Econ 101 - Microeconomics » Fall 2022 » Production and Costs of the Firm Quiz

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Question #1
A firm uses workers and seed to grow lettuce. Its lettuce output rises from 100 tons to 200 tons when the number of workers increases from 25 to 75. Its production process shows
A.   decreasing short-run average variable cost.
B.   increasing long-run average cost.
C.   diminishing returns to labor.
D.   decreasing returns to scale.
Question #2
To determine total cost, the businessperson must know
A.   output quantity and input price.
B.   input quantity and input price.
C.   output quantity and output price.
D.   input quantity and output price.
Question #3
Marginal physical product can tell a producer
A.   at what point to stop adding inputs to the production process.
B.   how much the last input added to the total amount of revenue.
C.   how much profit will be made at each level of production.
D.   how much the last input added to the total amount of production.
Question #4
When the marginal revenue product of an input is less than its price, the
A.   producer should expand the use of that input.
B.   price of the input will automatically rise in a free market.
C.   marginal physical product of that input must be below its average physical product.
D.   producer should reduce the use of that input.
Question #5
A firm is operating with an optimal combination of inputs. Suddenly the price of one input rises. The firm should
A.   buy more of the higher priced input and less of the lower priced input.
B.   buy less of that input and more of the other input.
C.   reduce its output.
D.   change its input mix so that the marginal physical product of the input whose price has risen falls and the marginal physical product of the other input rises.
Question #6
If a firm has a U-shaped long-run average cost curve,
A.   its fixed cost rises as output rises.
B.   it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production.
C.   the firm can maximize its output by operating at the point of minimum long-run average cost.
D.   it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production.
Question #7
One reason why critics argue that large firms should not be broken up is that in some cases
A.   many smaller firms would be less-efficient producers.
B.   large firms are less-efficient producers.
C.   large firms have a concentration of economic power.
D.   there is no economic reason to break up large firms that may have some control over the market.
Question #8
The long-run average cost curve
A.   All of these are correct.
B.   is a composite of short-run AC curves.
C.   depends on the firm's planning horizon.
D.   shows the lowest possible short-run AC corresponding to each output level.
Question #9
Which of the following is a variable cost for an airline?
A.   jet fuel
B.   insurance
C.   property taxes
D.   rent of airport space
Question #10
Total fixed cost
A.   remains constant even if the firm shuts down.
B.   is always zero.
C.   declines as output increases.
D.   increases as output increases.
Question #11
The total physical product of an input is the same thing as its
A.   marginal physical product times output.
B.   total consumer's surplus.
C.   output.
D.   total revenue product.
Question #12
An airline industry study recently reported, "Evidence is abundant that larger firms are not more efficient or less costly simply because they are larger. In fact, other things equal, the largest carriers tend to have a higher level of unit costs, possibly caused by the difficulties of managing an airline of large size." This means that
A.   the larger airlines are not profitable.
B.   the airline industry has constant returns to scale.
C.   there are increasing returns to scale in the airline industry.
D.   airlines are experiencing decreasing returns to scale.
Question #13
In the typical AC curve, the downward-sloping part is attributable to
A.   declining administrative costs as output increases.
B.   falling fixed costs.
C.   rising total product.
D.   spreading fixed costs over larger outputs and increasing returns to the variable inputs.
Question #14
If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing
A.   increasing costs per unit of output.
B.   constant returns to scale.
C.   decreasing returns to scale.
D.   increasing returns to scale.
Question #15
Marginal cost is the
A.   change in total cost resulting from the purchase of one more unit of the variable input.
B.   change in total cost resulting from the production of one more unit of output.
C.   difference between total cost and total expenditure.
D.   difference between total fixed cost and total variable cost.
Question #16
Which of the following is a fixed cost?
A.   steel to produce refrigerators
B.   worker bonuses
C.   mortgage on the building
D.   electricity
Question #17
When economies of scale are present,
A.   costs fall as the size of the product is increased.
B.   firms always make handsome profits.
C.   costs per unit decline as output expands.
D.   the government feels responsible for breaking up the firm.
Question #18
A firm practices input substitution when it
A.   allows fixed cost to become variable.
B.   retrains Joe the welder as a painter and Pat the painter as a welder.
C.   buys extra machines for its workers to use.
D.   replaces unskilled labor with automated machinery.

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