Question 1

Suppose a factory hires more workers, and each additional worker initially increases output more than the previous one. Which economic principle best explains this phenomenon?

Accepted Answer

Specialization increases efficiency

Question 2

If the Marginal Product of Labor (MPL) is at its maximum, what can you say about Marginal Cost (MC)?

Accepted Answer

MC is at its minimum

Question 3

Given the formula $$MC = \frac{\Delta TC}{\Delta Q}$$, what does a rising MC curve indicate about the cost of producing additional units?

Accepted Answer

Each additional unit is more expensive to produce

Question 4

Why does the Average Fixed Cost (AFC) curve always slope downward as output increases?

Accepted Answer

Fixed costs are spread over more units

Question 5

Which of the following best describes the relationship between Marginal Product of Labor (MPL) and Marginal Cost (MC)?

Accepted Answer

When MPL rises, MC falls

Question 6

If $$MC \u003c ATC$$, what happens to the Average Total Cost (ATC) as output increases?

Accepted Answer

ATC falls

Question 7

A firm notices that its Average Variable Cost (AVC) curve is U-shaped. What explains the upward-sloping portion of the AVC curve?

Accepted Answer

AVC rises when MPL falls

Question 8

Which formula correctly expresses the relationship between Marginal Cost (MC), wage (Wage), and Marginal Product of Labor (MPL)?

Accepted Answer

$$MC = \frac{Wage}{MPL}$$

Question 9

If a firm’s fixed costs do not change, but output increases, what happens to the Average Fixed Cost (AFC)?

Accepted Answer

AFC decreases

Question 10

At what point does the Marginal Cost (MC) curve cross the Average Total Cost (ATC) curve?

Accepted Answer

At the minimum of ATC

Question 11

A firm is experiencing diminishing marginal returns. What is likely happening to its Marginal Product of Labor (MPL) and Marginal Cost (MC)?

Accepted Answer

MPL is falling, MC is rising

Question 12

If the wage rate is constant and the Marginal Product of Labor (MPL) decreases, what happens to Marginal Cost (MC)?

Accepted Answer

MC increases

Question 13

Which of the following is NOT a reason why MPL eventually falls as more workers are hired?

Accepted Answer

Workers specialize and become more efficient

Question 14

If $$MC = AVC$$, what does this indicate about the Average Variable Cost (AVC) curve?

Accepted Answer

AVC is at its minimum

Question 15

Which cost curve is determined by the shape of the Marginal Cost (MC) curve?

Accepted Answer

Average Variable Cost (AVC)

Question 16

A firm’s Average Total Cost (ATC) is falling, but its Marginal Cost (MC) is rising. What can you infer about the relationship between MC and ATC?

Accepted Answer

MC is below ATC

Question 17

Which of the following best describes the shape of the Marginal Product of Labor (MPL) curve?

Accepted Answer

Upside-down U-shaped

Question 18

If a firm’s Average Variable Cost (AVC) is rising, what must be true about Marginal Cost (MC)?

Accepted Answer

MC is above AVC

Question 19

Suppose a firm’s output increases from 100 to 120 units, and its total cost rises from $$500 to 540. $$What is the Marginal Cost (MC) of producing each additional unit?

Accepted Answer

$$MC = \frac{540 - 500}{120 - 100} = \frac{40}{20} = 2$$

Question 20

Which of the following statements is TRUE regarding the behavior of Average Fixed Cost (AFC) as output increases?

Accepted Answer

AFC decreases and never rises

Production and Cost Curves: Marginal Product, Marginal Cost, and Average Costs

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