Question 1

The average product of a variable input is calculated as:

Accepted Answer

A)  total product divided by total output.
B)  the change in total product divided by the change in the variable input.
C)  total product divided by the change in the variable input.
D)  total product divided by the total quantity of the variable input.

Question 2

For a particular production function,over the range of output where marginal product rises as units of the variable input are added to the fixed input,marginal cost will be:

Accepted Answer

A)  increasing.
B)  constant.
C)  decreasing.
D)  cannot be determined without additional information.

Question 3

Which of the following statements is correct?

Accepted Answer

A)  Workers employed by General Motors are approximately twice as productive as their Japanese counterparts.
B)  Between 1979 and 1998, Chrysler and Ford eliminated the productivity gap between all of their production facilities and their Japanese counterparts.
C)  The increase in productivity Japanese manufacturers experienced in the early 1980s was the result primarily of changes in management focusing on inventory systems and plant layout.
D)  Auto workers in the United States are less productive than their Japanese counterparts primarily due to the higher wages U.S. workers receive.

Question 4

From the manager's perspective:

Accepted Answer

A)  it is important to treat implicit costs as explicit in order to make sound strategic decisions.
B)  implicit costs are simply a theoretical construct and should be ignored in the decision-making process.
C)  only explicit costs matter because accounting profit is based on explicit costs.
D)  there is no difference between implicit and explicit costs. As such, treating implicit costs as explicit would result in double counting and an overstatement of total costs.

Question 5

Economic profit is equal to the difference between:

Accepted Answer

A)  total revenue and the full opportunity cost of all the resources used in production.
B)  total revenue and implicit costs.
C)  accounting profit and explicit costs.
D)  implicit and explicit costs.

Question 6

-Refer to Scenario 3.The average total cost of 5 units of output is:

Accepted Answer

A)  $8.
B)  $10.
C)  $29.
D)  $39.

Question 7

Fred is considering opening a ski shop in Colorado.Assume Fred will incur the following costs: building rent = $100,000/year,inventory = $250,000/year,energy = $50,000/year,and labor (one clerk) = $10,000/year.In addition,Fred's current income as a computer programmer is $40,000 per year.Assuming Fred would earn $460,000 in revenues,he could expect to earn:

Accepted Answer

A)  an accounting profit of $10,000 per year.
B)  an accounting profit of $60,000 per year.
C)  an economic profit of $10,000 per year.
D)  an economic profit of $50,000 per year.

Question 8

According to a study by Blinder et al.,on average,fixed costs account for about 44 percent of firms' total costs of production,suggesting that fixed costs are more important to many firms' decision-making processes than standard theory would suggest.

Accepted Answer

A) True 
 B)False

Question 9

Explain the difference between the short run and the long run as it relates to the firm's production function.Why is this distinction important to a firm's manager?

Accepted Answer

In the short run,the amount of at least ...

Question 10

So long as a firm is enjoying increasing marginal returns,a one unit increase in output will cause marginal costs to ________ and total costs to ________.

Accepted Answer

A)  increase; increase
B)  decrease; increase
C)  increase; decrease
D)  decrease; decrease

Question 11

Which of the following statements is false?

Accepted Answer

A)  Economic costs include the opportunity costs of the resources owned by the firm.
B)  Accounting costs typically include only explicit costs.
C)  Economic profit will always be less than accounting profit if resources owned and used by the firm have any opportunity costs.
D)  Accounting profit is equal to total revenue minus implicit costs.

Question 12

The payment of wages by a firm is an example of:

Accepted Answer

A)  an explicit cost of production.
B)  an implicit cost of production.
C)  an irreversible cost of production.
D)  a long-run cost of production.

Question 13

-Refer to Scenario 3.The average variable cost of producing three units of output is:

Accepted Answer

A)  $15.
B)  $25.
C)  $41.67 (approximate) .
D)  $75.

Question 14

Which of the following would be classified as a short-run decision?

Accepted Answer

A)  A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.
B)  A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room.
C)  A trucking firm's decision to move to a smaller facility.
D)  A university's decision to add a new residence hall.

Question 15

All else constant,an improvement in technology would cause a firm's total,average and marginal product functions to increase (graphically,shift up).

Accepted Answer

A) True 
 B)False

Question 16

The term "fixed input" refers to:

Accepted Answer

A)  inputs to production that do not vary with respect to quality.
B)  inputs to production that do not vary in price.
C)  inputs to production that yield a constant or "fixed" marginal product.
D)  inputs to production, the quantity of which cannot be varied in the short run.

Question 17

-Refer to Scenario 2.The average fixed cost of 2 units of output is:

Accepted Answer

A)  $8.00.
B)  $8.50.
C)  $12.00.
D)  $20.50.

