Question 1

Which of the following scenarios best illustrates a firm experiencing positive technological change?

Accepted Answer

A training program makes a firm's workers more productive, allowing them to produce more output with the same inputs.

Question 2

Suppose a pizza parlor has the following costs per pizza: $$4.00 in labor, 1.00 in $$ingredients, and $0.50 in electricity. If the parlor produces 8,000 pizzas per month, what is the total variable cost per month?

Accepted Answer

$44,000

Question 3

Charles opens a lawn-mowing company and purchases equipment for $$4,000. He could have earned 8$$,000 as a lifeguard, and the equipment could have earned 4% interest per year in the bank. The equipment depreciates at 10% per year. What is Charles's implicit cost of production per year?

Accepted Answer

$8,560

Question 4

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

Accepted Answer

At least one of the firm's inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its plant.

Question 5

A flower grower hires gardeners (labor) and rents greenhouses (capital). If the marginal product of labor decreases as more gardeners are hired while the number of greenhouses remains fixed, this is an example of:

Accepted Answer

The law of diminishing returns

Question 6

A pizza restaurant hires 4 workers and produces 24 pizzas. What is the average product of labor?

Accepted Answer

$$6$$

Question 7

If the marginal product of the second worker is 6 and the total output with one worker is 5, what is the total output with two workers?

Accepted Answer

$$11$$

Question 8

Suppose the total cost of producing 20,000 tennis balls is $$30,000, and the fixed cost is 5$$,000. What is the average variable cost when output is 20,000?

Accepted Answer

$$1.25$$

Question 9

If Susan produces 1,000 pizzas at a total cost of $200.00, what is her average total cost of production?

Accepted Answer

$$0.20$$

Question 10

Suppose Susan increases production from 1,000 to 1,001 pizzas and her total cost rises from $$200.00 to 200.10. $$What is the marginal cost of producing the 1,001st pizza?

Accepted Answer

$$0.10$$

Question 11

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

Accepted Answer

Adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline.

Question 12

Segment.com switched from internal text messaging to email to reduce distractions. Does this represent positive or negative technological change?

Accepted Answer

Negative technological change, because output from a given quantity of inputs may decline.

Question 13

If Segment.com must pay higher salaries to software engineers due to competition, is this an example of negative technological change?

Accepted Answer

No, this would not represent technological change because the same output can be produced using the same inputs.

Question 14

Refer to the following scenario: A firm produces 200 pizzas with one worker at a total cost of $$1,450. The fixed cost is 800. $$What is the marginal cost of producing the 200th pizza?

Accepted Answer

$$3.25$$

Question 15

If the marginal product of labor increases as more workers are hired, this is most likely due to:

Accepted Answer

Division of labor and specialization

Question 16

When does the law of diminishing returns set in for the production of pizzas, given the following marginal products: 200 (1st worker), 250 (2nd), 100 (3rd), 50 (4th), 25 (5th), 15 (6th)?

Accepted Answer

When the third worker is hired

Question 17

Suppose the total cost of producing 20,000 tennis balls is $$30,000, and the fixed cost is 5$$,000. What is the variable cost?

Accepted Answer

$$25,000$$

Question 18

As output increases, the dollar difference between average total cost (ATC) and average variable cost (AVC):

Accepted Answer

Decreases

Question 19

If the marginal cost of production is less than the average total cost, what must be happening to the average total cost?

Accepted Answer

It is falling

Question 20

Which of the following is an implicit cost for a business owner?

Accepted Answer

Interest that could have been earned on invested capital

Ch. 11 Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards