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Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-51 Suppose that the firm's only variable input is labor. When 50 workers are used, the average
product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total
cost of the fixed input is $500. What is average total cost?
a. $0.825
b. $0.63
c. $1.80
d. $4.10
e. none of the above
8-52 Suppose that the firm's only variable input is labor. When 50 workers are used, the average
product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total
cost of the fixed input is $500. Which of the following is true?
a. Average variable cost is increasing.
b. Marginal cost is increasing.
c. Average variable cost is decreasing.
d. Cannot determine without more information.
8-53 Suppose that the firm's only variable input is labor. When 50 workers are used, the average
product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total
cost of the fixed input is $500. Suppose that installation of a new assembly line increases the
output produced per worker. The cost per unit of output
a. will increase.
b. will decrease.
c. will be unchanged.
d. is at its maximum.
e. is at its minimum
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-54 Average total cost
a. increases as output increases.
b. decreases as output increases.
c. increases if marginal cost is increasing.
d. increases if marginal cost is greater than average total cost.
e. both c and d
8-55 A firm is currently producing 10 units of output; marginal cost is $24 and average total
cost is $6 at this level of output. The average total cost at 9 units of output is:
a. $4
b. $5
c. $6
d. $8
e. none of the above
8-56
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
Above is a firm's average product of labor and marginal product of labor curves. The price of
labor is $60 per unit. Given this, diminishing returns set in with the
a. 3rd unit of labor.
b. 6th unit of labor.
c. 10th unit of labor.
d. 12th unit of labor.
e. 14th unit of labor.
8-57
Above is a firm's average product of labor and marginal product of labor curves. The price of
labor is $60 per unit. When the firm uses 6 units of labor, what is marginal cost?
a. $0.25
b. $5
c. $6.67
d. $7.06
e. $10.25
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-58
Above is a firm's average product of labor and marginal product of labor curves. The price of
labor is $60 per unit. When the firm uses 4 units of labor, what is AVERAGE variable cost?
a. $10
b. $24
c. $124
d. $240
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-59 Based on the following table, what is total variable cost when 100 units of output are produced?
Output
Total Cost
0
50
100
150
200
$ 300
800
1050
1650
2400
a. $5
b. $10.50
c. $105
d. $1050
e. none of the above
8-60 Based on the following table, what is average fixed cost when 150 units of output are produced?
Output
Total Cost
0
50
100
150
200
$ 300
800
1050
1650
2400
a. $2
b. $9
c. $11
d. $16.50
e. none of the above
8-61 Based on the following table, the additional cost of producing the 170th unit of output is:
Output
Total Cost
0
50
100
150
200
$ 300
800
1050
1650
2400
a. $10.50
b. $11.50
c. $13
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
d. $15
8-62 Based on the following table, what is average variable cost when output is 200?
Output
Total Cost
0
50
100
150
200
$ 300
800
1050
1650
2400
a. $2.00
b. $12.00
c. $10.50
d. $240
e. $210
8-63 Based on the following table, the additional cost of producing the 60th unit of output is:
Output
Total Cost
0
50
100
150
200
$ 300
800
1050
1650
2400
a. $5
b. $250
c. $8
d. $120
e. $80
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-64 Based on the following table, what is average fixed cost when 200 units of output are produced?
Output
Total Cost
0
50
100
150
200
$ 300
800
1050
1650
2400
a. $2.80
b. $80
c. $150
d. $1.50
e. none of the above
8-65 Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the
last worker added 12 units of output, and total fixed cost is $3,600. What is marginal cost?
a. $.20
b. $5
c. $240
d. $720
e. none of the above
8-66 Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the
last worker added 12 units of output, and total fixed cost is $3,600. What is average total cost?
a. $2
b. $8
c. $600
d. $1800
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-67 The capital stock is fixed at 5 units, the price of capital is $60 per unit, and the price of labor is
$20 per unit.
Units of
Labor
Units of
Output
2
4
6
8
10
12
10
26
46
60
72
80
Based on the above, if the firm produces 80 units of output, what is its total cost of production?
a. $540
b. $1,600
c. $1,900
d. $5,040
e. none of the above
8-68 The capital stock is fixed at 5 units, the price of capital is $60 per unit, and the price of labor is
$20 per unit.
Units of
Labor
Units of
Output
2
4
6
8
10
12
10
26
46
60
72
80
Based on the above, if the firm produces 60 units of output, what is average variable cost?
a. $5
b. $7.67
c. $20
d. $57.50
e. $2.67
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-69 The capital stock is fixed at 5 units, the price of capital is $60 per unit, and the price of labor is
$20 per unit.
Units of
Labor
Units of
Output
2
4
6
8
10
12
10
26
46
60
72
80
Based on the above, how much does the 12th unit of output add to the firm's total variable cost?
a. $2.50
b. $4
c. $5
d. $20
e. $40
8-70
In the figure above, the wage rate is $600 and total fixed cost is $15,000. When there are 40
workers, what is average variable cost?
a. $0.23
b. $5.00
c. $4.10
d. $6.00
e. $12.00
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-71
In the figure above, the wage rate is $600 and total fixed cost is $15,000. How much output does
the firm produce when average variable cost is at its minimum?
a. 270
b. 375
c. 30
d. 1,600
e. 4,800
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-72
In the figure above, the wage rate is $600 and total fixed cost is $15,000. What is average
variable cost at its minimum?
a. $3.75
b. $30
c. $0.94
d. $28
e. $2.80
8-73 Short-run average cost is
a. always greater than long-run average cost.
b. always less than long-run average cost.
c. less than short-run marginal cost when short-run marginal cost is decreasing.
d. both a and c
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-74 In the table below, the capital stock is fixed at 40 units, the price of capital is $15 per unit, and the
price of labor is $80 per unit.
Units of
Labor
Units of
Output
5
10
15
20
40
100
180
220
If the firm produces 180 units of output, what is total variable cost?
a. $1,200
b. $1,800
c. $14,400
d. $17,100
e. none of the above
8-75 In the table below, the capital stock is fixed at 40 units, the price of capital is $15 per unit, and the
price of labor is $80 per unit.
Units of
Labor
Units of
Output
5
10
15
20
40
100
180
220
If the firm produces 40 units of output, what is average fixed cost?
a. $7.50
b. $25
c. $120
d. $600
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-76 In the table below, the capital stock is fixed at 40 units, the price of capital is $15 per unit, and the
price of labor is $80 per unit.
Units of
Labor
Units of
Output
5
10
15
20
40
100
180
220
How much does the 50th unit of output add to the firm's total cost?
a. $6.67
b. $10
c. $400
d. $600
e. none of the above
8-77 A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is
$160, and total fixed cost is $100,000. What is average variable cost?
a. $0.32
b. $16
c. $20
d. $1,280
e. none of the above
8-78 A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is
$160, and total fixed cost is $100,000.What is the marginal product of labor?
a. $8 per worker
b. 8 units of output per worker
c. $16 per worker
d. 16 units of output per worker
e. none of the above
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-79 A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is
$160, and total fixed cost is $100,000. When output is 4,000 units,
a. average variable cost is decreasing.
b. average variable cost is increasing.
c. average total cost is decreasing.
d. average total cost is increasing.
e. both a and c
8-80
In the above figure, what is the TOTAL cost of producing 5 units of output?
a. $10
b. $60
c. $100
d. $225
e. $2,000
Chapter 8: PRODUCTION AND COST IN THE SHORT RUN
8-81
In the above figure, what is the AVERAGE total cost of producing 10 units of output?
a. $4
b. $8
c. $12
d. $50
e. $360
8-82
