MC Chapter 8 and 9
1) A short-run production function assumes that
| the level of output is fixed. | ||||||||||||||||||||||||||||||
| at least one input is a fixed input. | ||||||||||||||||||||||||||||||
| all inputs are fixed inputs. | ||||||||||||||||||||||||||||||
| both a and b | ||||||||||||||||||||||||||||||
| both b and c
2) Refer to the following table: Amount of total output produced from various combinations of labor and capital.
If capital is fixed at two units, what is the marginal product of the fourth unit of labor?
|
3) Refer to the following table:
Amount of total output produced from various combinations of labor and capital.
| Units of Capital |
| 1 | 2 | 3 | ||
| Units
of Labor |
12
3 4 5 6 |
80180
270 340 390 410 |
100220
330 420 490 530 |
120260
390 500 590 650 |
If labor is fixed at three units, how much does the third unit of capital add to total output?
| 60 | ||
| 80 | ||
| 110 | ||
| 130 | ||
| none of the above |
4) If average product is increasing, then marginal product
| must be greater than average product. | ||
| must be less than average product. | ||
| must be increasing. | ||
| cannot be decreasing. | ||
| both a and c |
5 Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month.
If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns
| set in when the fourth worker is hired. | ||
| set in when the fifth worker is hired. | ||
| set in when the sixth worker is hired. | ||
| have not yet set in because output is still increasing. |
6 The marginal product of labor
| measures how output changes as the wage rate changes. | ||
| is less than the average product of labor when the average product of labor is decreasing. | ||
| is negative when adding another unit of labor decreases output. | ||
| both a and b | ||
| both b and c |
7 Refer to the following table:
|
Output |
Total
Cost |
Total Fixed Cost | Total Variable Cost | Average Fixed Cost | Average Variable Cost | Average TotalCost | Marginal Cost |
| 100200
300 400
|
560_____
_____ _____ |
__________
_____ _____ |
60_____
_____ _____ |
__________
_____ _____ |
__________
4.00 _____ |
__________
_____ 7.00 |
_____4.00
_____ _____ |
What is the total fixed cost when 400 units of output are produced?
| $500 | ||
| $2000 | ||
| $3500 | ||
| $5000 | ||
| none of the above |
8 Refer to the following table:
|
Output |
Total
Cost |
Total Fixed Cost | Total Variable Cost | Average Fixed Cost | Average Variable Cost | Average TotalCost | Marginal Cost |
| 100200
300 400
|
560_____
_____ _____ |
__________
_____ _____ |
60_____
_____ _____ |
__________
_____ _____ |
__________
4.00 _____ |
__________
_____ 7.00 |
_____4.00
_____ _____ |
What is average total cost when 200 units of output are produced?
| $2.30 | ||
| $2.50 | ||
| $4.00 | ||
| $4.80 | ||
| none of the above |
9 Refer to the following table:
|
Output |
Total
Cost |
Total Fixed Cost | Total Variable Cost | Average Fixed Cost | Average Variable Cost | Average TotalCost | Marginal Cost |
| 100200
300 400 |
560_____
_____ _____ |
__________
_____ _____ |
60_____
_____ _____ |
__________
_____ _____ |
__________
4.00 _____ |
__________
_____ 7.00 |
_____4.00
_____ _____ |
What is average fixed cost when 300 units of output are produced?
| $0.60 | ||
| $3.00 | ||
| $160 | ||
| $500 | ||
| none of the above |
10 Refer to the following table:
|
Output |
Total
Cost |
Total Fixed Cost | Total Variable Cost | Average Fixed Cost | Average Variable Cost | Average TotalCost | Marginal Cost |
| 100200
300 400
|
560_____
_____ _____ |
__________
_____ _____ |
60_____
_____ _____ |
__________
_____ _____ |
__________
4.00 _____ |
__________
_____ 7.00 |
_____4.00
_____ _____ |
What is the marginal cost of the 250th unit of output?
| $0.14 | ||
| $2.40 | ||
| $4.00 | ||
| $7.40 | ||
| none of the above |
11) Marginal cost
| measures how total cost changes when input prices change. | ||
| measures how total cost changes when one more unit of output is produced. | ||
| is less than average cost when average cost is decreasing. | ||
| both a and b | ||
| both b and c
|
12) A firm is currently producing 10 units of output; marginal cost is $24 and average total cost is $6 at this level of output.
