question
What is the difference between technology and technological change?
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Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using the same inputs.
question
In economics, the best definition of technology is...
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the process a firm uses to turn inputs into outputs.
question
Further, positive technological change is defined as
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A. being able to produce more output using the same inputs.
B. being able to produce the same output using fewer inputs.
D. both a and b.
B. being able to produce the same output using fewer inputs.
D. both a and b.
question
Xylo Corporation is a large manufacturer of solar panels in the town of Southville. It is not only a major employer of the town's population, but also attracts a large number of workers from the neighboring county of Canning which has very few job opportunities. Based on industry reports that indicated a substantial increase in installed solar power capacity in the last two years, Xylo introduced new production technology to increase efficiency and lower costs at its Southville plant. The senior management decided that they would increase production of solar panels by 20 percent in the coming year to meet the higher demand. They also felt that lower costs, along with high expected demand, would help them to improve profit margins. However, Wilma Myers, the firm's operations head, is not so optimistic about the demand conditions. She feels that the sales in the coming year may not be as high as the senior management is anticipating.
Which of the following, if true, would weaken the management's view that the new technology and higher demand would increase profit margins?
Which of the following, if true, would weaken the management's view that the new technology and higher demand would increase profit margins?
answer
Due to improving employment conditions in Canning County, many workers in Southville moved back to their hometowns.
question
Xylo Corporation is a large manufacturer of solar panels in the town of Southville. It is not only a major employer of the town's population, but also attracts a large number of workers from the neighboring county of Canning which has very few job opportunities. Based on industry reports that indicated a substantial increase in installed solar power capacity in the last two years, Xylo introduced new production technology to increase efficiency and lower costs at its Southville plant. The senior management decided that they would increase production of solar panels by 20 percent in the coming year to meet the higher demand. They also felt that lower costs, along with high expected demand, would help them to improve profit margins. However, Wilma Myers, the firm's operations head, is not so optimistic about the demand conditions. She feels that the sales in the coming year may not be as high as the senior management is anticipating.
Which of the following, if true, would strengthen Wilma's point of view?
Which of the following, if true, would strengthen Wilma's point of view?
answer
The industry forecasts of higher demand were based on factory shipments of solar panels, not installations.
question
What is the difference between the short run and the long run?
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In the short run, at least one of a firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology.
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Is the amount of time that separates the short run from the long run the same for every firm?
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No
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Any cost that remains unchanged as output changes represents a firm's...
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fixed cost.
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Any cost that changes as output changes represents a firm's...
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variable cost.
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Which of the following is most likely to be a fixed cost for a farmer?
answer
insurance premiums on property
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Which of the following is most likely to a variable cost for a business firm?
answer
cost of shipping products
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What are implicit costs?
An implicit cost is...
An implicit cost is...
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a nonmonetary opportunity cost.
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How are implicit costs different from explicit costs?
answer
An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary cost.
question
What is a production function?
A firm's production function is best described as...
A firm's production function is best described as...
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illustrating the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs.
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What does the short-run production function hold constant?
A short-run production function holds constant...
A short-run production function holds constant...
answer
the amount of capital.
question
A technology website estimated that the cost of materials and components in Apple's iPhone XS Max was $453. Apple was selling this phone for $1,249.
Can we conclude from this information that Apple was making a profit of about $796 on each of these iPhones?
Can we conclude from this information that Apple was making a profit of about $796 on each of these iPhones?
answer
No; to calculate economic profit, all implicit and explicit costs relating to the production of the iPhone must be subtracted from the total revenue earned from selling the phones, so Apple made less than $796 on each iPhone.
question
For Jill Johnson's pizza restaurant, explain whether each of the following is a fixed or variable cost.
answer
The payment she makes on her fire insurance policy is a fixed cost.
The payment she makes to buy pizza dough is a variable cost.
The wages she pays her workers is a variable cost.
The lease payment she makes to her landlord who owns the building where her store is located is a fixed cost.
The $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a fixed cost.
The payment she makes to buy pizza dough is a variable cost.
The wages she pays her workers is a variable cost.
The lease payment she makes to her landlord who owns the building where her store is located is a fixed cost.
The $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a fixed cost.
question
A Federal Reserve publication notes "Airlines have high fixed costs."
Which of the following is likely to be one of the most important fixed costs for an airline?
Which of the following is likely to be one of the most important fixed costs for an airline?
answer
the cost of its planes
question
Airlines are likely to have particularly ______
fixed costs relative to their variable costs compared with an Old Navy clothing store or a Panera Bread restaurant.
fixed costs relative to their variable costs compared with an Old Navy clothing store or a Panera Bread restaurant.
answer
high
question
What is the distinction between the economic short run and the economic long run?
answer
In the short run, at least one input is fixed, but in the long run, the firm can vary all inputs.
question
Which costs are affected by the level of output produced?
answer
variable costs
question
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the
answer
production function.
question
Which of the graphs above represents a typical average total cost curve?
answer
B
question
The graph to the right illustrates the average product of labor.
