Question 1

Which of the following best describes a positive technological change in the context of a firm’s production process?

Accepted Answer

A firm improves its ability to turn inputs into outputs, producing more output with the same quantity of inputs.

Question 2

In the short run, which of the following statements is true regarding a firm’s inputs?

Accepted Answer

At least one input is fixed.

Question 3

Suppose Jill Johnson’s restaurant has $$800 per week in fixed costs and variable costs of 650 $$per week for each worker employed. If she hires 3 workers, what is her total cost per week?

Accepted Answer

$2,750

Question 4

Which equation correctly represents the relationship between total cost, fixed cost, and variable cost?

Accepted Answer

$$TC = FC + VC$$

Question 5

A book publisher’s costs include intellectual property, printing machines, paper, and electricity. Which of these is most likely a fixed cost?

Accepted Answer

Printing machines

Question 6

Jill Johnson quits her $30,000/year job to start a pizza store. The foregone salary is an example of:

Accepted Answer

Implicit cost

Question 7

The marginal product of labor is defined as:

Accepted Answer

The additional output produced by hiring one more worker.

Question 8

If the marginal product of labor is less than the average product of labor, what happens to the average product of labor?

Accepted Answer

It decreases.

Question 9

Which formula correctly calculates the average product of labor?

Accepted Answer

$$APL = \frac{Q}{L}$$

Question 10

The law of diminishing returns states that:

Accepted Answer

At some point, adding more of a variable input to the same amount of a fixed input will cause the marginal product of the variable input to decrease.

Question 11

Marginal cost is defined as:

Accepted Answer

The change in total cost from producing one more unit of output.

Question 12

Which formula represents average total cost?

Accepted Answer

$$ATC = AFC + AVC$$

Question 13

If marginal cost is above average total cost, what happens to average total cost as output increases?

Accepted Answer

Average total cost rises.

Question 14

In the long run, all of a firm’s costs are:

Accepted Answer

Variable

Question 15

Economies of scale occur when:

Accepted Answer

Long-run average cost falls as output increases.

Question 16

The minimum efficient scale is:

Accepted Answer

The level of output at which economies of scale are exhausted.

Question 17

An isoquant shows:

Accepted Answer

All combinations of inputs that produce the same level of output.

Question 18

The slope of an isoquant represents:

Accepted Answer

The marginal rate of technical substitution (MRTS).

Question 19

At the cost-minimizing point, the slope of the isoquant equals the slope of the isocost line. Which equation expresses this condition?

Accepted Answer

$$\frac{MP_L}{MP_K} = \frac{w}{r}$$

Question 20

If the price of labor increases relative to capital, what happens to the cost-minimizing combination of inputs for a firm?

Accepted Answer

The firm will use less labor and more capital.

Chapter 11: Technology, Production, and Costs – Microeconomics Study Notes

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