The average total cost at 9 units of output is:
| $4 | ||
| $5 | ||
| $6 | ||
| $8 | ||
| none of the above | ||
13) Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the last worker added 12 units of output, and total fixed cost is $3,600.
What is marginal cost?
| $.20 | ||
| $5 | ||
| $240 | ||
| $720 | ||
| none of the above |
14) Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the last worker added 12 units of output, and total fixed cost is $3,600.
What is average total cost?
| $2 | ||
| $8 | ||
| $600 | ||
| $1800 | ||
| none of the above |
15) Short-run average cost is
| always greater than or equal to long-run average cost. | ||
| always less than long-run average cost. | ||
| less than short-run marginal cost when short-run marginal cost is decreasing. | ||
| both a and c |
16) When marginal cost is rising, average variable cost
| must be rising. | ||
| must be falling. | ||
| must be constant. | ||
| could be rising or falling. |
17) A sofa manufacturer currently is using 50 workers and 30 machines to produce 5,000 sofas a day. The wage rate is $200 and the rental rate for a machine is $1,000. At these input levels, another worker adds 200 sofas, while another machine adds 500 sofas. Assuming that the marginal product of labor is constant between 45 and 50 workers and the marginal product of capital is constant between 30 and 31 machines, if the firm uses 45 workers and 31 machines instead, then its
| cost will be unchanged, and its output will decrease by 500 units. | ||
| cost will be unchanged, and its output will increase by 300 units. | ||
| cost will be unchanged, and its output will increase by 500 units. | ||
| output will be unchanged, and its cost will decrease by $800. | ||
| none of the above |
18 A dry cleaner currently has 10 workers and 4 machines. The workers’ wage rate is $300 per worker and the rental rate for a machine is $500. The last worker added 600 units to total output and the last machine also added 600 units to total output. Assuming that the marginal product of labor is constant between 10 and 11 workers and the marginal product of capital is constant between 3 and 4 machines, if the dry cleaner uses 11 workers and 3 machines instead, then
| cost will be unchanged and output will increase by 300 units. | ||
| cost will be unchanged and output will decrease by 200 units. | ||
| output will be unchanged and cost will decrease by $500. | ||
| output will be unchanged and cost will decrease by $200. | ||
| none of the above |
19 A firm is using 500 units of labor and 100 units of capital to produce 100 units of output. The price of labor is $5 per unit and the price of capital is $20 per unit. At these input levels, another unit of labor adds 50 units of output, while another unit of capital adds 400 units of output. The firm could increase output by
| 10 units by spending $1 more on capital and $1 less on labor. | ||
| 10 units by spending $1 more on labor and $1 less on capital. | ||
| 350 units by spending $1 more on capital and $1 less on labor. | ||
| 350 units by spending $1 more on labor and $1 less on capital. | ||
| none of the above |
20 You overhear a businessman say: “We want to be big because there are economies associated with bigness.” What he means is that
| total cost decreases as more is produced. | ||
| long-run average cost decreases as more is produced. | ||
| marginal cost decreases as more is produced. | ||
| total fixed cost decreases as more is produced. |
21 Diseconomies of scale
| exist when fixed cost increases as output increases. | ||
| exist when long−run average cost increases as output increases. | ||
| result eventually as the firm uses more and more labor with a fixed capital stock. | ||
| both a and b | ||
| all of the above |
22) If a firm is producing the level of output at which long−run average cost equals long−run marginal cost, then
| long−run marginal cost is at its minimum point. | ||
| long−run average cost is at its minimum point. | ||
| long−run total cost is at its minimum point. | ||
| both a and b | ||
| all of the above |
23) If a firm is producing the level of output at which short−run average cost equals long−run average cost, then
| the firm has chosen the cost−minimizing combination of inputs to produce this level of output. | ||
| with a fixed amount of capital, short−run average cost is greater than long−run average cost at any other level of output. | ||
| the firm has chosen the profit-maximizing level of output. | ||
| both a and b | ||
| all of the above |
24 Economies of scale exist when
| total cost decreases as output increases. | ||||||||||||||
| long-run average cost decreases as output increases. | ||||||||||||||
| marginal cost decreases as output increases. | ||||||||||||||
| fixed cost decreases as output increases.
25 If there are no fixed costs in the long run, how can it be said that economies of scale arise from spreading fixed costs over more units of output?
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