Micro Econ Test 2 Chapter 7 - Assignment Essays

question

The short run is the time period during which

answer

some of the firm's input decisions are constrained by previous commitments

question

In the long run,

answer

all of the firm's input quantities are variable

question

In which case will the transition from short run to long run involve the shortest chronological time?

answer

a service that provides temporary secretaries to companies

question

The case presented by economists of production with a single variable input is analogous to

answer

a controlled laboratory experiment in which the scientist permits one variable to change at a time

question

The total physical product of an input is the same thing as its

answer

output

question

Which of the following experiments will yield observations that would allow one to calculate the marginal physical product of labor?

answer

increase the number of workers on an assembly line and record the change in output

question

Marginal physical product can tell a producer

answer

how much the last input added to the total amount of production

question

The marginal physical product of an input is the

answer

addition to output from using one more unit of an input

question

A total product curve shows the

answer

relationship between units of inputs and total product or total output

question

USX, a steel company, reduced the # of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs. Technically. this raise in productivity means

answer

average product of labor increased

question

The "law" of diminishing returns is also referred to as

answer

the "law" of variable input proportions

question

The "law" of diminishing returns

answer

is based on regular observations of input-output relationships over the last two centuries

question

Which of the following statements is equivalent to the law of diminishing marginal returns?

answer

too many cooks spoil the broth

question

The marginal revenue product of an hour of labor used in steel production is equal to

answer

its marginal physical product times the price of steel

question

When the marginal revenue product of an input is less than its price, the

answer

producer should reduce the use of that input

question

In August 1988, the LA Kings hired Wayne Gretzky for $15mil in cash. The hockey team's decision must have been based on the expectation that

answer

Gretzky's marginal revenue product will equal or exceed $15mil

question

Marginal revenue product is the

answer

additional revenue from one additional unit of input

question

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

answer

short of an optimal input point

question

Which of the following equations defines marginal revenue product?

answer

MRP = MPP times price of the product

question

The rule for the optimal use of any input says that

answer

when MRP is greater than price, it pays to expand resource use

question

The optimal level of resource use comes when

answer

MRP equals input price

question

Which of the following indicates an input is being overused relative to the optimal level?

answer

MRP<P of input

question

The optimum quantity of an input occurs when

answer

marginal revenue product equals input price

question

Which of the following is the correct statement of the marginal rule for optimal input proportions? The input proportion is optimal when

answer

Pa/Pb = MPPa/MPPb

question

A firm practices input substitution when it

answer

replaces unskilled labor with automated machinery

question

Determining the optimal choice of input combinations generally does not involve

answer

fixing the level of technology in the long run

question

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm would

answer

reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery

question

At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels. A unit of labor costs $6, and a unit of seed costs $12. The farmer should

answer

buy more seed and less labor

question

A firm is operation with an optimal combination of inputs. Suddenly the price of one input rises. The firm should

answer

buy less of that input and more of the other input

question

A firm's optimal input proportions may change if

answer

all of the above: input price changes; the relative marginal productivities of the inputs change; and the firm's optimal output level changes

question

A firm uses two inputs, A and B. At its optimal choice of input proportions,

answer

P of A/P of B = MRP of A/MRP of B

question

If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75 and the price of the machinery per period is $25, in order to achieve optimal input proportions the firm should use

answer

the current combination

question

A production function describes how much

answer

output can be produced given any combination of inputs

question

The production function

answer

shows the relationship between output and all inputs

question

A production function shows the

answer

maximum output that can be obtained from each combination of inputs

question

A production function provides

answer

technological information on how much output varies with changes in inputs

question

The firm can calculate all points on its total cost curve it it knows

answer

the prices of inputs and its production function

question

To determine total cost, the businessperson must know

answer

input quantity and input price

question

Marginal cost

answer

all of the above are correct: is the increase in total cost resulting from production of one additional unit of input; is the cost of the marginal unit of output; and the average cost curve are U-shaped

