Chapter 07 Test Bank Key
1. Which of the following are factors of production?
2. Which of the following is a factor of production for the Little Biscuit Bread Company?
3. A production function shows the
A. Minimum amount of output that can be obtained from alternative combinations of inputs.
4. A production function shows
A. How a firm’s production changes as quantity of labor and other inputs changes.
5. Greater labor productivity means
A. Lower output per labor-hour.
6. Labor productivity will increase in response to
7. Technical efficiency is achieved when a firm produces
8. When a firm produces at a technically efficient output level, it is
9. The most desired goods and services that are given up in order to get more of another good are the
A. Average total cost.
10. The short-run production function shows how output changes when
A. The quantity of labor changes.
11. The period in which at least one input is fixed in quantity is the
12. Which of the following statements is not true regarding the production function and the production
possibilities curve?
A. Both the production function and the production possibilities curve maximize the amount of
13.
The marginal physical product of the third unit of labor in Figure 21.1 is
14.
The marginal physical product of labor in Figure 21.1 is negative for the
15.
In Figure 21.1, diminishing marginal returns first occur with the
16. The change in total output associated with one additional unit of input is the
17. The marginal physical product is the
A. Change in total input required to produce one additional unit of output.
18. Which of the following is the slope of the production function with respect to an input?
A. The marginal physical product of the input.
19. If a firm could hire all the workers it wanted at a zero wage (i.e., the workers are volunteers), the firm
should hire
A. Enough workers to produce the output where diminishing returns begin.
20. Ceteris paribus, the law of diminishing returns states that beyond some point, the
21. In the short run, the law of diminishing
returns A. Occurs for only a few economies.
22. Diminishing returns occur because
23. Which of the following is the best explanation of why the law of diminishing returns does not apply in the
long run?
24. As an In and Out Burger restaurant increases the number of employees for a specific restaurant,
25. Profit is
26. The most desirable rate of output for a firm is the output that
27. The shape of the marginal cost curve reflects the
28. Marginal cost
A. Is the change in total output from hiring one more factor of production.
30. Marginal cost
A. Rises as a direct result of diminishing returns.
31. If the marginal physical product (MPP) is falling, then
the A. Marginal cost of each unit of output is falling.
32. The sum of fixed cost and variable cost at any rate of output
is A. Total variable cost.
33. An increase in production in the short run definitely results in an increase in
A. Average total costs.
34. In the short run, when a firm produces zero output, total cost equals
35. Which of the following costs do not change when output changes in the short run?
A. Average variable costs.
36. Which of the following is most likely a fixed cost?
37. Which of the following is most likely a fixed cost?
A. The material used to make jackets.
38. At any given rate of output, the difference between total cost and fixed cost is
39. Changes in short-run total costs result from changes in
40. Average total cost is equal to
A. Total cost divided by fixed cost.
41. Marginal cost is equal to
A. The change in total costs divided by the change in quantity produced.
the rate of change in total costs as output increases. It is also equal to the change in variable costs.
42. In the short run, which of the following is most likely a variable
cost? A. Contractual lease payments.
43. In the short run, when a firm produces zero output, variable cost equals
44. In the long run, which of the following is likely to be a variable cost?
45. Sam’s surf shop has total costs of $2,000 when it is not producing any surfboards. This means that
46. Which of the following is always downward-sloping?
47. The average fixed cost (AFC) curve
A. Is U-shaped as a result of diminishing returns.
48. The average variable cost curve slopes upward with a higher rate of output in the short run because of
49. A U-shaped average total cost curve implies
A. First diminishing returns, and then increasing returns.
50. Average total cost is important to a business because
A. It tells the firm what the profit per unit produced is.
51. The marginal cost curve intersects the minimum of the curve representing
52. If the marginal cost curve is rising, which of the following must be true?
53. When the average total cost curve is rising, the marginal cost curve will be
54. The average total cost (ATC) curve will be negatively sloped so long as
55.
What is the marginal cost of the 120th unit of output in Figure 21.2?
56.
What is the total fixed cost in Figure 21.2?
57.
What is the total cost of 120 units in Figure 21.2?
58.
What is the average fixed cost when output is 120 units in Figure 21.2?
59.
What is the total variable cost when output is 100 units in Figure 21.2?
60.
At what output level do diminishing marginal returns begin in Figure 21.2?