Deck 8: Production and Cost in the Short Run

Question 1

Suppose you run a pizza shop and currently have two employees. If you hire a third employee, your output of pizzas per day rises from 55 to 65. If you hire a fourth employee, output rises to 80 per day. A fifth and sixth employee would cause output to rise to 90 and 95 per day, respectively. Pick the correct statement:

A) Diminishing returns set in with the hiring of the fourth worker.
B) Diminishing returns set in with the hiring of the fifth worker.
C) Diminishing returns set in with the hiring of the sixth worker.
D) Diminishing returns set have not yet set in because output is still increases.

Answer 1

B

Question 2

Fill in the blanks in the table below and answer the next questions:



-In the above table, the average product of labor when 4 units of labor are employed is

A) 22.
B) 20.
C) 19.
D) 16.

Answer 2

19.

Question 3

Refer to the following:
$$\begin{array} { c c c c } \begin{array} { c } \text { Units } \\\text { of Labor }\end{array} & \begin{array} { c } \text { Totel } \\\text { Praduet }\end{array} & \begin{array} { c } \text { Average } \\\text { Product }\end{array} & \begin{array} { c } \text { Narginal } \\\text { Produet }\end{array} \\\hline 1 & - & - & 100 \\2 & - & 125 & - \\3 & 300 & - & - \\4 & - & - & 20\\5&290&-&-\end{array}$$

-In the table above, what is the maximum amount of output that can be produced with two workers?

A) 50
B) 125
C) 150
D) 250
E) 320

Answer 3

250

Question 4

Fill in the blanks in the table below and answer the next questions:



-In the above table, diminishing returns begin with the

A) first unit of labor.
B) third unit of labor.
C) fourth unit of labor.
D) sixth unit of labor.

Question 5

A production function measures the relation between

A) input prices and output prices.
B) the quantity of inputs and the quantity of output.
C) input prices and the quantity of output.
D) the quantity of inputs and input prices.
E) none of the above

Question 6

Fill in the blanks in the table below and answer the next questions:



-In the above table, marginal product is negative when _____ units of labor are employed.

A) 5 units of labor are employed.
B) 6 units of labor are employed.
C) 7 units of labor are employed.
D) both b and C

Question 7

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3 \\\hline &1 & 80 & 100 & 120 \\\text {Units }&2 & 180 & 220 & 260 \\\text {of }&3 & 270 & 330 & 390 \\\text {Labor }&4 & 340 & 420 & 500 \\&5 & 390 & 490 & 590 \\&6 & 410 & 530 & 650\end{array}$

-If labor is fixed at three units, how much does the third unit of capital add to total output?

A) 60
B) 80
C) 110
D) 130
E) none of the above

Question 8

If average product is increasing, then marginal product

A) must be greater than average product.
B) must be less than average product.
C) must be increasing.
D) cannot be decreasing.
E) both a and c

Question 9

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3 \\\hline &1 & 80 & 100 & 120 \\\text {Units }&2 & 180 & 220 & 260 \\\text {of }&3 & 270 & 330 & 390 \\\text {Labor }&4 & 340 & 420 & 500 \\&5 & 390 & 490 & 590 \\&6 & 410 & 530 & 650\end{array}$

-If labor is fixed at 5 units, how much does the second unit of capital add to total output?

A) 490
B) 390
C) 50
D) 100
E) none of the above

Question 10

Refer to the following:
$$\begin{array} { c c c c } \begin{array} { c } \text { Units } \\\text { of Labor }\end{array} & \begin{array} { c } \text { Totel } \\\text { Praduet }\end{array} & \begin{array} { c } \text { Average } \\\text { Product }\end{array} & \begin{array} { c } \text { Narginal } \\\text { Produet }\end{array} \\\hline 1 & - & - & 100 \\2 & - & 125 & - \\3 & 300 & - & - \\4 & - & - & 20\\5&290&-&-\end{array}$$

-In the table above, diminishing returns

A) begin with the first unit of labor.
B) begin with the third unit of labor.
C) begin with the fourth unit of labor.
D) begin with the fifth unit of labor.
E) do not occur because output is positive for all levels of labor usage.

