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Q:
Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm.
Refer to Figure 11-6. In the figure above which letter represents the marginal cost curve?
A) A
B) B
C) C
D) D
Q:
Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm.
Refer to Figure 11-6. In the figure above which letter represents the average total cost curve?
A) A
B) B
C) C
D) D
Q:
Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm.
Refer to Figure 11-6. In the figure above which letter represents the average fixed cost curve?
A) A
B) B
C) C
D) D
Q:
Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm.
Refer to Figure 11-6. In the figure above which letter represents the average variable cost curve?
A) A
B) B
C) C
D) D
Q:
Average fixed cost can be calculated using any of the formulas below exceptA) TFC/Q.B) (TC - VC)/Q.C) (TC - VC)/Q.D) (TC/Q) - AVC.
Q:
Which of the following statements is false?
A) When marginal cost equals average total cost, average total cost is at its highest value.
B) The marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points.
C) The difference between average total cost and average fixed cost is average variable cost.
D) Firms often refer to the process of lowering average fixed cost as "spreading the overhead."
Q:
As output increases
A) average variable cost becomes smaller and smaller.
B) the difference between average total cost and average variable cost decreases.
C) marginal cost increases continuously.
D) the difference between average total cost and average variable cost becomes greater and greater.
Q:
Which of the following statements is true?
A) As output increases, average fixed cost becomes smaller and smaller.
B) Average fixed cost does not change as output increases.
C) The marginal cost curve intersects the average fixed cost curve at its minimum point.
D) When marginal cost is greater than average fixed cost, average fixed cost increases.
Q:
Average fixed cost is equal to
A) the amount of total cost that does not change as output changes in the short run.
B) fixed cost divided by the quantity of output produced.
C) fixed cost multiplied by the quantity of output produced.
D) average total cost plus average variable cost.
Q:
Average total cost is equal to
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.
Q:
Which of the following equations isincorrect?
A) ATC - AFC = AVC
B) AVC + AFC = ATC
C) AFC = ATC - AVC
D) ATC = AVC - AFC
Q:
If the average variable cost curve is above the marginal cost curve, then
A) marginal costs must be decreasing.
B) average variable costs must be increasing.
C) marginal costs must be increasing.
D) marginal costs can be either increasing or decreasing.
Q:
If the marginal cost curve is below the average variable cost curve, then
A) average variable cost is increasing.
B) average variable cost is decreasing.
C) marginal cost must be decreasing.
D) average variable cost could either be increasing or decreasing.
Q:
Figure 11-5 Refer to Figure 11-5. Curve Gapproaches curveF because
A) marginal cost is above average variable costs.
B) average fixed cost falls as output rises.
C) fixed cost falls as capacity rises.
D) total cost falls as more and more is produced.
Q:
Figure 11-5 Refer to Figure 11-5. The vertical difference between curves F and G measures
A) average fixed costs.
B) marginal costs.
C) fixed costs.
D) sunk costs.
Q:
Figure 11-5 Refer to Figure 11-5. Identify the curves in the diagram.
A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve
B) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve
C) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve, H = marginal cost curve
D) E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.
Q:
Table 11-7Quantity of LanternsFixed Cost (dollars)Variable Cost (dollars)Total Cost (dollars)Average Total Cost (dollars)752001703704.93802002304305.36902007.6710020081011520011.81172001264146412.51202001480Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.Refer to Table 11-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?A) $420B) $32C) $11.1D) $8.1
Q:
Table 11-7Quantity of LanternsFixed Cost (dollars)Variable Cost (dollars)Total Cost (dollars)Average Total Cost (dollars)752001703704.93802002304305.36902007.6710020081011520011.81172001264146412.51202001480Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.Refer to Table 11-7. What is the average variable cost per unit of production when the firm produces 90 lanterns?A) $490B) $33.67C) $7.67D) $5.44
Q:
Table 11-7Quantity of LanternsFixed Cost (dollars)Variable Cost (dollars)Total Cost (dollars)Average Total Cost (dollars)752001703704.93802002304305.36902007.6710020081011520011.81172001264146412.51202001480Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.Refer to Table 11-7. What is the average total cost of production when the firm produces 120 lanterns?A) $1,680B) $72C) $14D) $12.3
Q:
Table 11-7Quantity of LanternsFixed Cost (dollars)Variable Cost (dollars)Total Cost (dollars)Average Total Cost (dollars)752001703704.93802002304305.36902007.6710020081011520011.81172001264146412.51202001480Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns?A) $1,556B) $1,157C) $956D) $10.05
Q:
Suppose you have just opened a store to sell espresso machines. Both you and a competing store buy this machine from a manufacturer for $130 each. Your competitor who has a store of the same size as yours is currently selling about 10 machines a month at a price of $200 per machine. You expect to sell about 6 machines a month at a price of $220 per machine. If you lower your price, you expect to make a loss. Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?
