Question 1

How do economic costs of production differ from accounting costs?

Accepted Answer

A)  Economic costs include expenditures for hired resources while accounting costs do not.
B)  Economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.
C)  Accounting costs include expenditures for hired resources while economic costs do not.
D)  Accounting costs are always larger than economic costs.E) B) and C)
F) C) and D)

Question 2

If marginal cost is above the average variable cost, then average variable cost is decreasing.

Accepted Answer

A) True 
 B)False

Question 3

The slope of an isocost line determines the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 4

Figure 7.11 a, ATCb and ATCc. -Refer to Figure 7.11.For output rates greater than 20 000 picture frames per month, A) the firm will not make a profit because the average cost of production will be too high. B) the firm will experience diseconomies of scale. C) the firm will experience diminishing returns. D) the short-run average total cost will equal the long-run average total cost of production." class="answers-bank-image d-inline" rel="preload" > Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc.
-Refer to Figure 7.11.For output rates greater than 20 000 picture frames per month,

Accepted Answer

A)  the firm will not make a profit because the average cost of production will be too high.
B)  the firm will experience diseconomies of scale.
C)  the firm will experience diminishing returns.
D)  the short-run average total cost will equal the long-run average total cost of production.E) A) and D)
F) C) and D)

Question 5

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Accepted Answer

A)  Average cost increases as more is produced.
B)  Average cost will fall.
C)  Average cost could increase or decrease depending on what happens to variable cost.
D)  Average cost could increase or decrease depending on what happens to fixed cost.E) None of the above
F) A) and D)

Question 6

Table 7.1 th worker is A) 137 metrics B) 50 metrics C) 12.5 metrics D) 5 metrics" class="answers-bank-image d-inline" rel="preload" > Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 7.1.The marginal product of the 4th worker is

Accepted Answer

A)  137 metrics
B)  50 metrics
C)  12.5 metrics
D)  5 metricsE) C) and D)
F) A) and C)

Question 7

Figure 7.2 
-Refer to Figure 7.2.The curve labelled 'F' is

Accepted Answer

A)  the total product curve.
B)  the average product curve.
C)  the marginal product curve.
D)  the output supply curve.E) A) and D)
F) B) and D)

Question 8

Figure 7.6  Figure 7.6 contains information about the short-run cost structure of a firm.
-Refer to Figure 7.6.In the figure above, which letter represents the average variable cost curve?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) All of the above
F) A) and D)

Question 9

Average total cost is equal to

Accepted Answer

A)  average fixed cost minus average variable cost.
B)  total cost divided by the level of output.
C)  marginal cost plus variable cost.
D)  total cost divided by the number of workers.E) A) and D)
F) All of the above

Question 10

A change in the slope of an isocost line is due to a change in

Accepted Answer

A)  the output price.
B)  the price of one or both inputs.
C)  total cost.
D)  quantity of output.E) A) and B)
F) None of the above

Question 11

On an isoquant/isocost graph, the least cost input combination of producing a given output is

Accepted Answer

A)  any point on the isoquant curve.
B)  any point on the isocost curve.
C)  given by the tangency between the isoquant curve and the isocost line.
D)  one of the intercept values on the graph.E) None of the above
F) C) and D)

Question 12

What is true at the minimum efficient scale?

Accepted Answer

A)  All possible economies of scale have not been exhausted.
B)  The firm has achieved the lowest possible average cost of production.
C)  Any increases in the scale of operation will encounter further economies of scale.
D)  Marginal cost is at its minimum.E) B) and C)
F) B) and D)

Question 13

Table 7.3 
-Refer to Table 7.3.The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes.The capital used to produce the boxes is fixed.The highest value of the average product of labour is ________ when Manny hires ________ workers.

Accepted Answer

A)  80; 3
B)  100; 3
C)  100; 2
D)  80; 4E) A) and B)
F) A) and C)

Question 14

Accounting costs exclude implicit costs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a fixed cost?

Accepted Answer

A)  Payment to hire a security worker to guard the gate to the factory around the clock
B)  Wages to hire assembly line workers
C)  Payments to an electric utility
D)  Costs of raw materialsE) A) and B)
F) None of the above

Question 16

When the average total cost is $16 and the total cost is $800, how many units is the firm producing?

Accepted Answer

A)  Impossible to determine with the information given.
B)  12 800.
C)  784.
D)  50.E) B) and C)
F) A) and D)

Question 17

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

A) True 
 B)False

Question 18

If a firm produces 20 units of output and incurs a total cost of $1000, and the variable cost is $700, what is the firm's average fixed cost of production if it expands output to 25 units?

