Question 1

Which of the following best describes 'technology' in economics?

Accepted Answer

The process by which a firm uses inputs to produce outputs of goods and services.

Question 2

In the short run, which of the following is true about a firm's inputs?

Accepted Answer

At least one input is fixed.

Question 3

Jill Johnson’s restaurant pays $$800 per week for pizza ovens and 650 $$per week for workers. In the short run, what type of cost is the cost of pizza ovens?

Accepted Answer

Fixed cost

Question 4

Which formula correctly represents average total cost?

Accepted Answer

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

Question 5

If Jill Johnson hires one worker and produces 200 pizzas at a total cost of $1,450, what is the average total cost per pizza?

Accepted Answer

$$ ATC = \frac{1,450}{200} = 7.25 $$

Question 6

What is the marginal cost of producing the 200th pizza if the total cost increases from $$800 to 1$$,450?

Accepted Answer

$$ MC = \frac{1,450 - 800}{200 - 0} = 3.25 $$

Question 7

Which of the following statements about cost curves is correct?

Accepted Answer

The average total cost curve is typically U-shaped.

Question 8

If the marginal cost is above the average total cost, what happens to the average total cost?

Accepted Answer

Average total cost rises.

Question 9

In the long run, which of the following is true about a firm's costs?

Accepted Answer

All costs are variable.

Question 10

Which equation represents average variable cost?

Accepted Answer

$$ AVC = \frac{VC}{Q} $$

Question 11

A firm experiences economies of scale when:

Accepted Answer

Its long-run average costs fall as it increases output.

Question 12

Which of the following is NOT a reason for economies of scale?

Accepted Answer

Difficulty in managing large operations.

Question 13

If a firm’s long-run average cost remains unchanged as it increases output, it is experiencing:

Accepted Answer

Constant returns to scale.

Question 14

Suppose Sarah owns a pizza restaurant and is currently selling 1100 pizzas per week. According to the long-run average cost curve, what should Sarah do to minimize her average cost?

Accepted Answer

Reduce output to the minimum efficient scale.

Question 15

Which formula correctly represents marginal cost?

Accepted Answer

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

Question 16

If Jill Johnson’s restaurant produces 450 pizzas at a total cost of $$2,100, what is the average fixed cost per pizza if the fixed cost is 800$$?

Accepted Answer

$$ AFC = \frac{800}{450} = 1.78 $$

Question 17

Which of the following best describes the production function?

Accepted Answer

The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs.

Question 18

If a firm gets too large to manage effectively and its long-run average costs rise, it is experiencing:

Accepted Answer

Diseconomies of scale.

Question 19

Which equation shows the relationship between average total cost, average fixed cost, and average variable cost?

Accepted Answer

$$ ATC = AFC + AVC $$

Question 20

A pizza restaurant finds that its average total cost per pizza decreases as it increases production from 200 to 450 pizzas per week, but then increases as it produces more than 450 pizzas. What is this phenomenon called?

Accepted Answer

The U-shaped average total cost curve.

Chap 11 - Technology, Production, and Costs in Microeconomics

Study Guide - Practice Questions

Study Guide - Flashcards