The Costs of Production 3243
121.
Refer to Scenario 13–13. Christine could earn $6,000 per year preparing taxes. In calculating
the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as
part of her business’s
a.
total revenue.
b.
explicit costs.
c.
implicit costs.
d.
marginal costs.
122.
Refer to Scenario 13–13. Christine used $5,000 from her personal savings account to buy
pottery tools for her
business. The savings account paid 1% annual interest. Christine could earn
$6,000 per year as a tax preparer.
What is the annual accounting profit of her cookie jar
business?
a. $36,000
b. $35,950
c. $30,000
d. $29,950
123.
Refer to Scenario 13–13. Christine used $5,000 from her personal savings account to buy
pottery tools for her
business. The savings account paid 1% annual interest. Christine could earn
$6,000 per year as a tax preparer.
What is the annual economic profit of her cookie jar business?
a. $36,000
b. $35,950
c. $30,000
d. $29,950
Multiple Choice – Section 02: Production and Costs
1.
Which of these assumptions is often realistic for a firm in the short run?
a.
The firm can vary both the size of its factory and the number of workers it employs.
b.
The firm can vary the size of its factory but not the number of workers it employs.
c.
The firm can vary the number of workers it employs but not the size of its factory.
d.
The firm can vary neither the size of its factory nor the number of workers it employs.
2.
Assume a certain firm regards the number of workers it employs as variable but regards the size
of its factory as
fixed. This assumption is often realistic
a.
in the short run but not in the long run.
b.
in the long run but not in the short run.
c.
both in the short run and in the long run.
d.
neither in the short run nor in the long run.
3.
Suppose that a “doggie day care” firm uses only two inputs: hourly workers (labor) and a building
(capital). In the
short run, the firm most likely considers
a.
both labor and capital to be fixed.
b.
both labor and capital to be variable.
c.
labor to be variable and capital to be fixed.
d.
capital to be variable and labor to be fixed.
4.
Suppose that Christine owns her own CPA firm. She uses only two inputs in her business: her
hours worked (labor)
and a computer (capital). In the short run, Christine most likely considers
a.
both labor and capital to be fixed.
b.
both labor and capital to be variable.
c.
capital to be variable and labor to be fixed.
d.
labor to be variable and capital to be fixed.
5.
A production function describes
a.
how a firm maximizes profits.
b.
how a firm turns inputs into output.
c.
the minimal cost of producing a given level of output.
d.
the relationship between cost and output.
6.
A production function is a relationship between inputs and
a.
quantity of output.
b.
revenue.
c.
costs.
d.
profit.
7.
If a firm uses labor to produce output, the firm’s production function depicts the relationship
between
a.
the number of workers and the quantity of output.
b.
marginal product and marginal cost.
c.
the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of
labor.
d.
fixed inputs and variable inputs in the short run.
8.
For a firm, the production function represents the relationship between
a.
implicit costs and explicit costs.
b.
quantity of inputs and total cost.
c.
quantity of inputs and quantity of output.
d.
quantity of output and total cost.
9.
For a firm, the relationship between the quantity of inputs and quantity of output is called the
a.
profit function.
b.
production function.
c.
total-cost function.
d.
quantity function.
The Costs of Production 3249
Figure 13-1
10.
Refer to Figure 13-1. Suppose the production function shifts from TP1 to TP2. Such a shift in
the total product
curve is most likely due to an increase in the firm’s
a.
costs of production.
b.
productivity.
c.
product price.
d.
market share.
11.
Refer to Figure 13-1. Suppose the production function shifts from TP2 to TP1. Such a shift in
the total product
curve is most likely due to a decrease in the firm’s
a.
costs of production.
b.
product price.
c.
market share.
d.
productivity.
12.
Refer to Figure 13-1. Which of the following could explain why the total product curve would
shift from TP1 to
TP2?
a.
There is less capital equipment available to the firm.
b.
Labor skills have become rusty and outdated in the firm.
c.
The firm has developed improved production technology.
d.
The firm is now receiving a higher price for its product.
13.
Refer to Figure 13-1. Which of the following could explain why the total product curve would
shift from TP2 to
TP1?
a.
There is additional capital equipment available to the firm.
b.
Labor skills have become rusty and outdated in the firm.
c.
The firm has developed improved production technology.
d.
The firm is now receiving a higher price for its product.
14.
Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is
considering hiring his cousin
Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per
year. If Bubba hires Bobby, what will be the
total output of his shrimp business?
a.
7,000 pounds
b.
3,500 pounds
c.
3,000 pounds
d.
1,000 pounds
15.
Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband
William to work for
her. Together Kate and William can arrange 35 bouquets per day. What is
William’s marginal product?
a.
55 bouquets
b.
35 bouquets
c.
22.5 bouquets
d.
15 bouquets
16.
Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband
William to work for
her. William can arrange 18 bouquets per day. What would be the total daily
output of Kate’s firm if she hired her
husband?
a.