Question 11

Refer to the following:
$$\begin{array} { c c c c } \begin{array} { c } \text { Units } \\\text { of Labor }\end{array} & \begin{array} { c } \text { Totel } \\\text { Praduet }\end{array} & \begin{array} { c } \text { Average } \\\text { Product }\end{array} & \begin{array} { c } \text { Narginal } \\\text { Produet }\end{array} \\\hline 1 & - & - & 100 \\2 & - & 125 & - \\3 & 300 & - & - \\4 & - & - & 20\\5&290&-&-\end{array}$$

-In the table above, how much does the third unit of labor ADD to total output?

A) 100
B) 125
C) 150
D) 300
E) none of the above

Question 12

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3 \\\hline &1 & 80 & 100 & 120 \\\text {Units }&2 & 180 & 220 & 260 \\\text {of }&3 & 270 & 330 & 390 \\\text {Labor }&4 & 340 & 420 & 500 \\&5 & 390 & 490 & 590 \\&6 & 410 & 530 & 650\end{array}$

-If capital is fixed at two units, what is the marginal product of the fourth unit of labor?

A) 60
B) 80
C) 100
D) 420
E) none of the above

Question 13

Refer to the following:
$$\begin{array} { c c c c } \begin{array} { c } \text { Units } \\\text { of Labor }\end{array} & \begin{array} { c } \text { Totel } \\\text { Praduet }\end{array} & \begin{array} { c } \text { Average } \\\text { Product }\end{array} & \begin{array} { c } \text { Narginal } \\\text { Produet }\end{array} \\\hline 1 & - & - & 100 \\2 & - & 125 & - \\3 & 300 & - & - \\4 & - & - & 20\\5&290&-&-\end{array}$$

-the table above, what is the marginal product of the fifth unit of labor?

A) 20
B) 50
C) 80
D)-10
E) -30

Question 14

Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns

A) set in when the fourth worker is hired.
B) set in when the fifth worker is hired.
C) set in when the sixth worker is hired.
D) have not yet set in because output is still increasing.

Question 15

Refer to the following:
$$\begin{array} { c c c c } \begin{array} { c } \text { Units } \\\text { of Labor }\end{array} & \begin{array} { c } \text { Totel } \\\text { Praduet }\end{array} & \begin{array} { c } \text { Average } \\\text { Product }\end{array} & \begin{array} { c } \text { Narginal } \\\text { Produet }\end{array} \\\hline 1 & - & - & 100 \\2 & - & 125 & - \\3 & 300 & - & - \\4 & - & - & 20\\5&290&-&-\end{array}$$

-In the table above, what is the average product of four units of labor?

A) 20
B) 60
C) 80
D) 100
E) 350

Question 16

A short-run production function assumes that

A) the level of output is fixed.
B) at least one input is a fixed input.
C) all inputs are fixed inputs.
D) both a and b
E) both b and c

Question 17

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3 \\\hline &1 & 80 & 100 & 120 \\\text {Units }&2 & 180 & 220 & 260 \\\text {of }&3 & 270 & 330 & 390 \\\text {Labor }&4 & 340 & 420 & 500 \\&5 & 390 & 490 & 590 \\&6 & 410 & 530 & 650\end{array}$

-If capital is fixed at one unit, diminishing returns begin with the

A) first unit of labor.
B) second unit of labor.
C) third unit of labor.
D) fourth unit of labor.
E) none of the above

Question 18

Which of the following statements is FALSE?

A) A firm plans in the long run and operates in the short run.
B) In the short run, a firm can change some but not all of its inputs.
C) In the long run all inputs are variable.
D) In the short run all inputs are fixed.

Question 19

For a short-run production function in which output is determined by the number of workers utilized (capital stock held constant), which of the following is FALSE?

A) In general, when there are few workers the marginal product of labor will be increasing.
B) When the marginal product of labor is negative, total product is falling.
C) To determine the marginal product of labor, the capital stock must be held constant.
D) When diminishing returns set in, adding one more worker decreases output.
E) none of the above

Question 20

Fill in the blanks in the table below and answer the next questions:



-In the above table, the marginal product of the fifth unit of labor is

A) 16.
B) 10.
C) 4.
D) -2.

Question 21

If marginal product is decreasing, then it must be the case that

A) average product is decreasing.
B) average product is greater than marginal product.
C) average product is less than marginal product.
D) both a and c
E) none of the above.

