Jennifer moves her office from the premises she rents at a local mall to her hom

Question

Jennifer moves her office from the premises she rents at a local mall to her home. As a result of this move
A) Jennifer's explicit costs fall and her implicit costs rise. C) Jennifer's total costs fall.
B) Jennifer's implicit costs fall. D) Jennifer's opportunity costs fall.

Stan owns a software design business. He obtained a bank loan to buy computer equipment for his business.
He pays $1,000 per month for interest on the loan. He has 10 employees, each of whom is paid $4,000 per
month. Because his business has been successful, next month he will increase employee wages to $5,000. If the
revenue from his business remains at its current level, Stan is considering an addition to his office. Which of the
following statements regarding Stan's business is false?
A) The payments Stan makes to his employees are variable costs and explicit costs.
B) The monthly payment Stan makes for his bank loan is an implicit cost.
C) The monthly payment Stan makes for his bank loan is a fixed cost.
D) The time and effort Stan spends on his software design business is an implicit cost.

Diminishing marginal product of labor occurs when adding another unit of labor
A) decreases output.
B) changes output by an amount smaller than the output added by the previous unit of labor.
C) increases output by an amount larger than the output added by the previous unit of labor.
D) decreases output by an amount smaller than the output added by the previous unit of labor

An avocado orchard employs five full-time workers. Currently, the average product of labor is 120 pounds
of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of
avocados. The average product of the six workers will now be
A) more than 120 pounds. C) less than 120 pounds.
B) equal to 120 pounds. D) less than the marginal product of labor.


The division of labor and specialization explain
A) why, when the marginal product of labor increases, so does the average product of labor.
B) why the average product of labor falls when firms use more capital or change the layout of their businesses.
C) why the marginal product of labor rises as a firm hires its first units of labor.
D) why firms may find it profitable to use more workers when the marginal product of labor is negative.

After Suzie, owner a sweet shop, hires her 8th worker the average product of labor (APL) declines. Which of
the following statements must be true?
A) The marginal product of the 8th worker is negative.
B) The marginal product of the 8th worker is less than the APL before the 8th worker was hired.
C) Suzie's profits would be greater if she did not hire the 8th worker.
D) The APL is negative.

Which of the following describes how output changes in the short run? Because of specialization and the
division of labor, as more workers are hired
A) output will first increase at an increasing rate, then output will increase at a decreasing rate.
B) output will first decrease at an increasing rate, then increase at a decreasing rate.
C) the marginal product of labor will first decrease, then increase at a decreasing rate.
D) the marginal product of labor will first be negative and then will be positive.

Which of the following explains why the marginal cost curve has a U shape?
A) Initially, the marginal product of labor falls, then rises.
B) Initially, the average product of labor rises, then falls.
C) Initially, the marginal product of labor rises, then falls.
D) Initially, the average cost of production rises, then falls

Which of the following statements is false?
A) Marginal cost will be equal to average total cost when marginal cost is at its lowest point.
B) When marginal cost is less than average total cost, average total cost will fall.
C) When marginal cost is greater than average total cost, average total cost will rise.
D) Marginal cost will be equal to average total cost when average total cost is at its lowest point

As output increases
A) average variable cost becomes smaller and smaller.
B) the difference between average total cost and average variable cost decreases.
C) marginal cost increases continuously.
D) the difference between average total cost and average variable cost becomes greater and greater.

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of
$2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of
A) diminishing returns. C) economies of scale.
B) diseconomies of scale. D) the law of supply.

Explanation / Answer

B) Jennifer's implicit costs fall. D,C,D,A,B,A,C,A,C

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