Q: Which formula is used to calculate marginal cost (MC)?

$$MC = \frac{\text{change in TC}}{\text{change in Q}}$$

Question 1

Which of the following best describes the economic definition of 'technology' in the context of production?

Accepted Answer

The process a firm uses to transform inputs into outputs, including skills, organization, and methods.

Question 2

A pizzeria manager attends a seminar and learns a new dough-spreading technique, which he teaches to his staff. As a result, the pizzeria produces more pizzas per day with the same number of workers and ovens. This is an example of:

Accepted Answer

A positive technological change.

Question 3

In the short run, which of the following statements is TRUE regarding costs?

Accepted Answer

At least one input is fixed, so some costs are fixed and some are variable.

Question 4

If a firm produces zero output in the short run, what is its total cost?

Accepted Answer

Total cost equals fixed cost.

Question 5

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

Accepted Answer

$$TC = FC + VC$$

Question 6

A firm owner withdraws $100,000 from a savings account earning 5% interest to buy equipment. What is the implicit cost associated with this decision?

Accepted Answer

The $5,000 in foregone interest per year.

Question 7

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

Accepted Answer

The lease payment for the building.

Question 8

Refer to the table showing the quantity of workers and pizzas produced. If hiring a second worker increases output from 200 to 450 pizzas, what is the marginal product of labor for the second worker?

Accepted Answer

250 pizzas

Question 9

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 10

When the marginal product of labor (MPL) is rising, what happens to the marginal cost (MC) of output?

Accepted Answer

MC is falling.

Question 11

At what point does the average product of labor (APL) reach its maximum?

Accepted Answer

When MPL equals APL.

Question 12

Which formula is used to calculate marginal cost (MC)?

Accepted Answer

$$MC = \frac{	ext{change in TC}}{	ext{change in Q}}$$

Question 13

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

Accepted Answer

Average total cost decreases.

Question 14

In the long run, which of the following statements is TRUE?

Accepted Answer

All costs are variable.

Question 15

Which formula correctly represents average fixed cost (AFC)?

Accepted Answer

$$AFC = \frac{FC}{Q}$$

Question 16

On the long-run average cost (LRAC) curve, what does the minimum efficient scale represent?

Accepted Answer

The lowest possible average cost achieved after all economies of scale are exhausted.

Question 17

Which of the following is NOT a cause of economies of scale?

Accepted Answer

Increasing bureaucracy and coordination problems.

Question 18

A firm is producing at a point where its average cost rises as output increases. This is known as:

Accepted Answer

Diseconomies of scale.

Question 19

Which formula is used to find the optimal combination of labor and capital for a firm?

Accepted Answer

$$\frac{MPL}{P_L} = \frac{MPK}{P_K}$$

Question 20

An isoquant curve shows:

Accepted Answer

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

Chapter 11

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