Question 22

Refer to the following:

$\begin{array}{cccc}\begin{array}{c}\text { Number of } \\\text { Workers }\end{array} & \begin{array}{c}\text { Total } \\\text { Product }\end{array} & \begin{array}{c}\text { Average } \\\text { Product }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Product }\end{array} \\\hline 5 &- & 28 & -30 \\10 & - & - & 30\\15 & 420 & - &- \\20 &- & - &22\\\end{array}$

-How much does the 13th worker add to total output?

A) 28 units
B) 29 units
C) 130 units
D) 420 units
E) none of the above

Question 23

The marginal product of labor

A) measures how output changes as the wage rate changes.
B) is less than the average product of labor when the average product of labor is decreasing.
C) is negative when adding another unit of labor decreases output.
D) both a and b
E) both b and c

Question 24

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3&4 \\\hline &1 & 50&120&160&180 \\\text {Units }&2 & 110&260&360&390 \\\text {of }&3 & 150&360&510&560\\\text {Labor }&4 & 170&430&630&690 \\&5 & 160&4801&710&790 \\\end{array}$

-If labor is fixed at three units, how much does the second unit of capital add to total output?

A) 100
B) 150
C) 210
D) 360
E) none of the above

Question 25

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$$\begin{array}{l}     \text { Units of Capital }\\\begin{array} { c c c c c c } & & 1 & 2 & 3 & 4 \\\hline \text { Units } & 1 & 20 & 36 & 48 & 53 \\\text { of } & 2 & 38 & 68 & 88 & 94 \\\text { Iabor } & 3 & 53 & 94 & 122 & 133 \\& 4& 63 & 112 & 148 & 164 \\& 5 & 68 & 120 & 164 & 184\end{array}\end{array}$$

-Which of the following input combinations can produce the same level of output?

A) 4K, 2L and 3K, 2L
B) 3K, 2L and 2K, 3L
C) 2K, 3L and 4K, 2L
D) all of the above

Question 26

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$$\begin{array}{l}     \text { Units of Capital }\\\begin{array} { c c c c c c } & & 1 & 2 & 3 & 4 \\\hline \text { Units } & 1 & 20 & 36 & 48 & 53 \\\text { of } & 2 & 38 & 68 & 88 & 94 \\\text { Iabor } & 3 & 53 & 94 & 122 & 133 \\& 4& 63 & 112 & 148 & 164 \\& 5 & 68 & 120 & 164 & 184\end{array}\end{array}$$

-If capital is fixed at three units, how much does the fourth unit of labor add to total output?

A) 16
B) 28
C) 34
D) 36
E) none of the above

Question 27

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$$\begin{array}{l}     \text { Units of Capital }\\\begin{array} { c c c c c c } & & 1 & 2 & 3 & 4 \\\hline \text { Units } & 1 & 20 & 36 & 48 & 53 \\\text { of } & 2 & 38 & 68 & 88 & 94 \\\text { Iabor } & 3 & 53 & 94 & 122 & 133 \\& 4& 63 & 112 & 148 & 164 \\& 5 & 68 & 120 & 164 & 184\end{array}\end{array}$$

-Diminishing marginal productivity

A) occurs when the marginal product curve begins to slope downward.
B) means that adding one more unit of the variable input will reduce total product.
C) occurs eventually because each additional unit of the variable unit has, on average, fewer units of the fixed input with which to work.
D) both a and c
E) both b and c

Question 28

A firm is using a single variable input, labor, with a given amount of a fixed input, capital. If the level of capital is decreased,

A) the total product curve of labor curve shifts downward.
B) the average product curve of labor curve shifts downward.
C) the marginal product curve of labor shifts downward.
D) all of the above
E) none of the above

Question 29

Refer to the following:

$\begin{array}{cccc}\begin{array}{c}\text { Number of } \\\text { Workers }\end{array} & \begin{array}{c}\text { Total } \\\text { Product }\end{array} & \begin{array}{c}\text { Average } \\\text { Product }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Product }\end{array} \\\hline 5 &- & 28 & -30 \\10 & - & - & 30\\15 & 420 & - &- \\20 &- & - &22\\\end{array}$

-As the number of workers increases from 10 to 15, output per worker

A) increases from 290 to 420
B) increases from 28 to 29
C) decreases from 29 to 28
D) decreases from 30 to 26
E) none of the above

Question 30

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3&4 \\\hline &1 & 50&120&160&180 \\\text {Units }&2 & 110&260&360&390 \\\text {of }&3 & 150&360&510&560\\\text {Labor }&4 & 170&430&630&690 \\&5 & 160&4801&710&790 \\\end{array}$

-If the capital stock is fixed at four units and there are three units of labor, what is the average product of labor?

