12) Which of the following statements correctly describes a total product curve?
A) Points above the total produce curve are efficient.
B) The curve shows that output always increases as labor employed increases.
C) The curve separates attainable outputs from unattainable outputs.
D) The curve shows minimum levels of output.
E) The curve first falls, reaches a minimum, and then rises.
13) The marginal product of labor is the change in
A) total cost from employing one more worker.
B) total revenue from employing one more worker.
C) average product from employing one more worker.
D) total output from employing one more worker.
E) total output divided by the change in cost from employing one more worker.
14) The marginal product of labor equals the change in ________ from a one-unit increase in the
quantity of labor.
A) total product
B) average product
C) total cost
D) the slope of the average product curve
E) the wage rate
15) The marginal product of labor is
A) total product divided by labor.
B) the change in total product divided by the increase in labor.
C) a measure of labor.
D) output that does not meet quality specifications.
E) total product minus the quantity of labor.
16) When the slope of the total product curve is steep, the marginal product is
A) zero.
B) negative.
C) high.
D) low.
E) not defined.
17) At the Punjab Bakery, two workers can decorate 14 cakes in an hour and three workers can
decorate 18 cakes in an hour. The marginal product of the third worker is
A) 18 cakes and the average product for three workers is 6 cakes.
B) 9 cakes and is equal to the average product.
C) 4 cakes and the average product for three workers is 6 cakes.
D) 32 cakes and the average product for three workers is 9 cakes.
E) 6 cakes and the average product for three workers is also 6 cakes.
18) Jill runs a factory that makes lie detectors in Little Rock, Arkansas. This month, Jill’s 34
workers produced 690 machines. Suppose Jill adds one more worker and, as a result, her
factory’s output increases to 700. Jill’s marginal product of labor from the last worker hired
equals ________.
A) 10
B) 20
C) 690
D) 700
E) None of the above answers is correct.
19) If 9 workers can produce 1,550 units of output and 10 workers can produce 1,700 units of
output, then the marginal product of the 10th worker is
A) 1,700 units.
B) 1,500 units.
C) 150 units.
D) 170 units.
E) It is impossible to calculate with the information given.
20) Increasing marginal returns always occurs when the
A) marginal product of an additional worker exceeds the marginal product of the previous
worker.
B) average product of an additional worker exceeds the average product of the previous worker.
C) marginal product of an additional worker is less than the marginal product of the previous
worker.
D) average product of an additional worker is less than the average product of the previous
worker.
E) marginal product of an additional worker exceeds the average product of the previous worker.
21) Jeremiah runs a bullfrog farm in Frogville, Oklahoma. Jeremiah notices that each additional
worker he employs adds more to the total output than does the previous worker. Jeremiah must
be
A) experiencing increasing marginal returns to labor.
B) producing at a point where the average product of labor decreases as more workers are
employed.
C) producing at a point below his total product curve.
D) mistaken because the law of decreasing returns points out that it cannot be the case that the
marginal product increases as more workers are employed.
E) producing at a point where the average product of labor exceeds the marginal product of
labor.
22) Increasing marginal returns to labor
A) occur when a particularly efficient worker is employed.
B) describe the portion of a total product curve where the marginal product is negative.
C) mean that two workers produce less than twice the output of one worker.
D) are the result of specialization and division of labor in the production process.
E) occur only when there are increasing marginal returns to capital.
23) When the marginal product of an additional worker is less than the marginal product of the
previous worker, there are ________ returns to labor.
A) increasing total
B) decreasing total
C) increasing marginal
D) decreasing marginal
E) constant average
24) Decreasing marginal returns
A) can be avoided if a firm watches costs.
B) affect all firms, but at different production levels.
C) affect all firms at the same level of production.
D) disappear when the firm produces a large enough level of output.
E) mean that the average product of labor starts as a negative number and then becomes positive.
25) Decreasing marginal returns occur in the short run as more labor is hired to work in a fixed
sized plant because
A) less efficient and less productive workers are hired.
B) adding more workers exhausts the possible gains from specialization.
C) the entrepreneur does not know how to manage more workers.
D) each worker will produce more than the worker previously hired.
E) the plant becomes less specialized.
26) The law of decreasing returns states that as a firm uses more of a
A) fixed input, with a given quantity of variable inputs, the marginal product of the fixed input
eventually decreases.
B) variable input, total output will increase indefinitely.
C) variable input, with a given quantity of fixed inputs, the marginal product of the variable input
eventually decreases.
D) variable input, output will begin to fall immediately.
E) fixed input and a variable input, the marginal product of the fixed input and the marginal
product of the variable input both decrease.
27) Average product is equal to
A) marginal product + total product.
B) total product ÷ marginal product.
C) total product ÷ quantity of labor.
D) total product × quantity of labor.
