Question 1

Which of the following best defines 'technology' in the context of microeconomics?

Accepted Answer

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

Question 2

Suppose a firm experiences a positive technological change. Which of the following is most likely to occur?

Accepted Answer

The firm can produce more output with the same quantity of inputs.

Question 3

In the short run, which of the following statements is true?

Accepted Answer

At least one input is fixed.

Question 4

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

Accepted Answer

The salary the owner could have earned working elsewhere.

Question 5

Jill Johnson quits her $$30,000 job to open a pizza store and uses 50$$,000 of her savings to buy equipment. What is the opportunity cost of her decision?

Accepted Answer

Both the $$30,000 salary and the foregone interest on her 50$$,000 savings.

Question 6

If a firm’s total cost is $$2,000 when producing 100 units, what is its average total cost?

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

Accepted Answer

$$ATC = \frac{2,000}{100} = 20$$

Question 7

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

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 8

Suppose Jill Johnson’s restaurant hires a third worker, and the marginal product of labor decreases compared to the second worker. What economic principle does this illustrate?

Accepted Answer

Law of diminishing returns.

Question 9

If the marginal cost (MC) of producing an additional pizza is $$5, and the average total cost (ATC) is 6$$, what will happen to the ATC if another pizza is produced?

Accepted Answer

ATC will decrease.

Question 10

Which of the following equations correctly represents average fixed cost (AFC)?

Accepted Answer

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

Question 11

Why do average total cost (ATC) curves typically have a U-shape?

Accepted Answer

Because marginal cost first falls due to specialization, then rises due to diminishing returns.

Question 12

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

Accepted Answer

All costs are variable.

Question 13

A car company increases its scale of production and its long-run average cost decreases. This is an example of:

Accepted Answer

Economies of scale.

Question 14

Which of the following is NOT a reason why large firms may experience economies of scale?

Accepted Answer

Difficulty in managing large operations.

Question 15

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

Accepted Answer

Constant returns to scale.

Question 16

Which of the following best describes the minimum efficient scale?

Accepted Answer

The lowest level of output at which all economies of scale are exhausted.

Question 17

A publishing company’s explicit costs include all of the following EXCEPT:

Accepted Answer

Foregone interest on the owner’s savings.

Question 18

Which of the following is the correct formula for marginal cost (MC)?

Accepted Answer

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

Question 19

If the marginal product of labor is greater than the average product of labor, what happens to the average product of labor as another worker is hired?

Accepted Answer

It increases.

Question 20

Which of the following scenarios best illustrates diseconomies of scale?

Accepted Answer

A car factory’s average cost rises as it becomes too large to manage efficiently.

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

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