18 bouquets
b.
19 bouquets
c.
20 bouquets
d.
38 bouquets
17.
The marginal product of labor is equal to the
a.
incremental cost associated with a one unit increase in labor.
b.
incremental profit associated with a one unit increase in labor.
c.
increase in labor necessary to generate a one unit increase in output.
d.
increase in output obtained from a one unit increase in labor.
18.
The marginal product of labor can be defined as the change in
a.
profit divided by the change in labor.
b.
output divided by the change in labor.
c.
labor divided by the change in output.
d.
labor divided by the change in total cost.
19.
The marginal product of an input in the production process is the increase in
a.
total revenue obtained from an additional unit of that input.
b.
profit obtained from an additional unit of that input.
c.
total revenue obtained from an additional unit of that input.
d.
quantity of output obtained from an additional unit of that input.
20.
When a firm’s only variable input is labor, then the slope of the production function measures the
a.
quantity of labor.
b.
quantity of output.
c.
total cost.
d.
marginal product of labor.
21.
Let L represent the number of workers hired by a firm, and let Q represent that firm’s quantity of
output. Assume
two points on the firm’s production function are (L = 12, Q = 122) and (L = 13, Q
= 130). Then the marginal product
of the 13th worker is
a.
8 units of output.
b.
10 units of output.
c.
122 units of output.
d.
132 units of output.
22.
Let L represent the number of workers hired by a firm, and let Q represent that firm’s quantity of
output. Assume
two points on the firm’s production function are (L = 5, Q = 125) and (L = 6, Q =
152). Then the marginal product of
the 6th worker is
a.
25 units of output.
b.
27 units of output.
c.
37 units of output.
d.
162 units of output.
23.
Let L represent the number of workers hired by a firm, and let Q represent that firm’s quantity of
output. Assume
two points on the firm’s production function are (L=6,Q=147) and (L=7,Q=184).
The marginal product of the seventh
worker is
a.
25 units of output.
b.
27 units of output.
c.
37 units of output.
d.
184 units of output.
24.
Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired.
The firm is able to
produce 181 units of output per day when 16 workers are hired, holding other
inputs fixed. The marginal product of
the 16th worker is
a.
10 units of output.
b.
11 units of output.
c.
16 units of output.
d.
181 units of output.
25.
Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able
to produce 340 units
of output with a 16th worker. What is the marginal product of the 16th
worker?
a.
10 units of output
b.
15 units of output
c.
16 units of output
d.
25 units of output
26.
The marginal product of any input is the
a.
increase in total cost associated with a one–unit increase in production.
b.
change in total output associated with a $1.00 increase in total cost.
c.
increase in total cost resulting from the hiring of an additional worker.
d.
increase in total output obtained from one additional unit of that input.
27.
Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend
Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy’s marginal
product?
a.
2 houses
b.
3 houses
c.
5 houses
d.
8 houses
28.
Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week.
She is considering
hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell
seven cases per week. What is Atul’s
marginal product?
a.
2 cases
b.
3 cases
c.
5 cases
d.
7 cases
29.
Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend
Murphy. Murphy
can paint five houses per week. What is the maximum total output possible if
Eldin hires Murphy?
a.
2 houses
b.
3 houses
c.
5 houses
d.
8 houses
30.
Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week.
She is considering
hiring her friend Atul to help her. Atul can bottle and sell three cases per week.
What is the maximum total output
possible if Riva hires Atul?
a.
3 cases
b.
4 cases
c.
7 cases
d.
11 cases
The Costs of Production 3259
Table 13–1
Number of Workers
Total Output
Marginal Product
0
0
—
1
30
2
45
3
60
4
50
5
40
31.
Refer to Table 13–1. What is total output when 1 worker is hired?
a.
10
b.
30
c.
45
d.
75
32.
Refer to Table 13-1. What is total output when 2 workers are hired?
a.
15
b.
45
c.
75
d.
120
33.
Refer to Table 13-1. What is total output when 3 workers are hired?
a.
15
b.
60
c.
105
d.
135
34.
Refer to Table 13-1. What is total output when 4 workers are hired?
a. –10
b.
50
c.
135
d.
185
35.
Refer to Table 13-1. What is total output when 5 workers are hired?
a. –10
b.
90
c.
185
d.
225
Table 13–2
Number of
Workers
Total
Output
Marginal
Product
0
0
—
1
300
2
500
3
600
4
650
36.
Refer to Table 13-2. What is the marginal product of the first worker?
a.
300 units
b.
200 units
c.
100 units
d.
50 units
37.
Refer to Table 13–2. What is the marginal product of the second worker?
a.
300 units
b.
200 units
c.
100 units
d.
50 units
38.
Refer to Table 13-2. What is the marginal product of the third worker?
a.
300 units
b.
200 units
c.
100 units
d.
50 units