E) marginal product × quantity of labor.
28) Jill runs a factory that makes lie detectors in Little Rock, Arkansas. This month, Jill’s 34
workers produced 680 machines. Jill’s average product of labor equaled ________ lie detectors
per worker.
A) 680
B) 34
C) 23
D) 20
E) None of the above answers is correct.
29) If 9 workers can produce 1,550 units of output and 10 workers can produce 1,700 units of
output, then the average product of 10 workers is
A) 1,700 units.
B) 1,500 units.
C) 170 units.
D) 150 units.
E) It is impossible to calculate with the information given.
30) Denise owns a plant that produces watch parts in Ohio. Denise noticed that when she hired
the last worker, that worker’s marginal product exceeded the marginal product of the previous
worker. As a result, when the last worker was hired, Denise’s average product of labor
A) decreased.
B) increased.
C) did not change.
D) perhaps changed, but there is not enough information to determine whether or not it did
change.
E) equals the marginal product of labor.
31) Kenya owns a lawn mowing company. His total product schedule is in the above table. The
marginal product of the fourth worker is ________ lawns mowed per week.
A) 80
B) 25
C) 20
D) 5
E) 320
32) Kenya owns a lawn mowing company. His total product schedule is in the above table. When
4 workers are employed, the average product is ________ lawns mowed per week.
A) 80
B) 25
C) 20
D) 5
E) 320
33) Kenya owns a lawn mowing company. His total product schedule is in the above table.
Decreasing marginal returns first occur with the
A) first worker.
B) second worker.
C) third worker.
D) fourth worker.
E) fifth worker.
34) The above table shows the total product schedule for Hair Today, a hair styling salon. Based
on the table, the marginal product for Hair Today
A) never reaches a maximum.
B) decreases after the 1st worker.
C) reaches a maximum with the 4th worker.
D) reaches a maximum with the 3rd worker.
E) reaches a maximum with the 5th worker.
35) The above table shows the total product schedule for Hair Today, a hair styling salon. The
average product when four workers are hired is
A) 10 hair stylings.
B) 15 hair stylings.
C) 20 hair stylings.
D) 240 hair stylings.
E) the same as when five workers are hired.
36) Which of the following is correct about marginal and average products?
A) When the marginal product is increasing, the average product must be increasing.
B) When the marginal product exceeds the average product, the average product must be
increasing.
C) When the average product is increasing, the marginal product must be decreasing.
D) When the marginal product is decreasing, the average product must be decreasing.
E) When the marginal product is increasing, the average product must be decreasing.
37) When the average product is at its maximum,
A) the marginal product is increasing as output increases.
B) the marginal product is negative.
C) it is equal to the marginal product.
D) total product is also at its maximum.
E) total product is at its minimum.
38) Under which of the following sets of circumstances is it definitely the case that the average
product increases as more labor is hired?
A) Total product increases as more labor is hired.
B) The marginal product is equal to the average product.
C) The marginal product is positive.
D) The marginal product is greater than the average product.
E) The marginal product is less than the average product.
39) The average product is the greatest in the short run when the
A) total product is maximized.
B) marginal product is equal to zero.
C) marginal product is maximized.
D) marginal product is equal to the average product.
E) marginal product is greater than the average product.
40) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. The total product schedule shows
A) increasing marginal returns when the 6th worker is hired.
B) decreasing marginal returns when the 1st worker is hired.
C) first increasing and then decreasing marginal returns.
D) output first increases then increases.
E) only decreasing marginal returns.
41) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. Increasing marginal returns
A) end when the fourth worker is hired.
B) occur at all levels of employment.
C) occur as long as output increases.
D) end when the second worker is hired.
E) never occur.
42) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. Decreasing marginal returns start to occur after the ________ worker is hired.
A) first
B) fourth
C) fifth
D) sixth
E) third
43) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. When the 4th worker is hired, the ________ product of labor equals ________ lawns
mowed.
A) average; 60
B) average; 3.75
C) marginal; 3.75
D) marginal; 0
E) marginal; 15
44) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. The average product of labor ________ when the 7th worker is hired.
A) reaches its maximum
B) equals 1 lawn mowed
C) equals 28 lawns mowed
D) equals 4 lawns mowed
E) equals 2 lawns mowed
45) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. When the ________ worker is hired, the average product of labor ________ the
marginal product of labor.
A) 4th; exceeds
B) 5th; exceeds
C) 6th; exceeds
D) 7th; is less than
E) 7th; equals
46) The table above shows the total product schedule for Rick’s Lawn Service, a yard care
company. When does the average product of labor equal the marginal product of labor?
A) between the 4th and 5th workers
B) at the 5th worker
C) between the 5th and 6th workers
D) between the 6th and 7th workers
E) between 0 workers and the 3rd worker
47) The short run is a time period during which
A) some of the firm’s resources are fixed.
