-average cost-marginal cost
0-12000-0-/-/
-50.00
40-12000-2000-350.00-
-X
80-12000-3800-A-
-Y
120-12000-6000-B
-Z
160-12000-8500-C
-75.00
200-12000-11500-117.50
X = 45.00, Y= 55.00, Z = 62.50
X = 40.00, Y= 60.00, Z = 62.50
X = 18.00, Y= 55.00, Z = 50.00
X = 45.00, Y= 62.50, Z = 55.00
answer
X = 45.00, Y= 55.00, Z = 62.50
Explanation:
Marginal cost =Change in variable cost / change in output. For X for example, change in variable cost=3800-2000=1800, change in output=80-40=40, therefore marginal cost=1800/40=45.
Explanation:
Marginal cost =Change in variable cost / change in output. For X for example, change in variable cost=3800-2000=1800, change in output=80-40=40, therefore marginal cost=1800/40=45.
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 ________.
$0.20
$0.50
$5.00
$2.00
$0.20
$0.50
$5.00
$2.00
answer
$5.00
Explanation:
Total cost goes up by $250 (1 worker * wage) and total output goes up by 50. Marginal cost = $250/50 = $5.00.
Explanation:
Total cost goes up by $250 (1 worker * wage) and total output goes up by 50. Marginal cost = $250/50 = $5.00.
question
Using the information in the question above, [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] 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.
depend on her level of output
stay the same
decrease
increase
depend on her level of output
stay the same
decrease
increase
answer
increase
Explanation:
If MC>AC AC will rise.
Explanation:
If MC>AC AC will rise.
question
When a firm earns zero economic profits, it does which of the following?
Has a positive accounting profit
Has a negative accounting profit
Cannot continue to produce and should shut down
Has opportunity costs that are larger than accounting profits
Has a positive accounting profit
Has a negative accounting profit
Cannot continue to produce and should shut down
Has opportunity costs that are larger than accounting profits
answer
Has a positive accounting profit
Explanation:
Economic profit includes opportunity costs. If we have zero economic profits, it means we are doing the same as our opportunity cost, and both possible firms are getting the normal rate of return. Our accounting profit is therefore positive if we examine this rate of return. Alternatively, we could just look at profits without subtracting opportunity costs to get accounting profits, and they'll be positive since they are zeroed out when including opportunity costs.
Explanation:
Economic profit includes opportunity costs. If we have zero economic profits, it means we are doing the same as our opportunity cost, and both possible firms are getting the normal rate of return. Our accounting profit is therefore positive if we examine this rate of return. Alternatively, we could just look at profits without subtracting opportunity costs to get accounting profits, and they'll be positive since they are zeroed out when including opportunity costs.
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 we increase one of the inputs into a production process and hold the others constant, we will eventually reach the point of diminishing marginal returns. One explanation might be that each additional worker does not have sufficient tools to use and may have to wait or arrange production in order to share the available tools.
Explanation:
Think of data entry clerks working with a given number of computers. As the number of workers increases, total production per hour increases. As we add workers, each additional worker may add an increasing amount to production as workers cooperate and specialize. But eventually, given the fixed number of computers, workers will have to wait for their time on the machines and may not be able to spend their time as effectively as they can when each worker has their own computer. The additions to total production are the marginal returns to the additional workers. At first there may be increasing returns due to specialization and possible cooperation. But eventually, there will be diminishing marginal returns.
Explanation:
Think of data entry clerks working with a given number of computers. As the number of workers increases, total production per hour increases. As we add workers, each additional worker may add an increasing amount to production as workers cooperate and specialize. But eventually, given the fixed number of computers, workers will have to wait for their time on the machines and may not be able to spend their time as effectively as they can when each worker has their own computer. The additions to total production are the marginal returns to the additional workers. At first there may be increasing returns due to specialization and possible cooperation. But eventually, there will be diminishing marginal returns.
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
The fact that marginal product increases or decreases as the amount of labor increases does not affect whether the average product increases or decreases. Average product will always increase if the marginal product is larger than the average. Average product will decrease if the marginal product is less than the average. A marginal product that is greater than the current average means that more product is being added by the additional worker than the average worker was producing. Thus, the average will increase.
question
How will an improvement in technology change total product, average product, marginal product, total cost, average cost, and marginal cost in the short run?
answer
Output will increase at each combination of inputs. Total product increases. Average product also increases. Marginal product would also normally increase. Total cost at each level of output decreases as more is produced with each input. As average product and marginal product increase, average cost and marginal cost must fall.
question
How will an increase in the rent a business pays affect total product, average product, marginal product, total cost, average cost, and marginal cost in the short run?
answer
Total production will be the same at each level of output and therefore marginal product and average product will not change. If space is fixed, total cost will increase by the amount of the rent increase. Average cost increases, but the increase in rent is spread out over the number of units of output. Marginal cost, because it is based on variable costs, does not change.
question
How will an increase in the wage a business pays affect total product, average product, marginal product, total cost, average cost, and marginal cost in the short run?
answer
If a variable cost changes, say wage rates increase, variable costs change (total fixed cost does not). Total costs increase at each level of product. Thus, average costs also increase. Marginal costs also increase. The reasoning is that to increase production, the variable input is increased. Because that variable input (labor) now costs more, marginal cost has increased.
question
If the cost of labor (a variable input) decreases, at all levels of output:
Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will decrease in the short run.
Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will remain the same in the short run.
Total costs will decrease, average total costs will decrease, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Total costs will decrease, average total costs will remain the same, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will decrease in the short run.
Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will remain the same in the short run.
Total costs will decrease, average total costs will decrease, average variable costs will remain the same, and marginal costs will remain the same in the short run.
Total costs will decrease, average total costs will remain the same, average variable costs will remain the same, and marginal costs will remain the same in the short run.
answer
Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will decrease in the short run.
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