Chapter 11 : Output and Costs
Multiple choices:
1) An example of a variable resource in the short run is
C) an employee.
2) The short run is a period of time in which
A) the quantity used of at least one resource is fixed.
3) An example of a fixed factor of production is
A) capital equipment.
4) A cost that has already been made and cannot be recovered
is called a
C) sunk cost.
5) The long run is a time frame in which
B) the quantities of all resources can be varied.
6) Points below a firm's total product curve are
C) attainable but not technologically efficient.
7) The marginal product of labor is equal to the
B) increase in the total product that results from hiring one
more worker.
8) The total output produced with any quantity of labor is equal
to the sum of the
A) marginal products of each of the workers hired.
9) Average product equals the
C) total amount of output produced divided by the quantity of
labor employed.
Pizza Hut
Total product
Labor
(pizzas produced
(workers)
per hour)
0
0
1
5
2
9
3
12
4
14
5
15
10) Using the data in the above table, what is the marginal
product of the second worker?
B) 4 pizzas per hour
11) Using the data in the above table, what is the average
product of three employees?
C) 4 pizzas per hour
12) In the figure above, the marginal product of the second
worker is
B) 5 units.
13) At point d in the above figure, the average product of labor
equals
C) 3.75.
14) In the figure above,
A) d is an efficient point.
15) In the above figure, an inefficient point is
D) f.
16) Increasing marginal returns to labor might occur at low
levels of labor input because of
C) increasing specialization of tasks.
17) "Diminishing marginal returns" refer to a situation in which
the
C) marginal product of the last worker hired is less than the
marginal product of the previous worker hired.
18) Diminishing marginal returns to labor occur because
B) the capital resources used by the firm are fixed in the
short run.
19) The law of diminishing returns states that as a firm
increases
C) a variable input, with a given quantity of fixed inputs, the
marginal product of the variable input eventually decreases.
20) When marginal product of labor is a maximum, average
product of labor is ________.
B) increasing
21) When the marginal and average products of labor are equal
to each other, the
A) average product must be at its maximum value.
22) With a technological change that increases productivity,
the average product curve ________ and the marginal product
curve ________.
D) shifts upward; shifts upward
23) Total cost is the sum of fixed costs and
D) variable costs.
24) Total fixed cost
B) does not change as output changes.
25) Total variable cost is the sum of all
C) costs that rise as output increases.
26) Ernie's Earmuffs produces 200 earmuffs per year at a
total cost of $2,000 and $400 of this cost is fixed. What is
Ernie's average total cost?
B) $10
27) As output increases, average fixed cost
A) always decreases.
28) The average total cost curve
D) All of the above answers are correct.
Output
(pies)
0
100
200
300
400
Total
variable Total cost
cost
(dollars)
(dollars)
0
300
400
1,000
1,800
2,800
29) The above table gives some of the costs of the Delicious
Pie Company. What is the total fixed cost of producing 100
pies?
A) $300
30) The above table gives some of the costs of the Delicious
Pie Company. The marginal cost of increasing pie output from
200 to 300 pies equals ________ per pie.
C) $8
31) The above table gives some of the costs of the Delicious
Pie Company. What is the average variable cost of producing
300 pies?
C) $5
32) The vertical distance between a firm's total cost (TC) and
its total variable cost (TVC) curves
C) is equal to the total fixed cost, TFC.
33) In the above figure, the total fixed cost curve is curve
C) C.
34) In the figure above, curve C is the ________ curve.
B) average variable cost
35) In the figure above, curve A is the ________ curve.
D) marginal cost
36) In the figure above, curve B is the ________ curve.
C) average total cost
37) In the figure above, when 20 units are produced the
marginal cost is
A) less than $8.
38) In the figure above, when 40 units are produced the
average fixed cost is
A) $4
39) Average variable cost is at a minimum at the same amount
of output at which
A) average product is at a maximum.
40) A technological change that increases productivity
________ marginal product and ________ marginal cost.
B) increases; decreases
41) Which curve intersects the AVC curve at its minimum
point?
A) the MC curve
Essay Questions
1) What is the difference between the short run and the long
run?
Answer: The short run is a time period so short that the firm
cannot change the quantity of at least one factor, say plant
size for a manufacturer or land for a farmer. The only way to
increase output, therefore, is by combining more units of the
variable factors with the fixed factor. The long run is a time
period sufficiently long that a firm can change the quantity of
all factors. Nothing is fixed so output can be produced with
whatever combination of factors the firm chooses.
2) What does the average product of labor equal?
Answer: The average product of labor equals the total
product (the total output) divided by the quantity of labor.
3) How do we calculate average fixed cost and why does
average fixed cost fall as output increases?
Answer: Average fixed cost is calculated by dividing total
fixed cost by the quantity of output. Because total fixed cost
stays the same for all levels of output, as the quantity
produced increases, the average fixed cost decreases.
4) "Marginal cost is the increase in total cost that results from
a one-unit increase in a variable input." True or false? Explain.
Answer: False. Marginal cost is the increase in total cost that
results from a one-unit increase in output, not a one unit
increase in an input.
GOOD LUCK …