Q: Which formula correctly calculates the marginal product of labor ($$MP_L$$)?

$$MP_L = \text{Change in Total Product} \div \text{Change in Labor}$$

Question 1

Which of the following best describes a fixed input in the short run?

Accepted Answer

An input that cannot be varied regardless of output level.

Question 2

A factory building is considered what type of input in the short run?

Accepted Answer

Fixed input

Question 3

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

Accepted Answer

The salary the owner could earn working elsewhere.

Question 4

Suppose a firm pays $$500 for rent, 300 $$for labor, and the owner could earn $200 elsewhere. What is the total economic cost?

Accepted Answer

$1000

Question 5

Which formula correctly calculates the marginal product of labor ($$MP_L$$)?

Accepted Answer

$$MP_L = 	ext{Change in Total Product} \div 	ext{Change in Labor}$$

Question 6

If a firm’s total cost is $$TC = FC + VC$$, where $$FC is $$fixed cost and $$VC is $$variable cost, what happens to $$TC if $$output increases in the short run?

Accepted Answer

$$TC$$ increases as $$VC$$ increases, while $$FC$$ stays the same.

Question 7

A firm is producing 100 units of output. The cost of ingredients is $$2 per unit, labor is 1 $$per unit, and fixed costs are $50 per day. What is the total cost per day?

Accepted Answer

$250

Question 8

Which of the following statements about opportunity cost is correct?

Accepted Answer

It is the value of the next best alternative forgone.

Question 9

If the marginal product of the 5th worker is negative, what does this imply?

Accepted Answer

Adding the 5th worker decreases total output.

Question 10

Which of the following can a firm do in the long run but not in the short run?

Accepted Answer

Change the size of its physical plant.

Question 11

Suppose a firm’s production function is $$Q = 2L + 3K$$, where $$Q is $$output, $$L is $$labor, and $$K is $$capital. If $$L = 4$$ and $$K = 2$$, what is the output?

Accepted Answer

$$Q = 14$$

Question 12

Which of the following is NOT an example of a variable cost?

Accepted Answer

Monthly rent for the factory.

Question 13

If a firm experiences diminishing marginal returns, what happens as more units of labor are added?

Accepted Answer

Each additional worker adds less to total output than the previous worker.

Question 14

Which of the following is a real-world example of an explicit cost?

Accepted Answer

The cost of purchasing flour for a bakery.

Question 15

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

Accepted Answer

$$ATC = \frac{TC}{Q}$$

Question 16

If a firm’s total product increases from 20 to 30 when labor increases from 2 to 3, what is the marginal product of the third worker?

Accepted Answer

10

Question 17

Which of the following best describes the law of diminishing marginal returns?

Accepted Answer

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

Question 18

A firm’s opportunity cost of using its own building for production is:

Accepted Answer

The rent it could earn by leasing the building to someone else.

Question 19

If a firm’s marginal product of labor ($$MP_L) is $$negative, what should the firm do to maximize output?

Accepted Answer

Reduce the number of workers.

Question 20

Which of the following is true about explicit and implicit costs?

Accepted Answer

Implicit costs are not recorded in accounting statements.

Production, Costs, and Marginal Analysis in Microeconomics: Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards