Question 1 When a production facility is in production and running well, it adds

Question

Question 1 When a production facility is in production and running well, it adds a new worker. You would expect this worker to produce

more than prior workers.

less than prior workers.

the same as prior workers.

Question 2 "Fill in the blank" question: select the correct answer.

When production is just beginning, more efficient use of each input can be achieved by

-Select-

adding new variable inputs

adding new fixed inputs

reducing fixed inputs

reducing variable inputs

Question 3 True or false. Observe the following table, consisting of the number of variable inputs and resulting yields. In the table, the average product of the third input is 20.

Question 4 To implement technical efficiency, a producer would choose to

minimize the amount of input resources used.

minimize consumption of resources and creation of waste

minimize production expenses.

Question 5 "Fill in the blank" question: select the correct answer.

An example of a variable input is

-Select-

labor costs for production

rent for the production facility

annual business insurance payment

annual business license

Question 6 True or false. A company CEO is planning an expansion of the business, and his plan involves starting a second shift. He is thinking about the long-run time period.

Question 7 In the short run, a firm maximizes output by choosing inputs so that every dollar spent on inputs has the same

marginal product.

average profit.

total cost.

Question 8 "Fill in the blank" question: select the correct answer.

Implicit opportunity costs are included when calculating

-Select-

economic profit only

economic and accounting profits

accounting profit only

economic profit only.

Question 9 True or false. If an entrepreneur could start a different company with a different set of skills, the equivalent value of those skills would be subtracted from his or her current company’s accounting profit.

Question 10 Accounting profits plus implicit opportunity costs is equal to

marginal costs.

explicit costs.

economic profits.

Question 11 "Fill in the blank" question: select the correct answer.

Implicit (opportunity) cost is not a factor in

-Select-

accounting

economic

both economic and accounting

either economic or accounting

accounting profit.

Question 12 True or false. Fixed costs change with production only in the long term.

Question 13 The average fixed cost is the

change in total cost divided by the change in output.

total of fixed costs divided by the total of variable costs.

total fixed costs divided by the total units produced.

Question 14"Fill in the blank" question: select the correct answer.

All of the following curves are U-shaped, except the

-Select-

average fixed costs

marginal cost

average variable costs

average cost

Question 15 True or false. If a cost curve is increasing, the production function (as shown by a product curve) is also increasing.

Question 16 When adding a new production facility leads to higher average costs, this is an example of

increasing average fixed costs.

economies of scale.

diseconomies of scale.

Question 17 "Fill in the blank" question: select the correct answer.

No costs are fixed in the

-Select-

long-run time frame

short-run time frame

optimum short-run production cycle

long-run time frame.

Question 18 True or false. The average fixed cost curve has its minimum at the point where economies of scale turn into diseconomies of scale.

Question 19 If a firm builds a plant whose size yields output equal to the minimum point on the long-run average cost curve, the firm will

maximize profitability.

minimize profitability.

have no average costs.

Question 20 "Fill in the blank" question: select the correct answer.

A marginal revenue value for a firm with two or more units of production will always be

-Select-

less than

equal to

more than

less than the total revenue.

Question 21 True or false. A firm trying to maximize profitability should decrease production when marginal revenue is equal to marginal costs.

Question 22 You have a factory that makes an odorless spray that repels pet fur (useful for clothing, carpets, and car interiors for pet owners). Your invention has a marginal cost of production of $12, and you sell the units for $19.95. You should

decrease production.

increase production.

halt production for a few weeks.

Explanation / Answer

4. minimize the amount of input resources used.

Technical efficiency means reduce amount of inputs used in the production.

5. labor costs for production

Labor cost depends upon the number of workers hired. So labor cost is directly related to workers.

6. True. Expansion of firm is a long run concept.

7. marginal product.

8. economic profit only

Economic Profit = Total Revenue - Total cost including implicit and explicit cost

9. False

Accounting profit does not take into account the opportunity cost.

10. Economic profit

Economic profit = Accounting profit + Implicit opportunity cost

11. Accounting profit

12. True
In long run, all factors of production are variable.

13. total fixed costs divided by the total units produced.

AFC = TFC/Q

14. average fixed costs

It is downward sloping curve.

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