A) 50
B) 140
C) 157.5
D) 170
E) none of the above

Question 31

If a firm is producing a given level of output in an economically efficient manner, then it must be the case that

A) this is the lowest cost method of producing that output.
B) each input is producing its maximum marginal product.
C) this output level is the most that can be produced with the given level of inputs.
D) both a and c
E) none of the above

Question 32

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3&4 \\\hline &1 & 50&120&160&180 \\\text {Units }&2 & 110&260&360&390 \\\text {of }&3 & 150&360&510&560\\\text {Labor }&4 & 170&430&630&690 \\&5 & 160&4801&710&790 \\\end{array}$

-If the capital stock is fixed at one unit, diminishing returns begin with the

A) first unit of labor.
B) second unit of labor.
C) third unit of labor.
D) fourth unit of labor.
E) fifth unit of labor.

Question 33

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$$\begin{array}{l}     \text { Units of Capital }\\\begin{array} { c c c c c c } & & 1 & 2 & 3 & 4 \\\hline \text { Units } & 1 & 20 & 36 & 48 & 53 \\\text { of } & 2 & 38 & 68 & 88 & 94 \\\text { Iabor } & 3 & 53 & 94 & 122 & 133 \\& 4& 63 & 112 & 148 & 164 \\& 5 & 68 & 120 & 164 & 184\end{array}\end{array}$$

-If the amount of capital increases from 3 to 4 units, the marginal product of the fourth unit of labor

A) decreases by 3 units.
B) increases by 8 units.
C) increases by 5 units.
D) decreases by 12 units.
E) none of the above

Question 34

Refer to the following:

$\begin{array}{cccc}\begin{array}{c}\text { Number of } \\\text { Workers }\end{array} & \begin{array}{c}\text { Total } \\\text { Product }\end{array} & \begin{array}{c}\text { Average } \\\text { Product }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Product }\end{array} \\\hline 5 &- & 28 & -30 \\10 & - & - & 30\\15 & 420 & - &- \\20 &- & - &22\\\end{array}$

-The maximum amount that can be produced using 20 workers is

A) 442 units.
B) 530 units.
C) 22 units.
D) 420 units.
E) 26.5 units.

Question 35

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$$\begin{array}{l}     \text { Units of Capital }\\\begin{array} { c c c c c c } & & 1 & 2 & 3 & 4 \\\hline \text { Units } & 1 & 20 & 36 & 48 & 53 \\\text { of } & 2 & 38 & 68 & 88 & 94 \\\text { Iabor } & 3 & 53 & 94 & 122 & 133 \\& 4& 63 & 112 & 148 & 164 \\& 5 & 68 & 120 & 164 & 184\end{array}\end{array}$$

-If the amount of labor used increases from three to four units, the marginal product of the second unit of capital

A) increases by 8 units.
B) increases by 49 units.
C) decreases by 14 units.
D) decreases by 49 units.
E) none of the above

Question 36

Refer to the following:

$\begin{array}{cccc}\begin{array}{c}\text { Number of } \\\text { Workers }\end{array} & \begin{array}{c}\text { Total } \\\text { Product }\end{array} & \begin{array}{c}\text { Average } \\\text { Product }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Product }\end{array} \\\hline 5 &- & 28 & -30 \\10 & - & - & 30\\15 & 420 & - &- \\20 &- & - &22\\\end{array}$

-Diminishing returns begin with the

A) 1st worker.
B) 5th worker.
C) 10th worker.
D) 11th worker.
E) 16th worker.

Question 37

Diminishing returns refers to the decrease in

A) profit that results from increases in output.
B) average total cost that results from decreases in input prices.
C) average product that results from increases in the variable input.
D) marginal product that results from increases in the variable input.
E) long-run average cost that results from increases in output.

Question 38

A firm's cost of production is affected by changes in

A) the available technology.
B) input prices.
C) profits.
D) both a and b
E) both b and c

Question 39

Refer to the following:
The amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} &\text { Units of Capital }\\&& 1 & 2 & 3&4 \\\hline &1 & 50&120&160&180 \\\text {Units }&2 & 110&260&360&390 \\\text {of }&3 & 150&360&510&560\\\text {Labor }&4 & 170&430&630&690 \\&5 & 160&4801&710&790 \\\end{array}$

-If the capital stock is fixed at one unit, how much does the third unit of labor add to total output?