B) all of the firm’s resources are fixed.
C) all of the firm’s resources are variable.
D) the fixed cost equals zero.
E) the firm cannot increase its output.
48) In the short run, firms increase output
A) only by increasing the size of their plant.
B) only by decreasing the size of their plant.
C) only by increasing the amount of labor used.
D) only by decreasing the amount of labor used.
E) either increasing the amount of labor used or increasing the size of their plant.
49) Which of the following is correct?
A) The short run for a firm can be longer than the long run for the same firm.
B) The short run is the same for all firms.
C) The long run is the time frame in which the quantities of all resources can be varied.
D) The long run is the time frame in which all resources are fixed.
E) The long run does not exist for some firms.
50) Marginal product equals
A) the total product produced by a certain amount of labor.
B) the change in total product that results from a one-unit increase in the quantity of labor
employed.
C) total product divided by the quantity of labor.
D) the amount of labor needed to produce an increase in production.
E) total product minus the quantity of labor.
51) If 5 workers can wash 30 cars a day and 6 workers can wash 33 cars a day, then the marginal
product of the 6th worker equals
A) 30 cars a day.
B) 33 cars a day.
C) 5 cars a day.
D) 5.5 cars a day.
E) 3 cars a day.
52) Increasing marginal returns occur when the
A) average product of an additional worker is less than the average product of the previous
worker.
B) marginal product of an additional worker exceeds the marginal product of the previous
worker.
C) marginal product of labor is less than the average product of labor.
D) total output of the firm is at its maximum.
E) total product curve is horizontal.
53) If 25 workers can pick 100 flats of strawberries per hour, then average product is
A) 100 flats per hour.
B) 125 flats per hour.
C) 75 flats per hour.
D) 4 flats per hour.
E) More information is needed about how many flats 24 workers can pick.
1) Total cost includes
A) the cost of variable resources only.
B) the cost of fixed resources only.
C) the cost of both variable and fixed resources.
D) the cost of neither variable nor fixed resources.
E) all explicit costs and all the implicit costs that actually must be paid using money.
2) Chuck owns a factory that produces leather footballs. His total fixed cost equaled $86,000 last
year. His total cost equaled $286,000 last year. Hence Chuck’s
A) total variable cost was zero.
B) incurred an economic loss.
C) total variable cost equaled $200,000.
D) total variable cost equaled $372,000.
E) None of the above answers is correct.
3) If Melissa owns a software company that incurs no fixed costs, then
A) her total cost equals her total variable cost.
B) she will earn an economic profit.
C) her total variable cost is less than her total cost.
D) her total cost equals zero.
E) her marginal cost must equal zero.
4) In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of
capital is a
A) short-run cost.
B) variable cost.
C) productivity cost.
D) fixed cost.
E) marginal cost.
5) The cost that does not change as output changes is
A) total fixed cost.
B) average fixed cost.
C) total variable cost.
D) average variable cost.
E) marginal cost.
6) Which of the following costs can be positive when output is zero?
A) average variable cost
B) total variable cost
C) marginal cost
D) total fixed cost
E) None of the above because when output is zero there are no costs.
7) Which of the following is a fixed cost for ACME manufacturing?
A) wages paid to labor
B) the annual fire and theft insurance premiums
C) the utility bill
D) raw material costs
E) the cost of shipping its product to market
8) Because the amount of labor a firm employs can be changed, the cost of labor is known as
A) minimum cost.
B) variable cost.
C) maximum cost.
D) fixed cost.
E) an unavoidable cost.
9) If a firm does not produce any output, its
A) total fixed cost must be zero.
B) economic profit must be positive.
C) total variable cost must be zero.
D) total costs must be zero.
E) marginal cost must be zero.
10) Total variable cost
A) includes the cost of capital.
B) includes the cost of labor.
C) includes both the cost of capital and of labor.
D) does not change when production changes.
E) is positive when output is zero.
11) The total variable cost curve ________ because ________ as output increases.
A) slopes upward; variable cost increases
B) slopes upward; marginal cost increases
C) slopes downward; variable cost increases
D) slopes downward; marginal cost increases
E) is horizontal; fixed cost does not change
12) Marginal cost equals
A) total cost minus total variable cost.
B) total fixed cost divided by total output.
C) total variable cost divided by total output.
D) the change in total cost that results from a one-unit increase in output.
E) the change in fixed cost that results from a one-unit increase in output.
13) The change in cost that results from a one-unit increase in output is called the
A) average fixed cost.
B) per-unit variable cost.
C) per-unit total cost.
D) marginal cost.
E) average cost change.
14) As a typical firm increases its output, its marginal cost
A) is constant.
B) decreases at first and then increases.
C) increases at first and then decreases.
D) decreases.
E) is negative at first and then positive.