Question 1

In the long run,

Accepted Answer

A)  all of the firm's input quantities are variable.
B)  the firm can vary the quantities of some but not all inputs.
C)  managers become less efficient.
D)  the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output.E) All of the above
F) A) and B)

Question 2

If a firm's marginal physical product is 5, and it sells its product for $60, and a unit of labor costs $200, the firm should

Accepted Answer

A)  increase the use of labor.
B)  decrease the use of labor.
C)  decrease the price of the product.
D)  reduce output of the product.E) A) and C)
F) A) and B)

Question 3

In which case is the transition from short run to long run likely to involve the shortest chronological time period?

Accepted Answer

A)  A service that provides temporary secretaries to companies
B)  An automobile factory
C)  A farm
D)  An electric utilityE) None of the above
F) B) and D)

Question 4

The graph of the average cost curve

Accepted Answer

A)  is identical to the AVC curve.
B)  is above the AVC curve
C)  lies everywhere below the AFC curve.
D)  lies below the AFC curve.E) A) and C)
F) A) and B)

Question 5

Which of the following indicates an input is being overused relative to the optimal level?

Accepted Answer

A)  MRP = P of input.
B)  MRP > P of input.
C)  MRP 
D)  MPP > P of output.E) A) and B)
F) None of the above

Question 6

Figure 7-15 
-For a firm at equilibrium, at point A in Figure 7-15,

Accepted Answer

A)  the price of labor is high relative to the price of machines.
B)  the MPP of labor is greater than the MPP of machines.
C)  the MPP of labor is less than at point B.
D)  output is higher than at point B.E) C) and D)
F) B) and C)

Question 7

A firm's optimal input proportions may change if

Accepted Answer

A)  input prices change.
B)  the relative marginal productivities of the inputs change.
C)  the firm's optimal output level changes.
D)  All of the responses are correct.E) A) and B)
F) A) and C)

Question 8

Decreasing returns to scale is strictly a short run phenomenon for firms.

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-10 
-The typical average cost curve

Accepted Answer

A)  continually declines as output increases.
B)  is horizontal.
C)  continually increases as output increases.
D)  first declines to a minimum and then increases as output increases.E) All of the above
F) A) and B)

Question 10

The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

Accepted Answer

A) True 
 B)False

Question 11

Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-7 
-In Figure 7-7 at 100 units, AVC equals

Accepted Answer

A)  8.
B)  800.
C)  100.
D)  1,000.E) None of the above
F) A) and B)

Question 13

Where marginal cost is less than average cost,

Accepted Answer

A)  opportunity cost must have been excluded from the calculation of marginal cost.
B)  marginal cost must be falling.
C)  marginal cost must be rising.
D)  marginal cost may be rising, falling, or constant.E) A) and C)
F) A) and D)

Question 14

Which of the following equations defines marginal revenue product?

Accepted Answer

A)  MRP = P times Q.
B)  MRP = total cost.
C)  MRP = total revenue minus total cost.
D)  MRP = MPP times price of the product.E) A) and B)
F) B) and C)

Question 15

Economies of scale

Accepted Answer

A)  require inputs' MPP to fall as output increases (everything else equal) .
B)  pertain to the long run only.
C)  refer to increased output generalized by an increase in the quantity of a single input.
D)  imply that the AC curve will fall continuously as output increases in the short run.E) B) and C)
F) B) and D)

Question 16

Marginal cost is the

Accepted Answer

A)  change in total cost resulting from the purchase of one more unit of the variable input.
B)  change in total cost resulting from the production of one more unit of output.
C)  difference between total fixed cost and total variable cost.
D)  difference between total cost and total expenditure.E) None of the above
F) All of the above

Question 17

Which of the following observations is true?

Accepted Answer

A)  In the long run, more costs become variable.
B)  Fixed costs cannot be completely varied if the time period is sufficiently long.
C)  Fixed costs arise when some types of inputs can be bought only in big batches.
D)  Variable costs arise when inputs have a large productive capacity.E) B) and D)
F) A) and B)

Question 18

Which of the following is most likely to be a fixed cost for farmer McDonald? Fertilizer

Accepted Answer

A)  Gasoline
B)  Fertilizer
C)  Insurance
D)  SeedE) C) and D)
F) All of the above

Question 19

Economies of scale is another term for

Accepted Answer

A)  increasing returns to scale.
B)  constant returns to scale.
C)  increasing marginal physical productivity.
D)  decreasing returns to scale.E) A) and D)
F) C) and D)

Question 20

The marginal cost curve shows the per-unit cost associated with various levels of output.

Accepted Answer

A) True 
 B)False

Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

In which case is the transition from short run to long run likely to involve the shortest chronological time period?

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Which of the following is most likely to be a fixed cost for farmer McDonald? Fertilizer

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Which of the following indicates an input is being overused relative to the optimal level?

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A firm's optimal input proportions may change if

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Figure 7-7 -In Figure 7-7 at 100 units, AVC equals

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The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

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Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

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Decreasing returns to scale is strictly a short run phenomenon for firms.

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Economies of scale

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In the long run,

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The marginal cost curve shows the per-unit cost associated with various levels of output.

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Figure 7-10 -The typical average cost curve

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Marginal cost is the

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Economies of scale is another term for

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Which of the following equations defines marginal revenue product?

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Where marginal cost is less than average cost,

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Figure 7-15 -For a firm at equilibrium, at point A in Figure 7-15,

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If a firm's marginal physical product is 5, and it sells its product for $60, and a unit of labor costs $200, the firm should

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Which of the following observations is true?

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The graph of the average cost curve

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