question
The marginal product of labor is defined as
answer
the additional output that results when one more worker is hired, holding all other resources constant.
question
The difference between technology and technological change is that
answer
technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs.
question
The formula for total fixed cost is
answer
TFC = TC - TVC.
question
Which of the following costs will not change as output changes?
answer
total fixed cost
question
A firm has successfully adopted a positive technological change when
answer
it can produce more output using the same inputs.
question
Higher isocost lines correspond to higher
answer
total costs of production.
question
If, when a firm doubles all its inputs, its average cost of production increases, then production displays
answer
diseconomies of scale.
question
When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is
answer
50
question
An isoquant shows
answer
the combinations of two inputs that yield the same total product.
question
The average total cost of production
answer
equals total cost of production divided by the level of output.
question
The explicit cost of production is also called
answer
accounting cost.
question
The slope of an isoquant measures
answer
the rate at which inputs can be substituted for each other keeping total output constant.
question
An expansion path shows
answer
the least-cost combination of inputs for each level of output.
question
An isocost line shows
answer
all the possible combinations of two inputs a firm can use that have the same total cost.
question
Suppose that a firm's production function is given by Y = 100 , where K is the level of capital and L is the number of laborers the firm employs. For the given production function the marginal products are, MPL = and MPK = . The rental rate of capital is $20 while the wage rate is $5.
What is the firm's total cost when it is minimizing its cost of production for 1800 units of output?
What is the firm's total cost when it is minimizing its cost of production for 1800 units of output?
answer
360
question
Marginal cost is the
answer
additional cost of producing an additional unit of output.
question
Suppose that a firm's production function is given by Y = 12 K L - L2, where K is the level of capital and L is the number of laborers the firm employs. For the given production function the marginal products are, MPL = 12 K - 2 L and MPK = 12 L. The rental rate of capital is $45 while the wage rate is $15.
What is the cost minimizing level of capital (K*)?
What is the cost minimizing level of capital (K*)?
answer
5
question
The absolute value of the slope of an isocost line equals the ratio of
answer
the prices of the two inputs.
question
If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?
answer
14
question
The production function shows
answer
the maximum output that can be produced from each possible quantity of inputs.
question
If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is
answer
5
question
If, when a firm doubles all its inputs, its average cost of production decreases, then production displays
answer
economies of scale.
question
A characteristic of the long run is
answer
all inputs can be varied.
question
At the minimum efficient scale,
answer
the firm has achieved the lowest possible average cost of production.
question
Which of the following are implicit costs for a typical firm?
answer
opportunity costs of capital owned and used by the firm
question
Which of the following equations is correct?
answer
AFC + AVC = ATC
question
If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the 7th carpenter is
answer
less than 8 chairs.
question
Marginal cost is equal to the
answer
change in total cost divided by the change in output.
question
Which of the following is a factor of production that generally is fixed in the short run?
answer
capital
question
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
answer
2 chairs
question
Economic costs of production differ from accounting costs in that
answer
economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.
question
If a producer is not able to expand its plant capacity immediately, it is
answer
operating in the short run.
question
Maximizing the level of output for a given total cost of production
answer
is equivalent to minimizing cost for a given level of output.
question
Suppose that a firm's production function is given by Y = 12 K L - L2, where K is the level of capital and L is the number of laborers the firm employs. For the given production function the marginal products are, MPL = 12 K - 2 L and MPK = 12 L. The rental rate of capital is $45 while the wage rate is $15.
What is the cost minimizing level of labor (L*)?
What is the cost minimizing level of labor (L*)?
answer
10
question
When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is
answer
$145
question
Chapter 12
answer
...
question
For a perfectly competitive firm, average revenue is equal to
answer
the market price.
question
Producing where marginal revenue equals marginal cost is equivalent to producing where
answer
total profit is maximized.
question
Both individual buyers and sellers in perfect competition
answer
have to take the market price as a given.
question
If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm
answer
is incurring a loss.
question
A very large number of small sellers who sell identical products imply
answer
the inability of one seller to influence price.
question
Which of the following is not a characteristic of a perfectly competitive market structure?
answer
There are restrictions on exit of firms.
question
Profit is the difference between
answer
total revenue and total cost.
question
For a firm in a perfectly competitive market, price is
answer
equal to both average revenue and marginal revenue.
question
If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is
answer
$40
question
For a perfectly competitive firm, which of the following is not true at profit maximization?
answer
Market price is greater than marginal cost.
question
In perfect competition
answer
the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.
question
Marginal revenue is
answer
the change in total revenue divided by the change in the quantity of output.
question
Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?
answer
The firm will not sell any output.
question
The marginal revenue curve for a perfectly competitive firm
answer
is the same as its demand curve.
question
The supply curve of a perfectly competitive firm in the short run is
answer
the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve.
question
Article Summary
According to the Department of Agriculture, net farm income will grow to a record high of $120.6 billion in 2013, up from the previous high mark in 2011 and after adjusting for inflation, its second highest level since 1973. Net cash income, however, is expected to fall by 10 percent due to unsold inventories. Exports of chickens and milk are expected to rise by 3 percent and 17 percent, respectively.
Source: Ros Krasny, "Farm income poised for record 2013: USDA," Reuters, August 27, 2013.
Assume that after the record year for U.S. farm income in 2013, farmers are expected to break even in 2014. This means that at the quantity being produced in 2014
According to the Department of Agriculture, net farm income will grow to a record high of $120.6 billion in 2013, up from the previous high mark in 2011 and after adjusting for inflation, its second highest level since 1973. Net cash income, however, is expected to fall by 10 percent due to unsold inventories. Exports of chickens and milk are expected to rise by 3 percent and 17 percent, respectively.
Source: Ros Krasny, "Farm income poised for record 2013: USDA," Reuters, August 27, 2013.
Assume that after the record year for U.S. farm income in 2013, farmers are expected to break even in 2014. This means that at the quantity being produced in 2014
answer
MR =ATC.
question
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?
answer
Yes, it should continue to produce because it is minimizing its loss.
question
If the market price is $25, the average revenue of selling five units is
answer
$25.
question
A perfectly competitive firm's supply curve is its
answer
marginal cost curve above its minimum average variable cost.
question
The price of a seller's product in perfect competition is determined by
answer
market demand and market supply.
question
What is always true at the quantity where a firm's average total cost equals average revenue?
answer
The firm breaks even.
question
If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm
answer
should shut down.
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