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1 | |
A production function measures the relation between... |
| | A) | input prices and output prices. |
| | B) | input prices and the quantity of output. |
| | C) | the quantity of inputs and the quantity of output. |
| | D) | the quantity of inputs and input prices. |
| | E) | none of the above |
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2 | |
A short-run production function assumes that... |
| | A) | at least one input is fixed in supply. |
| | B) | the level of output is fixed. |
| | C) | all inputs are fixed in supply. |
| | D) | both a and b |
| | E) | both b and c |
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3 | |
If average product is decreasing, then marginal product... |
| | A) | must be greater than average product. |
| | B) | must be less than average product. |
| | C) | must be increasing. |
| | D) | cannot be decreasing. |
| | E) | both a and c |
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4 | |
Which of the following statements is TRUE? |
| | A) | A firm plans in the short run and operates in the long run. |
| | B) | In the long run a firm can change all but one input. |
| | C) | In the long run all inputs are variable. |
| | D) | In the short run all inputs are fixed. |
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5 | |
Suppose you operate a sandwich shop and currently have two employees. If you hire a third employee, your output of sandwiches per day rises from 75 to 90. If you hire a fourth employee, output rises to 110 per day. A fifth and sixth employee would cause output to rise to 120 and 125 per day, respectively. Choose the correct statement: |
| | A) | Diminishing returns set have not yet set in because output is still increases. |
| | B) | Diminishing returns set in with the hiring of the fourth worker. |
| | C) | Diminishing returns set in with the hiring of the fifth worker. |
| | D) | Diminishing returns set in with the hiring of the sixth worker. |
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6 | |
The marginal product of labor... |
| | A) | is less than the average product of labor when the average product of labor is decreasing. |
| | B) | measures how output changes as the wage rate changes. |
| | C) | is negative when adding another unit of labor decreases output. |
| | D) | both a and c |
| | E) | both b and c |
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7 | |
Diminishing marginal productivity... |
| | A) | occurs when the marginal product curve begins to slope downward. |
| | B) | occurs eventually because each additional unit of the variable unit has, on average, fewer units of the fixed input with which to work. |
| | C) | occurs when adding one more unit of the variable input reduces total product. |
| | D) | both a and b |
| | E) | both a and c |
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8 | |
If marginal product is increasing, then it must be the case that... |
| | A) | average product is increasing. |
| | B) | average product is less than marginal product. |
| | C) | average product is greater than marginal product. |
| | D) | both a and c |
| | E) | both a and b. |
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9 | |
If a firm is producing a given level of output in a technically-efficient manner, then it must be the case that... |
| | A) | it is choosing the lowest-cost method of producing that output. |
| | B) | this output level is the most that can be produced with the given levels of inputs. |
| | C) | each input is producing its maximum marginal product. |
| | D) | both a and b |
| | E) | both a and c |
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10 | |
If a firm is producing a given level of output in an economically-efficient manner, then it must be the case that... |
| | A) | it is choosing the lowest-cost method of producing that output. |
| | B) | this output level is the most that can be produced with the given level of inputs. |
| | C) | each input is producing its maximum marginal product. |
| | D) | both a and b |
| | E) | both a and c |
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11 | |
A short-run cost function assumes that... |
| | A) | the level of output is fixed. |
| | B) | all inputs are fixed in supply. |
| | C) | at least one input is fixed in supply. |
| | D) | both a and c |
| | E) | none of the above |
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12 | |
Which of the following is an example of a fixed cost? |
| | A) | Property taxes on property owned by the firm. |
| | B) | Utility expenses incurred during production. |
| | C) | Wages and salaries paid to employees. |
| | D) | Buildings and equipment. |
| | E) | all of the above |
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13 | |
Average fixed cost... |
| | A) | increases if marginal cost is increasing. |
| | B) | increases as output increases. |
| | C) | decreases as output increases. |
| | D) | increases if marginal cost is greater than average fixed cost. |
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14 | |
Marginal cost... |
| | A) | is less than average cost when average cost is decreasing. |
| | B) | measures how total cost changes when one more unit of output is produced. |
| | C) | measures how total cost changes when input prices change. |
| | D) | both a and b |
| | E) | both b and c |
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15 | |
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At what output does the firm reach minimum average variable cost? |
| | A) | 80 |
| | B) | 100 |
| | C) | 600 |
| | D) | 6,000 |
| | E) | 8,000 |
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16 | |
What is AVC at its minimum? |
| | A) | $15 |
| | B) | $25 |
| | C) | $40 |
| | D) | $80 |
| | E) | $100 |
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17 | |
When the firm uses 60 units of labor, how much output does it produce? |
| | A) | 60 units |
| | B) | 360 units |
| | C) | 3,600 units |
| | D) | 5,400 units |
| | E) | none of the above |
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18 | |
When the firm uses 60 units of labor, what is AVC at this level of output? |
| | A) | $22.22 |
| | B) | $33.33 |
| | C) | $60 |
| | D) | $120 |
| | E) | $2,000 |
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19 | |
When the firm uses 60 units of labor, what is marginal cost at this level of output? |
| | A) | $22.22 |
| | B) | $33.33 |
| | C) | $90 |
| | D) | $180 |
| | E) | $2000 |
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20 | |
When the firm uses 60 units of labor, what is average total cost at this output? |
| | A) | $44.44 |
| | B) | $60 |
| | C) | $66.66 |
| | D) | $120 |
| | E) | none of the above |
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