A) The competing store probably has a lower marginal cost of production.
B) The competing store probably has a lower average variable cost of production.
C) The competing store's goal is to maximize revenue and not profit.
D) The competing store probably has a lower average cost because average fixed cost falls as output increases.
Q:
If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is
A) $1,000.
B) $700.
C) $300.
D) impossible to determine without additional information.
Q:
Average variable cost can be calculated using any of the formulas below exceptA) TVC/Q.B) (TC - FC)/Q.C) (TC - FC)/Q.D) (TC/Q) - AFC.
Q:
If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.
A) $300
B) $15
C) $12
D) It is impossible to determine without additional information.
Q:
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?
A) $65
B) $50
C) $15
D) It is impossible to determine without additional information.
Q:
Figure 11-4 Refer to Figure 11-4. What happens to the average fixed cost of production when the firm increases output from 150 to 200?
A) It remains constant.
B) It rises.
C) It falls.
D) It could rise or fall depending on what happens to total cost.
Q:
The formula for total fixed cost is
A) TFC = TC + TVC.
B) TFC = TVC - TC.
C) TFC = TC/TVC.
D) TFC = TC - TVC.
Q:
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true?
A) The fixed cost of running the studio is $22,000.
B) The variable cost of running the studio is $22,000.
C) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost.
D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.
Q:
When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is
A) impossible to determined with the information given.
B) 12,800.
C) 784.
D) 50.
Q:
Which of the following equations is correct?
A) AVC - ATC = AFC
B) AVC + ATC = AFC
C) AFC + AVC = ATC
D) ATC + AVC = AFC
Q:
Table 11-6Quantity of workersQuantity of foot massages per dayFixed costVariable costTotal costAverage total costMarginal cost00110225345460570Refer to Table 11-6. Alicia Gregory owns a foot massage business. She leases 4 computer-controlled massage booths, for which she pays $125 per day. She cannot increase the number machines she leases without giving the manufacturer 3 months notice. She can hire as many workers as she wants at a cost of $75 per day per worker. These are the only two inputs she uses in her business. Use this information to fill in the columns in the above table.
Q:
Table 11-5Number of WorkersOutput (boxes)Marginal Product of LaborOffice Rent (dollars)Labor Cost (dollars)Total Cost (dollars)00--12204002002250800368041601,20059401,00069801,600Refer to Table 11-5. Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette's mail order business. Suzette rents space for her factory for $400 a week in a nearby strip mall. She can hire temporary workers for $200 a week. Table 11-5 above shows her output and cost data. Use the table to answer questions a-e.a. Complete the table.b. In the last week of summer Suzette closes her business to go on a family vacation. What are her costs during that week?c. In one week Suzette exactly breaks even. If her revenue for the week is $1,200, how many boxes of fruit and nuts did she produce?d. Judging from the marginal product of labor data, would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer.e. Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months. If she expects the trend in the marginal product of labor will continue in the same direction, what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.
Q:
Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.
Q:
Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.
Q:
Describe the relationship between marginal cost and average total cost.
Q:
In the short run, if average product is at its maximum, then average variable cost is at its minimum.
Q:
If average total cost is falling marginal cost must also be falling.
Q:
The marginal cost curve is U-shaped because of the law of increasing opportunity costs.
Q:
If the marginal product of labor is decreasing, then marginal cost of production must be rising.
Q:
If marginal cost is above the average variable cost, then average variable cost is decreasing.
Q:
The change in a firm's total cost from producing one more unit of a good or service is
A) the result of economies of scale.
B) the definition of marginal product
C) the definition of marginal cost.
D) impossible to observe in large firms with many manufacturing plants.
Q:
Which of the following statements is false?
A) Marginal cost will equal average total cost when marginal cost is at its lowest point.
