Question 1

Which of the following best describes the economic definition of technology?

Accepted Answer

The processes a firm uses to turn inputs into outputs of goods and services.

Question 2

Suppose a pizza restaurant can hire more workers but cannot change the number of ovens in the next month. In this scenario, the number of ovens is:

Accepted Answer

A fixed input.

Question 3

Which of the following is an example of an implicit cost?

Accepted Answer

The salary the owner could have earned working elsewhere.

Question 4

If Jill Johnson’s restaurant has $$800 per week in fixed costs and hires 3 workers at 650 $$per week each, what is her total cost per week?

Accepted Answer

$2,750

Question 5

The law of diminishing returns states that:

Accepted Answer

Adding more of a variable input to a fixed input will eventually cause the marginal product of the variable input to decline.

Question 6

If the marginal product of the third worker is less than the average product of the first two workers, what happens to the average product of labor when the third worker is hired?

Accepted Answer

It decreases.

Question 7

Which formula correctly represents marginal cost ($$MC$$)?

Accepted Answer

$$MC = \frac{\Delta TC}{\Delta Q}$$

Question 8

A firm’s average total cost ($$ATC) $$can be calculated as:

Accepted Answer

$$ATC = AFC + AVC$$

Question 9

In the short run, which of the following costs must always decrease as output increases?

Accepted Answer

Average fixed cost ($$AFC)$$

Question 10

If the marginal cost ($$MC) of $$producing an additional pizza is below the average total cost ($$ATC$$), what will happen to $$ATC as $$output increases?

Accepted Answer

$$ATC$$ will fall.

Question 11

Which of the following best explains economies of scale?

Accepted Answer

Long-run average costs fall as output increases.

Question 12

A car company increases its factory size and output, but its long-run average cost remains unchanged. This is an example of:

Accepted Answer

Constant returns to scale.

Question 13

Which of the following is most likely to cause diseconomies of scale?

Accepted Answer

Difficulty managing a very large firm.

Question 14

Suppose a firm’s total cost ($$TC) is$$ $$5,000 when producing 500 units. What is the average total cost ($$ATC$)?

Accepted Answer

$$ATC = \frac{5,000}{500} = 10$$

Question 15

Which of the following is a real-world example of positive technological change?

Accepted Answer

The introduction of fracking in oil production.

Question 16

If a firm’s long-run average cost curve is U-shaped, what does the downward-sloping portion represent?

Accepted Answer

Economies of scale.

Question 17

Which of the following statements about fixed and variable costs is correct?

Accepted Answer

In the long run, all costs are variable.

Question 18

A firm’s production function shows:

Accepted Answer

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

Question 19

Which of the following is the best example of an explicit cost for a business?

Accepted Answer

Monthly rent paid for office space.

Question 20

If a firm’s marginal cost ($$MC) $$curve cuts through the minimum point of the average total cost ($$ATC) $$curve, what does this indicate?

Accepted Answer

The $$ATC is at $$its lowest point.

Technology, Production, and Costs: Microeconomics Chapter 11 Study Guide

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