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 formula correctly expresses the relationship between total cost, fixed cost, and variable cost?

Accepted Answer

$TC = FC + VC$

Question 5

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

Accepted Answer

The foregone salary the owner could have earned working elsewhere.

Question 6

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 7

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 8

Which equation represents average total cost (ATC) in terms of average fixed cost (AFC) and average variable cost (AVC)?

Accepted Answer

$ATC = AFC + AVC$

Question 9

If marginal cost (MC) is above average total cost (ATC), what happens to ATC as output increases?

Accepted Answer

ATC rises.

Question 10

A firm’s long-run average cost curve shows:

Accepted Answer

The lowest cost at which a firm can produce a given quantity of output when all inputs are variable.

Question 11

Economies of scale occur when:

Accepted Answer

Long-run average costs fall as output increases.

Question 12

Which of the following best describes the minimum efficient scale?

Accepted Answer

The output level at which a firm’s long-run average cost is minimized.

Question 13

If a firm experiences diseconomies of scale, what is happening to its long-run average costs as output increases?

Accepted Answer

Long-run average costs are rising.

Question 14

An isoquant represents:

Accepted Answer

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

Question 15

The slope of an isoquant is known as:

Accepted Answer

Marginal rate of technical substitution (MRTS)

Question 16

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.

Question 17

At the cost-minimizing point, the following condition holds:

Accepted Answer

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

Question 18

Which of the following best describes the expansion path of a firm?

Accepted Answer

A curve showing the cost-minimizing combinations of inputs for every level of output.

Question 19

A real-world example of positive technological change is:

Accepted Answer

Introducing remote-controlled robots and drones in oil production, reducing the number of workers needed.

Question 20

Which of the following is NOT a plausible reason for economies of scale in automobile production?

Accepted Answer

Difficulty coordinating large operations.

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

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