ECO 365T Wk 5 – Practice Knowledge Check (2021 New)

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ECO 365T Wk 5 - Practice Knowledge Check (2021 New)
ECO 365T Wk 5 – Practice Knowledge Check (2021 New)
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ECO 365T Wk 5 – Practice Knowledge Check (2021 New)

 

Refer to the provided graph showing the marginal product (MPL) and the average product of labor (APL). At which quantity of labor employed is total product maximized?

Multiple Choice

  • A

  • B

  • C

  • D

 

(Consider This) Which of the following is an example of a sunk cost, as it relates to a firm?

Multiple Choice

  • an expenditure on raw materials used in the production process

  • an expenditure on a nonrefundable, nontransferable airline ticket

  • an expenditure to buy a delivery van

  • an expenditure for a new factory

 

 

If the total cost of 20 units of a product is $20, and the total cost of 21 units is $21, then from 20 to 21 units of product the

Multiple Choice

  • marginal cost is decreasing.

  • marginal cost equals average total cost.

  • marginal cost equals average variable cost.

  • average total cost equals average variable cost.

 

 

 

 

 

Refer to the graph. Which one of the following would cause a move from point d to point e along short-run average total cost curve ATC2?

Multiple Choice

  • diminishing marginal returns

  • an increase in the wage rate

  • a decrease in the wage rate

  • increasing marginal returns

 

 

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

 

Number of Workers       Units of Output

0     0

1     40

2     90

3     126

4     150

5     165

6     180

 

What is the firm’s average product when three workers are hired?

Multiple Choice

  • 18 units of output.

  • 36 units of output.

  • 42 units of output.

  • 21 units of output.

 

In the short run, total output in an industry

Multiple Choice

  • is fixed at a specific level.

  • can vary as the result of using a fixed amount of plant and equipment more or less intensively.

  • may be altered by varying the size of plant and equipment which now exist in the industry.

  • can vary as the result of new firms entering or leaving the industry.

 

 

 

 

 

Refer to the short-run production and cost data. In Figure A curve (1) is

Multiple Choice

  • total product and curve (2) is average product.

  • total product and curve (2) is marginal product.

  • average product and curve (2) is marginal product.

  • marginal product and curve (2) is average product.

 

 

At what point does marginal product equal average product?

Multiple Choice

  • where average product is equal to its minimum value

  • where average product is equal to its maximum value

  • where marginal product is equal to its minimum value

  • where marginal product is equal to its maximum value

 

 

In the short run,

Multiple Choice

  • TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.

  • TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate.

  • TVC will increase by the same absolute amount for each additional unit of output produced.

  • one cannot generalize concerning the behavior of TVC as output increases.

 

 

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.

 

Output    ATC-A    ATC-B    ATC-C

10    $ 6   $ 13 $ 44

20    5     9     35

30    4     6     27

40    5     4     20

50    7     3     14

60    10    4     11

70    14    5     8

80    19    7     6

90    25    10    5

100  32    16    7

 

In the long run, the firm should use plant size “A” for

Multiple Choice

  • all possible levels of output.

  • 10 to 30 units of output.

  • 30 to 60 units of output.

  • all outputs greater than or equal to 40.

 

 

 

 

 

Refer to the diagram. The vertical distance between ATC and AVC reflects

Multiple Choice

  • the law of diminishing returns.

  • the average fixed cost at each level of output.

  • marginal cost at each level of output.

  • the presence of economies of scale.

 

 

If a technological advance reduces the amount of variable resources needed to produce any level of output, then the

Multiple Choice

  • AVC curve will shift upward.

  • MC curve will shift downward.

  • ATC curve will shift upward.

  • AFC curve will shift downward.

 

 

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

Multiple Choice

  • no generalization about the changes in TC and TVC can be made.

  • the changes in TC and TVC are equal.

  • the change in TC is greater than the change in TVC.

  • the change in TVC is greater than the change in TC.

 

 

At an output of 1,000 units per year, a firm’s variable costs are $5,000 and its average fixed costs are $3. Its total costs per year are

Multiple Choice

  • $10,000.

  • $8,000.

  • $6,000.

  • $5,000.

 

 

At the Amarillo Piano Company, the average product of labor stays constant at 5, regardless of how much labor is employed. This implies that

Multiple Choice

  • there are no fixed costs.

  • this firm can never maximize its profits.

  • the marginal product of labor is constant.

  • labor exhibits diminishing marginal returns.

 

 

 

 

 

Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. Average variable cost will be at a minimum when the firm is hiring

Multiple Choice

  • Q3 workers.

  • Q2 workers.

  • Q1 workers.

  • more than Q3 workers.

 

 

The vertical distance between a firm’s ATC and AVC curves represents

Multiple Choice

  • AFC, which increases as output increases.

  • AFC, which decreases as output increases.

  • marginal costs, which decrease as output decreases.

  • marginal costs, which increase as output increases.

 

 

Which of the following is a short-run adjustment?

Multiple Choice

  • A local bakery hires two additional bakers.

  • Six new firms enter the plastics industry.

  • The number of farms in the United States declines by 5 percent.

  • BMW constructs a new assembly plant in South Carolina.

 

 

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

 

The economic profits of Harvey’s firm in the first year were

Multiple Choice

  • $220,000.

  • $60,000.

  • $160,000.

  • $825,000.

 

 

Assume that the only variable resource used to produce output is labor.

 

Amount of Labor   Total Product

1     6

2     16

3     24

4     30

5     34

6     36

 

Refer to the provided table. With diminishing marginal returns, if the firm hires seven units of labor, which of the following numbers would most probably be the total product?