B) When marginal cost is less than average total cost, average total cost will fall.
C) When marginal cost is greater than average total cost, average total cost will rise.
D) Marginal cost will equal average total cost when average total cost is at its lowest point.
Q:
When the marginal product of labor rises
A) the marginal cost of production will exceed the average total cost.
B) the marginal cost of production also rises.
C) the marginal cost of production falls.
D) the average total cost of production also rises.
Q:
Marginal cost is calculated for a particular increase in output by
A) multiplying the total cost by the change in output.
B) multiplying the change in total cost by the change in output.
C) dividing the total cost by the change in output.
D) dividing the change in total cost by the change in output.
Q:
Jill Johnson owns a pizzeria. She currently produces 10,000 pizzas per month at a total cost of $500. If she produced one more pizza her total cost rises to $500.11. What does this tell us about Jill's marginal cost of producing pizzas?
A) The marginal cost of producing pizzas is constant.
B) The marginal cost of producing pizzas is falling.
C) The marginal cost of producing pizzas cannot be determined without more information.
D) The marginal cost of producing pizzas is rising.
Q:
The shape of the average total cost curve is determined by the shape of
A) the marginal cost curve.
B) the average fixed cost curve.
C) the average product curve.
D) the firm's production function.
Q:
Which of the following explains why the marginal cost curve has a U shape?
A) Initially, the marginal product of labor falls, then rises.
B) Initially, the average product of labor rises, then falls.
C) Initially, the marginal product of labor rises, then falls.
D) Initially, the average cost of production rises, then falls.
Q:
The change in a firm's total cost from producing one more unit of a good or service is the firm's
A) explicit cost of production.
B) marginal cost of production.
C) average cost of production.
D) implicit cost of production.
Q:
In the world oil market, oil is supplied up to the point where
A) the marginal cost of the last barrel is just equal to the price buyers are willing to pay for that last barrel.
B) the marginal cost of the last barrel is zero.
C) the marginal cost of the last barrel is the greatest distance from the price buyers are willing to pay for that last barrel.
D) the marginal cost of the last barrel is at a maximum.
Q:
If fixed costs do not change, then marginal cost
A) also remains constant.
B) equals the change in variable cost divided by the change in output.
C) equals the change in average variable cost divided by the change in output.
D) equals the change in average fixed cost divided by the change in output.
Q:
Average fixed costs of production
A) remain constant.
B) will rise at a fixed rate as more is produced.
C) graph as a U-shaped curve.
D) fall as long as output is increased.
Q:
Which of the following costs will not change as output changes?
A) marginal cost
B) total variable cost
C) average variable cost
D) average fixed cost
E) total fixed cost
Q:
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?
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.
Q:
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
A) $41.43.
B) $134.29.
C) $135.
D) $145.
Q:
In the short run, if marginal product is at its maximum, then
A) average cost is at its minimum.
B) average variable cost is at its minimum.
C) marginal cost is at its minimum.
D) total cost is at its maximum.
Q:
Marginal cost is the
A) change in average cost when an additional unit of output is produced.
B) the additional output when total cost is increased by one dollar.
C) additional cost of producing an additional unit of output.
D) change in the price of inputs if a firm buys more inputs to produce an additional unit of output.
Q:
Marginal cost is equal to the
A) change in total cost divided by the change in output.
B) change in average total costs divided by the change in output.
C) change in total product divided by the change in output.
D) change in average product divided by the change in output.
Q:
Fill in the missing values in the following table. Draw one graph showing how total output increases with the quantity of workers hired, and another graph showing the marginal product of labor and the average product of labor.Quantity of WorkersTotal OutputMarginal Product of LaborAverage Product of Labor0012002500390041,15051,300
Q:
Table 11-4Labor (hours)Quantity of Fish (pounds)Marginal Product (pounds)110218324428530632Refer to Table 11-4. The table above shows the following relationship between hours spent fishing and the quantity of fish caught for Juan, a commercial fisherman.a. Complete the Marginal Product column in Table 11-4.b. Characterize the production function, i.e. does the production function display increasing marginal returns, diminishing marginal returns, etc.c. Using the data above, graph Juan's marginal product curve. Be sure to label the horizontal and vertical axes. Is your graph consistent with your answer to part (b)? Explain.d. Juan uses the following inputs for fishing a small wooden boat (B), a fishing pole (P) and of course, his labor (L). Treating the boat and the fishing pole as fixed inputs and using the data above, graph Juan's Total Product of Labor curve. Be sure to label the horizontal and vertical axes.e. (Extra Credit) The opportunity cost of Juan's time is $8 per hour. If Juan receives $2 per pound for his fish, what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer. Hint: Recall marginal benefit and marginal cost analysis.