question

On Naomi's pig farm, Naomi hires all the labor used, grows all the grain fed to the pigs, and owns the barn. The costs used to calculate the total cost curve include

answer

the cost of labor, the cost of growing grain, and the opportunity cost of the barn

question

A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000. The factory's TC

answer

equals $15,000

question

Marginal cost is the

answer

change in total cost resulting from the production of one more unit of output

question

Where marginal cost is less than average cost,

answer

marginal cost may be rising, falling, or constant

question

Al's Donuts produces about 600 dozen doughnuts daily. If flour prices increase 20%

answer

marginal cost, average variable cost, and average total cost will shift up

question

Average cost curves have the same shape as

answer

marginal cost curves

question

Total fixed cost

answer

remains constant even if the firm shuts down

question

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller coast operator, electricity is

answer

a variable cost

question

Which of the following is a fixed cost?

answer

mortgage on the building

question

Total fixed cost

answer

is constant at all levels of output

question

Which of the following is a fixed cost to farmer McDonald?

answer

insurance

question

Which of the following is a variable cost for an airline?

answer

jet fuel

question

Which of the following is correct?

answer

AC = AFC + AVC

question

The typical average cost curve

answer

first declines to a minimum and then increases as output increases

question

The average cost curve

answer

is the vertical summation of the AFC and the AVC curves

question

Average cost curves decline because

answer

fixed cost is spread out over larger amounts of production

question

Which of the following formulas defines average cost?

answer

AC=TC/Q

question

A firm's AC will eventually begin to rise because

answer

bottlenecks may be reached for some inputs

question

In the typical AC curve, the downward-sloping part is attributable to

answer

spreading fixed costs over larger outputs and increasing returns to the variable inputs

question

If a firm has a U-shaped long-run average cost curve,

answer

it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production

question

AC is lower in the long run than in the short run because

answer

inputs can be combined more efficiently in the long run

question

Everything else equal, the AC curve will shift downward if

answer

input MPPs rise

question

Everything else equal, the AC curve will shift when

answer

technical change raises the MPP of one input

question

One reason why critics argue that large firms should not be broken up is that in some cases

answer

many smaller firms would be less-efficient producers

question

The long-run average cost curve

answer

all of the above are correct: is a composite of short-run AC curves; shows the lowest possible short-run AC corresponding to each output level; depends on the firm's planning horizon

question

A firm uses workers and seed to grow lettuce. Its lettuce output rises from 100 tons to 200 tons when the number of workers increases from 25 to 75. Its production process shows

answer

diminishing returns to labor

question

If economies of scale exist for a particular production function, long-run [average costs will

answer

fall

question

Whether or not a production process shows economies of scale depends on

answer

technology

question

When economies of scale exist,

answer

production costs per unit decline as output expands

question

When economies of scale are present

answer

costs per unit decline as output expands

question

Economies of scale

answer

pertain to the long run only

question

A firm's production process shows constant returns to scale. It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of

answer

50¢

question

Economies of scale is another term for

answer

increasing returns to scale

question

If a firm has increasing returns to scale at all levels of output, the

answer

slope of its long-run average cost curve is always negative

question

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

answer

increasing returns to scale

question

If a firm increases inputs by 15% and output increases by 12.5%, the firm is experiencing

answer

decreasing returns to scale

question

If in some range of production average cost is falling the firm is experiencing

answer

increasing returns to scale

question

If in some production range average cost is rising, the firm is experiencing

answer

decreasing returns to scale

question

A detroit business advertises "the more we sell, the lower the price, and the lower the price, the more we sell" This firm is experiencing

answer

increasing returns to scale

question

An airline industry study recently reported, "Evidence is abundant that larger firms are not more efficient or less costly simply because they are larger. In fact, other things equal, the largest carriers tend to have a higher level of unit costs, possibly caused by the difficulties of managing an airline of large size." This means that

answer

airlines are experiencing decreasing returns to scale

question

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a

answer

historical cost curve

question

Cost minimization is the process of making optimal use of all of the inputs whose quantities are

answer

variable in the short and long run

question

The major incentive for cost minimization is the

answer

discipline imposed by the market system

question

Production indifference curves bow inward toward the graph's origin because of

answer

the law of diminishing returns to a single point

question

Production costs for a given output will be minimized when the

answer

product indifference curve and the budget line are tangent

question

If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its inputs

answer

costs will not be minimal

1 of 85

question

The short run is the time period during which

answer

some of the firm's input decisions are constrained by previous commitments

question

In the long run,

answer

all of the firm's input quantities are variable

question

In which case will the transition from short run to long run involve the shortest chronological time?

