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Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
In the above figure, what is the AVERAGE variable cost of producing 5 units of output?
a. $12
b. $20
c. $40
d. $60
e. $80
8-83 To answer, refer to the following:
"Ford built 18 vehicles per auto employee in North America last year, while GM could only
manage 12." (The Wall Street Journal)
In comparison with GM, Ford had a higher
a. average product of labor.
b. average product of capital.
c. marginal product of labor.
d. marginal product of capital.
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-84 To answer, refer to the following:
"Ford built 18 vehicles per auto employee in North America last year, while GM could only
manage 12." (The Wall Street Journal)
In comparison with GM, Ford had
a. higher average variable cost.
b. lower average variable cost.
c. higher total variable cost.
d. both a and c
e. none of the above
8-85 To answer, refer to the following:
"At Huffy's ... bicycle factory, 1,700 employees turn out 15,000 bicycles a day (in 1987). Five
years before, it required 2,200 workers to make 10,000 bikes daily." (The Wall Street
Journal).
In 1987,
a. total product was 15,000 bicycles per day.
b. the average product of labor was 0.11.
c. the marginal product of labor was 8.8.
d. both a and b
e. both a and c
8-86 To answer, refer to the following:
"At Huffy's ... bicycle factory, 1,700 employees turn out 15,000 bicycles a day (in 1987). Five
years before, it required 2,200 workers to make 10,000 bikes daily." (The Wall Street
Journal).
Holding all else equal, we can conclude that, over those years,
a. Huffy's average variable cost decreased.
b. Huffy's average variable cost increased.
c. Huffy's marginal cost decreased.
d. Huffy's marginal cost increased.
e. both a and c
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-87 The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is
$25 per unit.
Output
Average
Variable Cost
10
20
30
40
$40
30
45
60
Given the above, if the firm produces 40 units of output, what is total variable cost?
a. $1.50
b. $60
c. $100
d. $2,400
e. none of the above
8-88 The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is
$25 per unit.
Output
Average
Variable Cost
10
20
30
40
$40
30
45
60
Given the above, if the firm produces 20 units of output, what is average fixed cost?
a. $1.50
b. $50
c. $150
d. $600
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-89 The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is
$25 per unit.
Output
Average
Variable Cost
10
20
30
40
$40
30
45
60
Given the above, how much does the 23rd unit of output add to the firm's total cost?
a. $75
b. $135
c. $750
d. $1,350
e. none of the above
8-90 The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is
$25 per unit.
Output
Average
Variable Cost
10
20
30
40
$40
30
45
60
Given the above, if the firm produces 30 units of output, how many units of labor does the firm
use?
a. 30
b. 45
c. 54
d. 60
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-91 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
At what output does the firm reach minimum average variable cost?
a. 7,400
b. 8,000
c. 100
d. 6,000
e. 600
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-92 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
What is AVC at its minimum?
a. $80
b. $100
c. $8
d. $50
e. $35
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-93 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
When the firm uses 40 units of labor, how much output does it produce?
a. 1,600 units
b. 400 units
c. 4,000 units
d. 2,800 units
e. none of the above
8-94 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
When the firm uses 40 units of labor, what is AVC at this level of output?
a. $120
b. $400
c. $40
d. $70
e. $86
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-95 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
When the firm uses 40 units of labor, what is marginal cost at this level of output?
a. $70
b. $35
c. $60
d. $280
e. $55
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-96 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
When the firm uses 40 units of labor, what is average total cost at this output?
a. $140
b. $40
c. $70
d. $170
e. none of the above
8-97 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
When the firm uses 120 units of labor, how much output does it produce?
a. 7,000 units
b. 70 units
c. 8,400 units
d. 9,200 units
e. 7,500 units
8-98 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
When the firm uses 120 units of labor, what is its AVC at this output?
a. $40
b. $70
c. $60
d. $56
e. none of the above
8-99 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
When the firm uses 120 units of labor, what is its marginal cost at this output?
a. $65
b. $70
c. $50
d. $56
e. $120
8-100 The following graph shows the marginal and average product curves for labor, the firm's only
variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
When the firm uses 120 units of labor, what is average total cost at this output?
a. $59
b. $40
c. $190
d. $84
e. $120