A) 20
B) 40
C) 60
D) 80
E) none of the above

Question 40

If a firm is producing a given level of output in a technically efficient manner, then it must be the case that

A) this is the lowest cost method of producing that output.
B) each input is producing its maximum marginal product.
C) this output level is the most that can be produced with the given levels of inputs.
D) both a and c
E) all of the above

Question 41

Average fixed cost

A) increases as output increases.
B) decreases as output increases.
C) increases if marginal cost is increasing.
D) increases if marginal cost is greater than average fixed cost.

Question 42

Refer to the following:

$\begin{array}{ccccccccc} & & \text { Total } & \text { Total } & \text { Average } & \text { Average } & \text { Average } & \\& \text { Total } & \text { Fixed } & \text { Variable } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline 100&560&-&60&-&-&-&-\\200&-&-&-&-&-&-&4.00\\300&-&-&-&-&4.00-&-&-\\400&-&-&-&-&-&7.00&-\\\end{array}$

-What is the marginal cost of the 250th unit of output?

A) $0.14
B) $2.40
C) $4.00
D) $7.40
E) none of the above

Question 43

A short-run cost function assumes that

A) the level of output is fixed.
B) at least one input is fixed in supply.
C) all inputs are fixed in supply.
D) both a and b
E) both b and c

Question 44

Refer to the following:

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.


-Which of the following is true?

A) Average variable cost is increasing.
B) Marginal cost is increasing.
C) Average variable cost is decreasing.
D) Cannot determine without more information.

Question 45

A firm is currently producing 10 units of output; marginal cost is $24 and average total cost is $6 at this level of output. The average total cost at 9 units of output is:

A) $4
B) $5
C) $6
D) $8
E) none of the above

Question 46

Average total cost

A) increases as output increases.
B) decreases as output increases.
C) increases if marginal cost is increasing.
D) increases if marginal cost is greater than average total cost.
E) both c and d

Question 47

Refer to the following:

$\begin{array}{rr}\text { Output } & \text { Total Cost } \\\hline 0 & \$ 300 \\50 & 800 \\100 & 1050 \\150 & 1650 \\200 & 2400\end{array}$

-What is total variable cost when 100 units of output are produced?

A) $5
B) $10.50
C) $105
D) $1050
E) none of the above

Question 48

Refer to the following:

$\begin{array}{rr}\text { Output } & \text { Total Cost } \\\hline 0 & \$ 300 \\50 & 800 \\100 & 1050 \\150 & 1650 \\200 & 2400\end{array}$

-What is average fixed cost when 150 units of output are produced?

A) $2
B) $9
C) $11
D) $16.50
E) none of the above

Question 49

Refer to the following:

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.


-What is the marginal cost?

A) $0.63
B) $0.94
C) $1.60
D) $3.20
E) none of the above

Question 50

Refer to the following:

$\begin{array}{ccccccccc} & & \text { Total } & \text { Total } & \text { Average } & \text { Average } & \text { Average } & \\& \text { Total } & \text { Fixed } & \text { Variable } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline 100&560&-&60&-&-&-&-\\200&-&-&-&-&-&-&4.00\\300&-&-&-&-&4.00-&-&-\\400&-&-&-&-&-&7.00&-\\\end{array}$

-What is the total fixed cost when 400 units of output are produced?

A) $500
B) $2000
C) $3500
D) $5000
E) none of the above

Question 51

Refer to the following:

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.


-Suppose that installation of a new assembly line increases the output produced per worker. The cost per unit of output

A) will increase.
B) will decrease.
C) will be unchanged.
D) is at its maximum.
E) is at its minimum

Question 52

Refer to the following:


Above is a firm's average product of labor and marginal product of labor curves. The price of labor is $60 per unit.

-When the firm uses 4 units of labor, what is AVERAGE variable cost?

A) $10
B) $24
C) $124
D) $240
E) none of the above

Question 53

A fixed cost is

A) the cost of any input with a fixed price per unit.
B) a cost which increases in a fixed proportion as output increases.
C) a cost the firm must pay even if output is zero.
D) both b and c
E) all of the above

Question 54

Refer to the following:


Above is a firm's average product of labor and marginal product of labor curves. The price of labor is $60 per unit.