Q:
Damian owns a tattoo parlor and has hired three tattoo artists to work for him. The marginal product of labor is 8 for the first artist, 12 for the second artist, and 7 for the third artist. What is Damian's average product of labor for these three tattoo artists?
Q:
What is the marginal product of labor and what is the average product of labor.
Q:
State the law of diminishing marginal returns.
Q:
If marginal product is equal to average product, then total product is at a maximum.
Q:
The additional output a firm produces by hiring one more worker is called the marginal product of labor.
Q:
If a firm experiences diminishing returns its marginal product must be negative.
Q:
If average product is decreasing, then marginal product must be negative.
Q:
A downward sloping marginal product of labor curve demonstrates the law of diminishing marginal returns.
Q:
If, after hiring the 6th worker, a firm's output falls, then the marginal product of the 6th worker is negative.
Q:
If production displays increasing marginal returns, then
A) total product rises by a constant amount throughout.
B) each new worker hired adds more to output than previous hires.
C) the firm must be adding new capital to keep boosting productivity.
D) total product reaches a maximum sooner than if production displayed decreasing returns.
Q:
If marginal product is greater than average product, then
A) average product must be decreasing.
B) marginal product must be decreasing.
C) marginal product must be increasing.
D) marginal product could either be increasing or decreasing.
Q:
Table 11-3Quantity of WorkersQuantity of BoxesMarginal Product of LaborAverage Product of Labor00----------1502200324042645284Refer to Table 11-3. 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 average product of labor will equal 60 boxes when Manny hiresA) the second worker.B) the third worker.C) the fourth worker.D) the fifth worker.
Q:
Table 11-3Quantity of WorkersQuantity of BoxesMarginal Product of LaborAverage Product of Labor00----------1502200324042645284Refer to Table 11-3. 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 is labor is ________ when Manny hires ________ workers.A) 80; 3B) 100; 3C) 100; 2D) 80; 4
Q:
Table 11-3Quantity of WorkersQuantity of BoxesMarginal Product of LaborAverage Product of Labor00----------1502200324042645284Refer to Table 11-3. 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. Diminishing returns to labor are first observed in this example after Manny hires the ________ worker.A) secondB) thirdC) fourthD) fifth
Q:
If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?
A) 0.16
B) 3
C) 4.67
D) 36
Q:
Which of the following describes how output changes in the short run? Because of specialization and the division of labor, as more workers are hired
A) output will first increase at an increasing rate, then output will increase at a decreasing rate.
B) output will first decrease at an increasing rate, then increase at a decreasing rate.
C) the marginal product of labor will first decrease, then increase at a decreasing rate.
D) the marginal product of labor will first be negative and then will be positive.
Q:
The marginal product of labor is calculated using the formulaA) L/Q.B) L/Q.C) Q/L.D) Q/L.
Q:
Which of the following statements is true?
A) The average product of labor is at its maximum when the average product of labor equals the marginal product of labor.
B) The average product of labor is at its minimum when the average product of labor equals the marginal product of labor.
C) The average product of labor tells us how much output changes as the quantity of workers hired changes.
D) Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing.
Q:
After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker the average product of labor declines. Which of the following statements must be true?
A) The marginal product of the 8th worker is negative.
B) The marginal product of the 8th worker is less than the average product of labor before the 8th worker was hired.
C) Suzie's profits would be greater if she did not hire the 8th worker.
D) The average product of labor is negative.
Q:
The total output produced by a firm divided by the quantity of workers employed by the firm is the definition of
A) the marginal product of labor.
B) the division of labor.
C) the average product of labor.
D) the average cost of production.
Q:
In his book The Wealth of Nations, Adam Smith employed the example of a pin factory in order to explain what economic concept?
A) the relationship between the marginal and average product of labor
B) the law of diminishing returns
C) why no firm would want to hire so many workers as to experience a negative marginal product of labor
D) the division of labor