Question 1

To produce 150 units of output,the firm must use 3 employee-hours.To produce 300 units of output,the firm must use 8 employee-hours.Apparently,the firm is

Accepted Answer

The increasing number of employee-hours required to produce additional units of output indicates diminishing marginal returns, which suggests that the firm is not able to efficiently use its resources to produce more output.

Question 2

The law of diminishing marginal returns

Accepted Answer

The law of diminishing marginal returns holds only in the short run because it describes the decrease in the additional output produced when one input is increased while other inputs are held constant, which is a short-run scenario.

Question 3

A variable factor of production

Accepted Answer

A variable factor of production is one that can be easily changed in quantity in the short run, but may be difficult or impossible to change in the long run. Therefore, it is variable in both the short run and the long run. The other choices are incorrect; A is wrong because a variable factor may be fixed in the long run, B is incorrect because a variable factor is subject to the law of diminishing marginal returns, D is wrong because variable factors are important in profit maximization decisions, and E is incorrect because variable factors are not limited to the short run.

Question 4

Profit is the

Accepted Answer

Profit is calculated as the difference between total revenue and the sum of explicit and implicit costs, which includes both accounting and opportunity costs.

Question 5

The reason for the existence of the law of diminishing marginal returns is that

Accepted Answer

The law of diminishing marginal returns occurs because, as more workers are added to a fixed amount of capital or workspace, each additional worker contributes less to output since they have less capital to work with.

Question 6

Which of the following factors of production is likely to be fixed in the short run?

Accepted Answer

The location of the firm is likely to be fixed in the short run as it is not easy to move the entire firm to a new location quickly. The other options, such as employee-hours, electricity consumption, paper usage, and RAM installed on the network server, can be adjusted in the short run based on the production needs.

Question 7

Which of the following factors of production is likely to be variable in the short run?

Accepted Answer

The number of employee-hours is likely to be variable in the short run as firms can adjust the amount of hours worked by existing employees or hire additional employees to meet fluctuations in demand. The other factors listed are more likely to be fixed in the short run, such as the location of the firm, size of the plant or office, specialized machinery, and custom-designed software application features.

Question 8

Profit maximization is the primary objective of

Accepted Answer

Profit maximization is the primary objective of private firms, as they aim to generate as much profit as possible for their owners or shareholders. Government, military, labour unions, and political parties have other primary objectives such as serving the public interest, national security, protecting workers' rights, and promoting public policies respectively.

Question 9

As long as the marginal product of labour is positive,a

Accepted Answer

As long as the marginal product of labor is positive, hiring additional workers will increase the firm's total output.

Question 10

A profit-maximizing price taker must decide

Accepted Answer

A price taker cannot influence the market price and must accept it as given, so they only decide on the quantity to produce to maximize profit.

Question 11

The short run is defined as

Accepted Answer

The short run is a period in which at least one factor of production is fixed, meaning not all inputs can be varied.

Question 12

Total revenue minus the sum of explicit and implicit costs defines

Accepted Answer

The formula for profit is total revenue minus total cost, where total cost is the sum of explicit and implicit costs. Therefore, B is the correct choice as it defines profit.

Question 13

The long run is defined as

Accepted Answer

The long run is a period in which all factors of production are variable, meaning firms have the ability to adjust their inputs to optimize their production. The length of the long run is not defined by a specific time period, but rather the level of flexibility firms have to adjust their inputs. Therefore, choice B is the best answer.

Question 14

When the existing factory is becoming increasingly crowded and workers must wait for their turn to use existing tools,it is an example of diminishing

Accepted Answer

Diminishing marginal returns is a concept in economics which states that as more and more units of a variable input, such as labor, are added to a fixed input, such as a factory or land, the overall output of the production process will eventually begin to decrease. In this scenario, the increasing number of workers using the same set of tools is an example of diminishing returns, as the workers are unable to work as efficiently as they would with their own set of tools.

Question 15

Diminishing marginal returns often arise because the

Accepted Answer

Diminishing marginal returns occur when the additional units of input (in this case, the additional worker) lead to a smaller increase in output than the previous units of input. This can happen when the additional worker must share the same machines and workspace, which can slow down the production process and reduce the overall efficiency. It is not related to the laziness of workers, the training period for new hires, the size of the plant, or the technological level of the plant.

Question 16

The location of a firm will be a _________ factor of production in ________ run.

Accepted Answer

In the long run, all factors of production, including location, can be changed or varied by the firm.

Question 17

When some factors of production are fixed,equal-sized increases in production will eventually require

Accepted Answer

When some factors of production are fixed (such as capital or land), equal-sized increases in production will eventually require larger increases in the variable factors (such as labor or raw materials). This is because the fixed factor cannot increase, and as more and more of the variable factor is added, it may become less productive or efficient (due to diminishing marginal returns), requiring even larger increases to maintain the same level of output.

Question 18

A period in which at least some factors of production are unchangeable defines

Accepted Answer

The period in which at least some factors of production are unchangeable defines the short run. The long run refers to a period of time in which all factors of production can be changed, while the medium run and two years or less are not widely recognized economic terms. One year or less may be considered a short period, but it does not encompass the specific requirement of some factors being unchangeable.

Question 19

A fixed factor of production

Accepted Answer

The answer of A fixed factor of production
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Question 20

Given a fixed amount of technology,machines,and work space,we expect the

Accepted Answer

This is the law of diminishing marginal returns. As more and more units of labor are added to a fixed amount of capital, the marginal product of labor will eventually fall. This occurs because the fixed capital becomes increasingly crowded as more labor is added, reducing the productivity of each additional unit of labor.

Quiz 5: Perfectly Competitive Supply: the Cost Side of the Market