-Diminishing returns set in with the

A) 3rd unit of labor.
B) 6th unit of labor.
C) 10th unit of labor.
D) 12th unit of labor.
E) 14th unit of labor.

Question 55

Refer to the following:

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.


-What is average total cost?

A) $0.825
B) $0.63
C) $1.80
D) $4.10
E) none of the above

Question 56

Marginal cost

A) measures how total cost changes when input prices change.
B) measures how total cost changes when one more unit of output is produced.
C) is less than average cost when average cost is decreasing.
D) both a and b
E) both b and c
Questions 49 through 53 refer to the following:
Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.

Question 57

Refer to the following:

$\begin{array}{ccccccccc} & & \text { Total } & \text { Total } & \text { Average } & \text { Average } & \text { Average } & \\& \text { Total } & \text { Fixed } & \text { Variable } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline 100&560&-&60&-&-&-&-\\200&-&-&-&-&-&-&4.00\\300&-&-&-&-&4.00-&-&-\\400&-&-&-&-&-&7.00&-\\\end{array}$

-What is average fixed cost when 300 units of output are produced?

A) $0.60
B) $3.00
C) $160
D) $500
E) none of the above

Question 58

Refer to the following:


Above is a firm's average product of labor and marginal product of labor curves. The price of labor is $60 per unit.

-When the firm uses 6 units of labor, what is marginal cost?

A) $0.25
B) $5
C) $6.67
D) $7.06
E) $10.25

Question 59

Refer to the following:

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.


-What is average variable cost?

A) $0.63
B) $1.60
C) $3.20
D) $10.00
E) none of the above

Question 60

Refer to the following:

$\begin{array}{ccccccccc} & & \text { Total } & \text { Total } & \text { Average } & \text { Average } & \text { Average } & \\& \text { Total } & \text { Fixed } & \text { Variable } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline 100&560&-&60&-&-&-&-\\200&-&-&-&-&-&-&4.00\\300&-&-&-&-&4.00-&-&-\\400&-&-&-&-&-&7.00&-\\\end{array}$

-What is average total cost when 200 units of output are produced?

A) $2.30
B) $2.50
C) $4.00
D) $4.80
E) none of the above

Question 61

Refer to the following:
The capital stock is fixed at 5 units, the price of capital is $60 per unit, and the price of labor is $20 per unit.

$$\begin{array} { c c } \text { units of } & \text { units of } \\\text { Labor } & \text { Output } \\\hline 2 & 10 \\4 & 26 \\0 & 46 \\8 & 60 \\10 & 72 \\12 & 80\end{array}$$

-If the firm produces 80 units of output, what is its total cost of production?

A) $540
B) $1,600
C) $1,900
D) $5,040
E) none of the above

Question 62

Refer to the following:

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000.


-What is the marginal product of labor?

A) $8 per worker
B) 8 units of output per worker
C) $16 per worker
D) 16 units of output per worker
E) none of the above

Question 63

Refer to the following:
The capital stock is fixed at 40 units, the price of capital is $15 per unit, and the price of labor is $80 per unit.
$$\begin{array} { c c } \text { units of } & \text { units of } \\\text { Labor } & \text { Output } \\\hline 5 & 40 \\10 & 100 \\15 & 180 \\20 & 220\end{array}$$

-If the firm produces 40 units of output, what is average fixed cost?

A) $7.50
B) $25
C) $120
D) $600
E) none of the above

Question 64

Refer to the following:
The capital stock is fixed at 40 units, the price of capital is $15 per unit, and the price of labor is $80 per unit.
$$\begin{array} { c c } \text { units of } & \text { units of } \\\text { Labor } & \text { Output } \\\hline 5 & 40 \\10 & 100 \\15 & 180 \\20 & 220\end{array}$$

-If the firm produces 180 units of output, what is total variable cost?

A) $1,200
B) $1,800
C) $14,400
D) $17,100
E) none of the above

Question 65

Refer to the following:


-In the above figure, what is the TOTAL cost of producing 5 units of output?

A) $10
B) $60
C) $100
D) $225
E) $2,000

Question 66

Refer to the following:
The capital stock is fixed at 40 units, the price of capital is $15 per unit, and the price of labor is $80 per unit.
$$\begin{array} { c c } \text { units of } & \text { units of } \\\text { Labor } & \text { Output } \\\hline 5 & 40 \\10 & 100 \\15 & 180 \\20 & 220\end{array}$$

-How much does the 50th unit of output add to the firm's total cost?