Use the three-point curved line drawing tool to graph the marginal product of labor. Properly label this curve.
Use the three-point curved line drawing tool to graph the marginal product of labor. Properly label this curve.
answer
A. Whenever the marginal product of labor is less than the average product of labor, it pulls the average product of labor down.
B. The marginal product of labor initially increases due to specialization and then decreases due to diminishing returns.
D. Both a and b.
B. The marginal product of labor initially increases due to specialization and then decreases due to diminishing returns.
D. Both a and b.
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Why do the marginal product of labor and the average product of labor curves have the shapes illustrated in the graph?
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initially increasing and then decreasing.
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The marginal product of labor is
answer
intersects the average product of labor curve when the average product of labor is at a maximum.
question
The marginal product of labor curve
answer
A. The marginal product of labor initially increases due to specialization and then decreases due to diminishing returns.
B. Whenever the marginal product of labor is greater than the average product of labor, it pulls the average product of labor up.
D. Both A and B.
B. Whenever the marginal product of labor is greater than the average product of labor, it pulls the average product of labor up.
D. Both A and B.
question
Which of the following is true regarding the shapes of the marginal product of labor and the average product of labor curves?
answer
adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline.
question
What is the law of diminishing returns?
The law of diminishing returns states that
The law of diminishing returns states that
answer
No
question
Does it apply in the long run?
answer
Diminishing marginal returns, where additional cooks produce less additional output.
question
Devra Gartenstein, a restaurant owner, made the following observation about preparing food: "Cooks become increasingly less productive as a kitchen becomes increasingly crowded."
What do economists call the problem she is describing? What are its implications for the marginal product of labor for cooks?
What do economists call the problem she is describing? What are its implications for the marginal product of labor for cooks?
answer
Yes, restaurant owners can vary the size, or number, of kitchens.
question
Devra Gartenstein, a restaurant owner, made the following observation about preparing food: "Cooks become increasingly less productive as a kitchen becomes increasingly crowded."
Do restaurant owners have a solution to this problem in the long run? Briefly explain.
Do restaurant owners have a solution to this problem in the long run? Briefly explain.
answer
The argument is incorrect. Gains from division of labor will occur whenever production of a good or provision of a service has multiple tasks.
question
Briefly explain whether you agree or disagree with the following argument:
Adam Smith's idea of the gains to firms from the division of labor makes a lot of sense when the good being manufactured is something complex like automobiles or computers, but it doesn't apply in the manufacturing of less complex goods or in other sectors of the economy, such as retail sales.
Adam Smith's idea of the gains to firms from the division of labor makes a lot of sense when the good being manufactured is something complex like automobiles or computers, but it doesn't apply in the manufacturing of less complex goods or in other sectors of the economy, such as retail sales.
answer
output increases at an increasing rate.
question
Refer to the graph. From the origin up until point A,
answer
output increases at a decreasing rate.
question
From point A up until point B,
answer
ATC = TC/Q
MC =ΔTC/ΔQ.
MC =ΔTC/ΔQ.
question
What is the difference between the average cost of production (ATC) and marginal cost of production (MC)?
answer
The marginal cost is $70. (Enter a numeric response using an integer.)
The total cost is $3900.
The variable cost is $3380.
The fixed cost is $520.
The total cost is $3900.
The variable cost is $3380.
The fixed cost is $520.
question
Use the information in the graph to the right to find the values for the following at an output level of 65.
answer
...
question
Consider the production of hamburgers. The average total cost (ATC) and average fixed cost (AFC) of producing hamburgers are illustrated in the graph to the right.
answer
ATC−AFC
question
Consider the production of hamburgers, where ATC is the average total cost and AFC is the average fixed cost of producing hamburgers.
Average variable cost equals
Average variable cost equals
answer
passes through the minimum points of the ATC and AVC curves.
question
Consider the production of hotdogs.
The marginal cost curve
The marginal cost curve
answer
the total cost of production equals the variable cost of production.
question
What is the difference between total cost and variable cost in the long run?
In the long run,
In the long run,
answer
when a firm's long-run average costs decrease with output.
question
Economies of scale occur
answer
A. Large firms may be able to purchase inputs at lower costs than smaller competitors; they can also borrow money at a lower interest rate.
B. Firm's production may increase with a smaller proportional increase in at least one input.
C. Both managers and workers may become more specialized and hence more productive as output expands.
D. All of the above.
B. Firm's production may increase with a smaller proportional increase in at least one input.
C. Both managers and workers may become more specialized and hence more productive as output expands.
D. All of the above.
question
For which of the following reason(s) may firms experience economies of scale?
answer
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