answer

a service that provides temporary secretaries to companies

question

The case presented by economists of production with a single variable input is analogous to

answer

a controlled laboratory experiment in which the scientist permits one variable to change at a time

question

The total physical product of an input is the same thing as its

answer

output

question

Which of the following experiments will yield observations that would allow one to calculate the marginal physical product of labor?

answer

increase the number of workers on an assembly line and record the change in output

question

Marginal physical product can tell a producer

answer

how much the last input added to the total amount of production

question

The marginal physical product of an input is the

answer

addition to output from using one more unit of an input

question

A total product curve shows the

answer

relationship between units of inputs and total product or total output

question

USX, a steel company, reduced the # of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs. Technically. this raise in productivity means

answer

average product of labor increased

question

The "law" of diminishing returns is also referred to as

answer

the "law" of variable input proportions

question

The "law" of diminishing returns

answer

is based on regular observations of input-output relationships over the last two centuries

question

Which of the following statements is equivalent to the law of diminishing marginal returns?

answer

too many cooks spoil the broth

question

The marginal revenue product of an hour of labor used in steel production is equal to

answer

its marginal physical product times the price of steel

question

When the marginal revenue product of an input is less than its price, the

answer

producer should reduce the use of that input

question

In August 1988, the LA Kings hired Wayne Gretzky for $15mil in cash. The hockey team's decision must have been based on the expectation that

answer

Gretzky's marginal revenue product will equal or exceed $15mil

question

Marginal revenue product is the

answer

additional revenue from one additional unit of input

question

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

answer

short of an optimal input point

question

Which of the following equations defines marginal revenue product?

answer

MRP = MPP times price of the product

question

The rule for the optimal use of any input says that

answer

when MRP is greater than price, it pays to expand resource use

question

The optimal level of resource use comes when

answer

MRP equals input price

question

Which of the following indicates an input is being overused relative to the optimal level?

answer

MRP<P of input

question

The optimum quantity of an input occurs when

answer

marginal revenue product equals input price

question

Which of the following is the correct statement of the marginal rule for optimal input proportions? The input proportion is optimal when

answer

Pa/Pb = MPPa/MPPb

question

A firm practices input substitution when it

answer

replaces unskilled labor with automated machinery

question

Determining the optimal choice of input combinations generally does not involve

answer

fixing the level of technology in the long run

question

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm would

answer

reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery

question

answer

buy more seed and less labor

question

A firm is operation with an optimal combination of inputs. Suddenly the price of one input rises. The firm should

answer

buy less of that input and more of the other input

question

A firm's optimal input proportions may change if

answer

all of the above: input price changes; the relative marginal productivities of the inputs change; and the firm's optimal output level changes

question

A firm uses two inputs, A and B. At its optimal choice of input proportions,

answer

P of A/P of B = MRP of A/MRP of B

question

answer

the current combination

question

A production function describes how much

answer

output can be produced given any combination of inputs

question

The production function

answer

shows the relationship between output and all inputs

question

A production function shows the

answer

maximum output that can be obtained from each combination of inputs

question

A production function provides

answer

technological information on how much output varies with changes in inputs

question

The firm can calculate all points on its total cost curve it it knows

answer

the prices of inputs and its production function

question

To determine total cost, the businessperson must know

answer

input quantity and input price

question

Marginal cost

answer

question

On Naomi's pig farm, Naomi hires all the labor used, grows all the grain fed to the pigs, and owns the barn. The costs used to calculate the total cost curve include