A) $6.67
B) $10
C) $400
D) $600
E) none of the above

Question 67

Refer to the following:

Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the last worker added 12 units of output, and total fixed cost is $3,600.


-What is marginal cost?

A) $.20
B) $5
C) $240
D) $720
E) none of the above

Question 68

Refer to the following:

The wage rate is $600 and total fixed cost is $15,000.

-How much output does the firm produce when average variable cost is at its minimum?

A) 270
B) 375
C) 30
D) 1,600
E) 4,800

Question 69

Refer to the following:

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000.


-What output is 4,000 units,

A) average variable cost is decreasing.
B) average variable cost is increasing.
C) average total cost is decreasing.
D) average total cost is increasing.
E) both a and c

Question 70

Refer to the following:

Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the last worker added 12 units of output, and total fixed cost is $3,600.


-What is average total cost?

A) $2
B) $8
C) $600
D) $1800
E) none of the above

Question 71

Refer to the following:

$\begin{array}{rr}\text { Output } & \text { Total Cost } \\\hline 0 & \$ 300 \\50 & 800 \\100 & 1050 \\150 & 1650 \\200 & 2400\end{array}$

-What is average variable cost when output is 200?

A) $2.00
B) $12.00
C) $10.50
D) $240
E) $210

Question 72

Refer to the following:

$\begin{array}{rr}\text { Output } & \text { Total Cost } \\\hline 0 & \$ 300 \\50 & 800 \\100 & 1050 \\150 & 1650 \\200 & 2400\end{array}$

-The additional cost of producing the 170th unit of output is:

A) $10.50
B) $11.50
C) $13
D) $15
E) none of the above

Question 73

Short-run average cost is

A) always greater than long-run average cost.
B) always less than long-run average cost.
C) less than short-run marginal cost when short-run marginal cost is decreasing.
D) both a and c
E) none of the above

Question 74

Refer to the following:

The wage rate is $600 and total fixed cost is $15,000.

-What is average variable cost at its minimum?

A) $3.75
B) $30
C) $0.94
D) $28
E) $2.80

Question 75

Refer to the following:
The capital stock is fixed at 5 units, the price of capital is $60 per unit, and the price of labor is $20 per unit.

$$\begin{array} { c c } \text { units of } & \text { units of } \\\text { Labor } & \text { Output } \\\hline 2 & 10 \\4 & 26 \\0 & 46 \\8 & 60 \\10 & 72 \\12 & 80\end{array}$$

-How much does the 12th unit of output add to the firm's total variable cost?

A) $2.50
B) $4
C) $5
D) $20
E) $40

Question 76

Refer to the following:

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000.


-What is average variable cost?

A) $0.32
B) $16
C) $20
D) $1,280
E) none of the above

Question 77

Refer to the following:

$\begin{array}{rr}\text { Output } & \text { Total Cost } \\\hline 0 & \$ 300 \\50 & 800 \\100 & 1050 \\150 & 1650 \\200 & 2400\end{array}$

-What is average fixed cost when 200 units of output are produced?

A) $2.80
B) $80
C) $150
D) $1.50
E) none of the above

Question 78

Refer to the following:
The capital stock is fixed at 5 units, the price of capital is $60 per unit, and the price of labor is $20 per unit.

$$\begin{array} { c c } \text { units of } & \text { units of } \\\text { Labor } & \text { Output } \\\hline 2 & 10 \\4 & 26 \\0 & 46 \\8 & 60 \\10 & 72 \\12 & 80\end{array}$$

-If the firm produces 60 units of output, what is average variable cost?

A) $5
B) $7.67
C) $20
D) $57.50
E) $2.67

Question 79

Refer to the following:

$\begin{array}{rr}\text { Output } & \text { Total Cost } \\\hline 0 & \$ 300 \\50 & 800 \\100 & 1050 \\150 & 1650 \\200 & 2400\end{array}$

-The additional cost of producing the 60th unit of output is:

A) $5
B) $250
C) $8
D) $120
E) $80

Question 80

Refer to the following:

The wage rate is $600 and total fixed cost is $15,000.

-When there are 40 workers, what is average variable cost?

A) $0.23
B) $5.00
C) $4.10
D) $6.00
E) $12.00