Accepted Answer

A)  $300
B)  $15
C)  $12
D)  It is impossible to determine without additional information.E) B) and D)
F) A) and C)

Question 19

Suppose two countries use different combinations of inputs, such as labour and capital, to produce the same product.This implies all of the following except that

Accepted Answer

A)  the two countries use different technologies to produce the product.
B)  the inputs are not equally productive in the two countries.
C)  the prices of the inputs are not the same in the countries.
D)  one country is more efficient in the production of the good than the other.E) None of the above
F) C) and D)

Question 20

One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

Accepted Answer

A)  the first workers hired get to use the best equipment.
B)  specialisation allows a worker to focus on one task, thereby increasing her proficiency at that task.
C)  the best workers are hired first and later hires are not as skilful.
D)  beyond some point, a firm has hired too many workers.E) B) and C)
F) B) and D)

Exam 7: Technology Production and Costs

Which of the following is a fixed cost?

Correct Answer
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A change in the slope of an isocost line is due to a change in

Correct Answer
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Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATC_a, ATC_b and ATC_c. -Refer to Figure 7.11.For output rates greater than 20 000 picture frames per month,

Correct Answer
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Suppose two countries use different combinations of inputs, such as labour and capital, to produce the same product.This implies all of the following except that

Correct Answer
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When the average total cost is $16 and the total cost is $800, how many units is the firm producing?

Correct Answer
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Correct Answer
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One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

Correct Answer
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On an isoquant/isocost graph, the least cost input combination of producing a given output is

Correct Answer
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Figure 7.6 Figure 7.6 contains information about the short-run cost structure of a firm. -Refer to Figure 7.6.In the figure above, which letter represents the average variable cost curve?

Correct Answer
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If a firm produces 20 units of output and incurs a total cost of $1000, and the variable cost is $700, what is the firm's average fixed cost of production if it expands output to 25 units?

Correct Answer
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If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Correct Answer
verified

Average total cost is equal to average variable cost minus average fixed cost.

Correct Answer
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Average total cost is equal to

Correct Answer
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The slope of an isocost line determines the marginal rate of substitution.

Correct Answer
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What is true at the minimum efficient scale?

Correct Answer
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How do economic costs of production differ from accounting costs?

Correct Answer
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Table 7.1 Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 7.1.The marginal product of the 4^th worker is

Correct Answer
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Figure 7.2 -Refer to Figure 7.2.The curve labelled 'F' is

Correct Answer
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If marginal cost is above the average variable cost, then average variable cost is decreasing.

Correct Answer
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Accounting costs exclude implicit costs.

Correct Answer
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Exam 7: Technology Production and Costs

Which of the following is a fixed cost?

Correct AnswerverifiedShow Answer

A change in the slope of an isocost line is due to a change in

Correct AnswerverifiedShow Answer

Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 7.11.For output rates greater than 20 000 picture frames per month,

Correct AnswerverifiedShow Answer

Suppose two countries use different combinations of inputs, such as labour and capital, to produce the same product.This implies all of the following except that

Correct AnswerverifiedShow Answer

When the average total cost is $16 and the total cost is $800, how many units is the firm producing?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

Correct AnswerverifiedShow Answer

On an isoquant/isocost graph, the least cost input combination of producing a given output is

Correct AnswerverifiedShow Answer

Figure 7.6 Figure 7.6 contains information about the short-run cost structure of a firm. -Refer to Figure 7.6.In the figure above, which letter represents the average variable cost curve?

Correct AnswerverifiedShow Answer

If a firm produces 20 units of output and incurs a total cost of $1000, and the variable cost is $700, what is the firm's average fixed cost of production if it expands output to 25 units?

Correct AnswerverifiedShow Answer

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Correct AnswerverifiedShow Answer

Average total cost is equal to average variable cost minus average fixed cost.

Correct AnswerverifiedShow Answer

Average total cost is equal to

Correct AnswerverifiedShow Answer

The slope of an isocost line determines the marginal rate of substitution.

Correct AnswerverifiedShow Answer

What is true at the minimum efficient scale?

Correct AnswerverifiedShow Answer

How do economic costs of production differ from accounting costs?

Correct AnswerverifiedShow Answer

Table 7.1 Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 7.1.The marginal product of the 4th worker is

Correct AnswerverifiedShow Answer

Figure 7.2 -Refer to Figure 7.2.The curve labelled 'F' is

Correct AnswerverifiedShow Answer

If marginal cost is above the average variable cost, then average variable cost is decreasing.

Correct AnswerverifiedShow Answer

Accounting costs exclude implicit costs.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATC_a, ATC_b and ATC_c. -Refer to Figure 7.11.For output rates greater than 20 000 picture frames per month,

Correct Answer
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Table 7.1 Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 7.1.The marginal product of the 4^th worker is

Correct Answer
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