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 adopts a new process that allows it to produce more output with the same amount of inputs.

Question 2

Suppose a pizza restaurant has weekly fixed costs of $$800 and variable costs of 650 $$per worker per week. If the restaurant employs 3 workers, what is its total cost per week?

Accepted Answer

$1,950

Question 3

Which of the following is an example of an implicit cost for a business owner?

Accepted Answer

The salary the owner could have earned working elsewhere

Question 4

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 5

If the marginal product of labor is decreasing as more workers are hired, which economic principle is being illustrated?

Accepted Answer

Law of diminishing returns

Question 6

A firm’s average total cost (ATC) is given by which of the following formulas?

Accepted Answer

$$ATC = \frac{FC}{Q} + \frac{VC}{Q}$$

Question 7

If a firm’s marginal cost (MC) is below its average total cost (ATC), what will happen to the ATC as output increases?

Accepted Answer

ATC will fall.

Question 8

Which of the following best explains why the long-run average cost curve is typically U-shaped?

Accepted Answer

Because of economies of scale at low output levels and diseconomies of scale at high output levels.

Question 9

A car manufacturer experiences lower average costs as it increases production due to bulk purchasing of inputs and greater specialization. This is an example of:

Accepted Answer

Economies of scale

Question 10

If a firm’s total cost (TC) is $$2,000 when producing 100 units, and its fixed cost (FC) is 500$$, what is its average variable cost (AVC)?

Accepted Answer

$$AVC = \frac{2,000 - 500}{100} = 15$$

Question 11

Which of the following is most likely to cause diseconomies of scale in a large corporation?

Accepted Answer

Difficulty in coordinating and managing a large workforce

Question 12

Suppose Jill’s pizza restaurant can produce 550 pizzas with 3 workers. What is the average product of labor?

Accepted Answer

183.3

Question 13

Which of the following best describes the marginal product of labor?

Accepted Answer

The additional output produced by hiring one more worker.

Question 14

If a firm’s marginal cost (MC) of producing the 11th unit is $$10, and the total cost (TC) of producing 10 units is 90$$, what is the total cost of producing 11 units?

Accepted Answer

$$TC_{11} = 90 + 10 = 100$$

Question 15

Which of the following is true about fixed costs in the long run?

Accepted Answer

All costs are variable in the long run.

Question 16

A firm’s production function shows:

Accepted Answer

The relationship between inputs employed and the maximum output that can be produced.

Question 17

If the marginal product of the next worker hired is greater than the current average product of labor, what will happen to the average product?

Accepted Answer

It will increase.

Question 18

Which of the following best describes the minimum efficient scale?

Accepted Answer

The output level at which long-run average cost is minimized.

Question 19

If a firm’s average fixed cost (AFC) is $$10 and its average variable cost (AVC) is 15 at a $$certain output level, what is its average total cost (ATC)?

Accepted Answer

$$ATC = 10 + 15 = 25$$

Question 20

Which of the following is NOT a likely source of economies of scale for a manufacturing firm?

Accepted Answer

Difficulty in managing a large workforce

Technology, Production, and Costs in Microeconomics

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