answer

the cost of labor, the cost of growing grain, and the opportunity cost of the barn

question

A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000. The factory's TC

answer

equals $15,000

question

Marginal cost is the

answer

change in total cost resulting from the production of one more unit of output

question

Where marginal cost is less than average cost,

answer

marginal cost may be rising, falling, or constant

question

Al's Donuts produces about 600 dozen doughnuts daily. If flour prices increase 20%

answer

marginal cost, average variable cost, and average total cost will shift up

question

Average cost curves have the same shape as

answer

marginal cost curves

question

Total fixed cost

answer

remains constant even if the firm shuts down

question

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller coast operator, electricity is

answer

a variable cost

question

Which of the following is a fixed cost?

answer

mortgage on the building

question

Total fixed cost

answer

is constant at all levels of output

question

Which of the following is a fixed cost to farmer McDonald?

answer

insurance

question

Which of the following is a variable cost for an airline?

answer

jet fuel

question

Which of the following is correct?

answer

AC = AFC + AVC

question

The typical average cost curve

answer

first declines to a minimum and then increases as output increases

question

The average cost curve

answer

is the vertical summation of the AFC and the AVC curves

question

Average cost curves decline because

answer

fixed cost is spread out over larger amounts of production

question

Which of the following formulas defines average cost?

answer

AC=TC/Q

question

A firm's AC will eventually begin to rise because

answer

bottlenecks may be reached for some inputs

question

In the typical AC curve, the downward-sloping part is attributable to

answer

spreading fixed costs over larger outputs and increasing returns to the variable inputs

question

If a firm has a U-shaped long-run average cost curve,

answer

it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production

question

AC is lower in the long run than in the short run because

answer

inputs can be combined more efficiently in the long run

question

Everything else equal, the AC curve will shift downward if

answer

input MPPs rise

question

Everything else equal, the AC curve will shift when

answer

technical change raises the MPP of one input

question

One reason why critics argue that large firms should not be broken up is that in some cases

answer

many smaller firms would be less-efficient producers

question

The long-run average cost curve

answer

all of the above are correct: is a composite of short-run AC curves; shows the lowest possible short-run AC corresponding to each output level; depends on the firm's planning horizon

question

A firm uses workers and seed to grow lettuce. Its lettuce output rises from 100 tons to 200 tons when the number of workers increases from 25 to 75. Its production process shows

answer

diminishing returns to labor

question

If economies of scale exist for a particular production function, long-run [average costs will

answer

fall

question

Whether or not a production process shows economies of scale depends on

answer

technology

question

When economies of scale exist,

answer

production costs per unit decline as output expands

question

When economies of scale are present

answer

costs per unit decline as output expands

question

Economies of scale

answer

pertain to the long run only

question

A firm's production process shows constant returns to scale. It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of

answer

50¢

question

Economies of scale is another term for

answer

increasing returns to scale

question

If a firm has increasing returns to scale at all levels of output, the

answer

slope of its long-run average cost curve is always negative

question

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

answer

increasing returns to scale

question

If a firm increases inputs by 15% and output increases by 12.5%, the firm is experiencing

answer

decreasing returns to scale

question

If in some range of production average cost is falling the firm is experiencing

answer

increasing returns to scale

question

If in some production range average cost is rising, the firm is experiencing

answer

decreasing returns to scale

question

A detroit business advertises "the more we sell, the lower the price, and the lower the price, the more we sell" This firm is experiencing

answer

increasing returns to scale

question

answer

airlines are experiencing decreasing returns to scale

question

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a

answer

historical cost curve

question

Cost minimization is the process of making optimal use of all of the inputs whose quantities are

answer

variable in the short and long run

question

The major incentive for cost minimization is the

answer

discipline imposed by the market system

question

Production indifference curves bow inward toward the graph's origin because of

answer

the law of diminishing returns to a single point

question

Production costs for a given output will be minimized when the

answer

product indifference curve and the budget line are tangent

question

If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its inputs

answer

costs will not be minimal

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