Question

Q1 Minimum efficient scale is defined as the level of output at which

A) all economies of scale are exhausted

B). diminishing returns affect average total cost

C). the firm's long - run average total cost starts falling .

D)the maximum output is produced .

Q2 If , when a firm doubles all its inputs , its average cost of production decreases , then production displays

A)diseconomies of scale .

B)diminishing returns

C). economies of scale .

D)declining fixed costs .

Q3 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

B). greater than the marginal product of labor

C). equal to 120 pounds

D) . less than 120 pounds

Q4 Suppose you have just opened a store to sell espresso machines . Both you and a competing store buy this machine from a manufacturer for $ 130 each . Your competitor who has a store of the same size as yours currently selling about 10 machines a month at a price of 200 per machine . You expect to sell about 6 machines a month at a price of $ 220 per machine . If you lower your price , you expect to make a loss . Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you ?

A)The competing store's goal is to maximize revenue and not profit .

B)The competing store probably has a lower marginal cost of production .

C)The competing store probably has a lower average variable cost of production

D)The competing store probably has a lower average cost because average fixed cost falls as output increases .

Q5 In the short run , why does a production function eventually display diminishing returns to labor ?

A)The opportunity cost of hiring additional workers must eventually rise .

B)As the number of workers increases it becomes difficult to monitor them .

C)As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline . D)As the number of workers increases eventually the gains from the division of labor and specialization are used up

Q6 Which of the following statements correctly describes the distinction between technology and technological change ?

A)Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs .

B)Technology is product - centered : its refers to developing new products with limited resources while technological change is process - centered in that it focuses on developing new production techniques .

C)Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain

D)Technology involves research and development while technological change involves the use of more efficient machinery .

Q7 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 a fixed cost

. C)The time and effort Stan spends on his software design business is an implicit cost

D)The monthly payment Stan makes for his bank loan is an implicit cost .

Q8 four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

A)2 chairs.

B)3 chairs .

C)4 chairs.

D)38 chairs .

Q9 Which of the following costs will not change as output changes ?

A)average fixed cost

B)average variable cost

C)total variable cost

D)total fixed cost

E)marginal cost

Q10 Implicit costs can be defined as

A)total cost minus fixed costs .

B)the deferred cost of production .

C)accounting profit minus explicit cost

D). the non - monetary opportunity cost of using the firm's own resources .

Q11 In the short run , if marginal product is at its maximum ,

A)then average cost is at its minimum .

B)average variable cost is at its minimum .

C)total cost is at its maximum .

D)marginal cost is at its minimum .

Q12 Average total cost is

A)the change in fixed plus variable cost divided by the quantity of output produced

B). total explicit costs divided by the quantity of output produced

C). variable cost divided by the quantity of output produced

D). total cost divided by the quantity of output produced .

Q13 Which of the following statements is true ?

A)Opportunity cost = explicit cost - implicit cost

B). Total cost = fixed cost + implicit cost

C). Total cost = fixed cost + variable cost

D)Variable cost = wages + salaries + benefits .

When a firm produces 50,000 units of output its total cost equals $6.5 million . When it increases its production to 70,000 units of output its total cost increases to $9.4 million . Within this range the marginal cost of an additional unit of output is

A) $ 41.43

B) $ 135

C) $134.29

D) $145

Answer 1

1.

A) all economies of scale are exhausted

It is the ouput level where , economies of scale are no longer enjoyed, the irm enters the constat returns to scale spectrum.

2.

C). economies of scale .

The firm is enjoying economies of scale, as increase in output , decreases the avergae cost , i.e per unit cost of the output.

3.

A)more than 120 pounds

The average product can be interpreted as , each six labour are giving an output of 120 pounds of avocados equally. The marginal product can be interpreted as the addition output given by the additional labour. As MP is higher that AP, thus AP will rise beyond 120

4.

D)The competing store probably has a lower average cost because average fixed cost falls as output increases

As output increases the Average fixed cost decreases, thus the competitor is able to make profit at $200 .

(first 4 questions done. Please consider giving an upvote if you find it useful)