Multiple Choice

  • 40

  • 39

  • 42

  • 37

 

If a technological advance reduces the amount of variable resources needed to produce any level of output, then the

Multiple Choice

  • AVC curve will shift upward.

  • MC curve will shift downward.

  • ATC curve will shift upward.

  • AFC curve will shift downward.

 

 

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.

 

Output    ATC-A    ATC-B    ATC-C

10    $ 6   $ 13 $ 44

20    5     9     35

30    4     6     27

40    5     4     20

50    7     3     14

60    10    4     11

70    14    5     8

80    19    7     6

90    25    10    5

100  32    16    7

 

In the long run, the firm should use plant size “A” for

Multiple Choice

  • all possible levels of output.

  • 10 to 30 units of output.

  • 30 to 60 units of output.

  • all outputs greater than or equal to 40.

 

 

 

Input (Workers)     Output    TFC ($)   TVC ($)  Total Cost ($)

0     0     50    0

1     8     50    40    90

2     20    50    80

3     28    50    120  170

4     35    50         210

5     41    50    200  250

 

 

Refer to the provided table. The average total cost of producing 20 units of output is

Multiple Choice

  • $4.00.

  • $4.50.

  • $6.50.

  • $8.50.

 

 

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

 

The economic profits of Harvey’s firm in the first year were

Multiple Choice

  • $220,000.

  • $60,000.

  • $160,000.

  • $825,000.

 

 

(Consider This) Which of the following is an example of a sunk cost, as it relates to a firm?

Multiple Choice

  • an expenditure on raw materials used in the production process

  • an expenditure on a nonrefundable, nontransferable airline ticket

  • an expenditure to buy a delivery van

  • an expenditure for a new factory

 

 

The law of diminishing returns describes the

Multiple Choice

  • relationship between total costs and total revenues.

  • profit-maximizing position of a firm.

  • relationship between resource inputs and product outputs in the short run.

  • relationship between resource inputs and product outputs in the long run.

 

 

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

 

Number of Workers       Units of Output

0     0

1     40

2     90

3     126

4     150

5     165

6     180

 

What is the firm’s average product when three workers are hired?

Multiple Choice

  • 18 units of output.

  • 36 units of output.

  • 42 units of output.

  • 21 units of output.

 

 

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm’s total costs

Multiple Choice

  • are $2.50.

  • are $1,250.

  • are $750.

  • are $1,100.

 

 

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

Multiple Choice

  • diseconomies of scale.

  • diminishing marginal utility.

  • diminishing marginal returns.

  • increasing opportunity cost.

 

 

 

 

 

Refer to the graph. Which one of the following would cause a move from point d to point e along short-run average total cost curve ATC2?

Multiple Choice

  • diminishing marginal returns

  • an increase in the wage rate

  • a decrease in the wage rate

  • increasing marginal returns

 

 

Assume that the only variable resource used to produce output is labor.

 

Amount of Labor   Total Product

1     6

2     16

3     24

4     30

5     34

6     36

 

Refer to the provided table. With diminishing marginal returns, if the firm hires seven units of labor, which of the following numbers would most probably be the total product?

Multiple Choice

  • 40

  • 39

  • 42

  • 37

 

 

At the Amarillo Piano Company, the average product of labor stays constant at 5, regardless of how much labor is employed. This implies that

Multiple Choice

  • there are no fixed costs.

  • this firm can never maximize its profits.

  • the marginal product of labor is constant.

  • labor exhibits diminishing marginal returns.

 

 

 

 

 

Refer to the diagram. At output level Q, average fixed cost

Multiple Choice

  • is equal to EF.

  • is equal to QE.

  • is measured by both QF and ED.

  • cannot be determined from the information given.

 

 

The fixed cost of the firm is $500. The firm’s total variable cost is indicated in the table.

 

Output    Total Variable Cost

1     $ 400

2     720

3     1,000

4     1,400

5     2,000

6     3,600

 

The average variable cost of the firm when 5 units of output are produced is

Multiple Choice

  • $100.

  • $200.

  • $300.

  • $400.

 

 

 

 

 

Refer to the diagram. Minimum efficient scale

Multiple Choice

  • occurs at some output greater than Q3.

  • is achieved at Q1.

  • is achieved at Q3.

  • cannot be identified in this diagram.

 

 

At what point does marginal product equal average product?

Multiple Choice

  • where average product is equal to its minimum value

  • where average product is equal to its maximum value

  • where marginal product is equal to its minimum value

 

 

Refer to the diagram. At output level Q, total variable cost is

Multiple Choice

  • 0BEQ.

  • BCDE.

  • 0CDQ.

  • 0AFQ.

 

 

At an output of 1,000 units per year, a firm’s variable costs are $5,000 and its average fixed costs are $3. Its total costs per year are

Multiple Choice

  • $10,000.

  • $8,000.

  • $6,000.

  • $5,000.

 

 

Diseconomies of scale occur mainly because

Multiple Choice

  • of the law of diminishing returns.

  • firms in an industry must be relatively large in order to use the most efficient production techniques.

  • of the inherent difficulties involved in managing and coordinating a large business enterprise.

  • the short-run average total cost curve rises when marginal product is greater than average total cost.

 

 

A firm doubles the quantity of all resources it employs and, as a result, output doubles. Which of the following is ?

Multiple Choice

  • There are increasing returns to scale.

  • The long-run average total cost curve is flat.

  • The law of diminishing returns is proven wrong.

  • The example is for the short-run rather than the long-run.