341)
The short run is
341)
A)
up to three years.
B)
the period of time in which the firm can vary its rate of output.
C)
a year or less.
D)
the period of time in which the firm cannot change its use of at least one input.
342)
In the long run, a firm can change
342)
A)
only one input, such as plant size.
B)
all inputs.
C)
nothing.
D)
None of the above are correct.
343)
Which of the following statement is correct?
343)
A)
When Marginal Product is greater than Average Product, Average Product is increasing.
B)
When Marginal Product is greater than Average Product, Total Product is increasing at a
decreasing rate.
C)
When Marginal Product is greater than Average Product, Average Product is decreasing.
D)
When Marginal Product is greater than Average Product, Average Product is equal to Total
Product.
344)
Which of the following is NOT one of the reasons a firm might be expected to experience
economies of scale?
344)
A)
improved productive equipment
B)
depreciation
C)
the dimensional factor
D)
specialization
Quantity of Total Average Marginal
Labor Product Product Product
1320
2335
3338
4320
345)
Refer to the above table. What does total product equal when 2 units of labor are used?
345)
A)
335
B)
670
C)
320
D)
350
346)
A firm‘s long–run average cost curve is
346)
A)
the envelope of the firm’s variable cost curves.
B)
the locus of points made up of the minimum point on each short–run average total cost curve
when only one input may be adjusted.
C)
the locus of points representing the minimum unit cost of producing any given rate of output
when all inputs may be adjusted.
D)
identical to the lowest short–run average cost curve the firm has.
Input of Labor Total Product
(no. of workers (no. of snowboards
in weeks) produced)
0 0
1 30
2 68
3110
4140
5 135
347)
In the above table, which two workers have the same marginal product?
347)
A)
2 and 4
B)
1 and 3
C)
1 and 4
D)
1 and 2
348)
For a wheat farmer in the middle of harvesting system, a fixed input would be
348)
A)
the land that had been planted.
B)
workers hired.
C)
combines rented.
D)
trucks rented to haul the wheat.
349)
Marginal cost begins to rise when
349)
A)
diminishing marginal product begins.
B)
fixed cost falls.
C)
diminishing marginal product ends.
D)
average total cost falls.
350)
Total product divided by the variable input is
350)
A)
marginal product.
B)
average product.
C)
marginal cost.
D)
average total cost.
351)
If Microsoft is determining whether to build a new plant in Southern California or in New Mexico,
it is making a(n) ________ decision.
351)
A)
short–run
B)
long–run
C)
variable–input
D)
immediate–run
352)
Which of the following is correct?
352)
A)
TC = TFC – TVC
B)
TC = TFC + TVC
C)
TC = TFC * TVC
D)
TC = TFC / TVC
353)
What happens to the marginal cost curve when the marginal physical product of labor is rising?
353)
A)
It becomes downward sloping.
B)
It becomes vertical.
C)
It becomes upward sloping.
D)
It becomes horizontal.
354)
The amount of calendar time associated with the long run
354)
A)
varies by industry.
B)
is between one and five years.
C)
is less than five years.
D)
is greater than one year.
355)
Which of the following is NOT a reason a firm might experience economies of scale?
355)
A)
more productive equipment
B)
increasing long–run average costs
C)
dimensional factors
D)
specialization
Quantity of Total Average Marginal
Workers Product Product Product
0 0
1 3
2 7
312
416
518
618
356)
In the above table, the average physical product of 2 workers and the marginal product of the 2nd
worker is
356)
A)
3.5; 4.
B)
3.5; 3.5.
C)
2; 2.
D)
4; 1.
357)
The shape of the short–run average total cost curve is a result of
357)
A)
falling profits.
B)
diseconomies of scale.
C)
the law of diminishing marginal product.
D)
economies of scale.
358)
As long as marginal product of labor exceeds the average product of labor, then average product of
labor
358)
A)
must fall.
B)
must rise.
C)
will be at its maximum value.
D)
will stay unchanged.
B
359)
Which of the following would be an example of a fixed cost to a firm?
359)
A)
rent for the building it occupies
B)
the cost of raw materials
C)
electricity and other fuel costs
D)
wages for the laborers
A
Average
Labor Output Product Marginal Product
110 –
212
315
4 52
5 9
360)
Using the above table, the total product and average product when 5 workers are employed are
360)
A)
62 and 15, respectively.
B)
61 and 21, respectively.
C)
62 and 13, respectively.
D)
61 and 12.2, respectively.
D
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
361)
What is the relationship between the marginal cost curve and marginal product? Explain.
C
362)
What is the difference between average variable costs and average total costs?
363)
What are the relationships between the marginal cost curve and the average cost curves? Explain in words.
364)
What is the law of diminishing marginal product? Is it a realistic concept for describing the real world? Explain.
365)
What is a production function?
366)
Explain how the long–run average cost curve is constructed graphically.
367)
“The long–run average cost curve is derived from adding all short–run average cost curves together.” Do you
agree or disagree? Explain.
368)
What is the law of diminishing marginal product?
369)
What is the most important determinant of the firm’s short–run cost curves?
370)
For an industry in which average costs continue to decline as output rises, what would you expect the
minimum efficient scale to be? Explain your answer.
371)
What is the difference between the short run and the long run? What is the appropriate time dimension of the
long run?
372)
Why might firms experience diseconomies of scale?
373)
“A firm cannot experience both economies of scale and diminishing marginal product.” Do you agree or
disagree? Why?
374)
Describe the concept of the production function. What happens to the production function when a firm becomes
less efficient, so that it now requires more labor to produce the same amount of output as before?
375)
Graphically, what does the marginal product curve for a labor input look like? Explain in words.
376)
Graphically, what happens to the production function if a firm uses automation to raise the amount of output
per worker? Explain.
377)
“In the short run, a firm cannot change any of its inputs.” Do you agree or disagree? Explain.
378)
What factors generate economies of scale?
379)
What is the relationship between marginal cost and marginal physical product?
380)
What is minimum efficient scale? Why is it important?
381)
“All average costs have a U–shaped curve.” Do you agree or disagree? Explain why?
382)
“Diminishing marginal product is a basic law because new workers are always less qualified than the existing
workers.” Do you agree or disagree? Explain.
383)
“If an industry’s minimum efficient scale is between 2,000 and 4,000 units of output, then a firm producing 2,000
units of output in that industry has a cost–saving advantage over another firm producing 4,000 units of output
in the same industry.” Do you agree or disagree? Explain.
384)
How is the long–run average cost curve found? What is its importance to the firm?
385)
Explain how you can calculate average physical product and marginal physical product from information on
total physical product and variable input.
386)
“The short–run average total cost curve and the long–run average cost curve are both U–shaped for the same
reasons.” Do you agree or disagree? Why?
387)
“In economics, the short run commonly refers to a period within one year and the long run is a period longer
than one year.” Do you agree or disagree? Explain your answer.
Answer Key
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