Question 18

When demand for a firm's product decreases,the firm can take a number of steps to adjust costs and quantities supplied to the market.Some are listed below.Which actions are short run and which are long run? Explain your reasoning.
a.Layoff 25 percent of the firm's existing employees.
b.Declare bankruptcy and sell all of the firm's plant and equipment.
c.Require management personnel to take a significant cut in pay.
d.Furlough employees for 3 days each month.
e.Move to a smaller production facility.

Accepted Answer

Options a,c,and d are all short-run opti...

Question 19

The law of diminishing returns is a result of the fact that more and more units of a variable input are being added to a fixed input.Because of the limitations imposed by the fixed input,at some point the productivity of additional units of the variable input must decline.

Accepted Answer

A) True 
 B)False

Question 20

For a typical short-run production function,so long as marginal product is increasing,average product will be increasing as well.

Accepted Answer

A) True 
 B)False

Exam 5: Production and Cost Analysis in the Short Run

For a particular production function,over the range of output where marginal product rises as units of the variable input are added to the fixed input,marginal cost will be:

Correct Answer
verified

Correct Answer
verified
Options a,c,and d are all short-run opti...
View Answer

From the manager's perspective:

Correct Answer
verified

So long as a firm is enjoying increasing marginal returns,a one unit increase in output will cause marginal costs to and total costs to .

Correct Answer
verified

All else constant,an improvement in technology would cause a firm's total,average and marginal product functions to increase (graphically,shift up).

Correct Answer
verified

-Refer to Scenario 3.The average variable cost of producing three units of output is:

Correct Answer
verified

-Refer to Scenario 3.The average total cost of 5 units of output is:

Correct Answer
verified

The term "fixed input" refers to:

Correct Answer
verified

For a typical short-run production function,so long as marginal product is increasing,average product will be increasing as well.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

Economic profit is equal to the difference between:

Correct Answer
verified

The average product of a variable input is calculated as:

Correct Answer
verified

Explain the difference between the short run and the long run as it relates to the firm's production function.Why is this distinction important to a firm's manager?

Correct Answer
verified
In the short run,the amount of at least ...
View Answer

Which of the following would be classified as a short-run decision?

Correct Answer
verified

The law of diminishing returns is a result of the fact that more and more units of a variable input are being added to a fixed input.Because of the limitations imposed by the fixed input,at some point the productivity of additional units of the variable input must decline.

Correct Answer
verified

According to a study by Blinder et al.,on average,fixed costs account for about 44 percent of firms' total costs of production,suggesting that fixed costs are more important to many firms' decision-making processes than standard theory would suggest.

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

The payment of wages by a firm is an example of:

Correct Answer
verified

-Refer to Scenario 2.The average fixed cost of 2 units of output is:

Correct Answer
verified

Exam 5: Production and Cost Analysis in the Short Run

For a particular production function,over the range of output where marginal product rises as units of the variable input are added to the fixed input,marginal cost will be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedOptions a,c,and d are all short-run opti...View AnswerShow Answer

From the manager's perspective:

Correct AnswerverifiedShow Answer

So long as a firm is enjoying increasing marginal returns,a one unit increase in output will cause marginal costs to ________ and total costs to ________.

Correct AnswerverifiedShow Answer

All else constant,an improvement in technology would cause a firm's total,average and marginal product functions to increase (graphically,shift up).

Correct AnswerverifiedShow Answer

-Refer to Scenario 3.The average variable cost of producing three units of output is:

Correct AnswerverifiedShow Answer

-Refer to Scenario 3.The average total cost of 5 units of output is:

Correct AnswerverifiedShow Answer

The term "fixed input" refers to:

Correct AnswerverifiedShow Answer

For a typical short-run production function,so long as marginal product is increasing,average product will be increasing as well.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economic profit is equal to the difference between:

Correct AnswerverifiedShow Answer

The average product of a variable input is calculated as:

Correct AnswerverifiedShow Answer

Explain the difference between the short run and the long run as it relates to the firm's production function.Why is this distinction important to a firm's manager?

Correct AnswerverifiedIn the short run,the amount of at least ...View AnswerShow Answer

Which of the following would be classified as a short-run decision?

Correct AnswerverifiedShow Answer

The law of diminishing returns is a result of the fact that more and more units of a variable input are being added to a fixed input.Because of the limitations imposed by the fixed input,at some point the productivity of additional units of the variable input must decline.

Correct AnswerverifiedShow Answer

According to a study by Blinder et al.,on average,fixed costs account for about 44 percent of firms' total costs of production,suggesting that fixed costs are more important to many firms' decision-making processes than standard theory would suggest.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

The payment of wages by a firm is an example of:

Correct AnswerverifiedShow Answer

-Refer to Scenario 2.The average fixed cost of 2 units of output is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Options a,c,and d are all short-run opti...
View Answer

Correct Answer
verified

So long as a firm is enjoying increasing marginal returns,a one unit increase in output will cause marginal costs to and total costs to .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In the short run,the amount of at least ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified