Question 1

Which of the following would cause a firm's production function to shift upward?

Accepted Answer

Increased training for the firm's workers can improve the productivity of the firm, leading to an upward shift in the production function. The other options do not necessarily result in an upward shift in the production function.

Question 2

Technological changes that increase productivity shift the

Accepted Answer

Technological changes that increase productivity lead to a decrease in average total cost as the same amount of output can be produced with fewer inputs.

Question 3

The In The News article "Ford Pumps $400 Million into Kansas City Plant" says that

Accepted Answer

The article states that the $400 million investment by Ford is aimed at "long-term production," indicating a decision made with economies of scale in mind.

Question 4

Assuming labor is a variable input, an increase in labor productivity will result in

Accepted Answer

An increase in labor productivity means that more output can be produced with the same amount of labor, which will cause the marginal cost of production to decrease. This results in a downward shift in the MC curve.

Question 5

In Figure 20.4, a firm that produces over 800 units of output should choose a plant with which short-run average total cost function?

Accepted Answer

The answer of  In Figure 20.4, a firm that...

Question 6

Refer to Figure 21.5. Diseconomies of scale begin to occur

Accepted Answer

The answer of  Refer to Figure 21.5. Diseconomies of...

Question 7

The creation of the World Wide Web has contributed to all of the following except

Accepted Answer

The creation of the World Wide Web has not increased marginal costs, but rather has decreased information and transaction costs while increasing productivity.

Question 8

The World View article titled "United States Gains Cost Advantage" says productivity advances have contributed to U.S. competitiveness in world markets. When improvements in productivity reduce costs, the production function shifts

Accepted Answer

When improvements in productivity reduce costs, the production function shifts upward and the cost curves shift downward. This means that the same amount of output can be produced at a lower cost, allowing the firm to produce more efficiently and at a lower price. This increases competitiveness in world markets.

Question 9

In Figure 21.4, the long-run average total cost curve is given by the curved line segment

Accepted Answer

The long-run average total cost curve is the envelope of all the short-run average total cost curves, and it is given by the lowest points of each short-run average total cost curve. In the graph, the lowest points of each curve fall on the line ABFDGE, and therefore this is the long-run average total cost curve.

Question 10

Which of the following is least likely to increase productivity?

Accepted Answer

While a higher wage rate may lead to increased motivation and satisfaction among workers, it does not necessarily translate to increased productivity. Other factors such as technological advances, improved labor skills, and increased managerial capabilities are more directly linked to productivity gains.

Question 11

Actual output will always equal the limit described in the production function.

Accepted Answer

The actual output may be less than the limit described in the production function due to various factors such as lack of resources, inefficiencies, and external factors such as market demand.

Question 12

Unit labor cost is equal to the

Accepted Answer

Unit labor cost is calculated as the wage rate divided by the marginal physical product (MPP) of labor. This measures the cost of labor per unit of output produced.

Question 13

Refer to Figure 21.5. Economies of scale occur in the following range of factory sizes

Accepted Answer

The graph shows that economies of scale occur from factory #1 to factory #3, as the average cost per unit decreases as the factory size increases within this range. Beyond factory #3, the average cost per unit remains relatively constant, indicating that there are no further significant economies of scale. Therefore, the correct answer is B.

Question 14

Higher education levels and better management

Accepted Answer

Higher education levels and better management can lead to more efficient use of resources and improved productivity, resulting in a lower long-run average total cost (ATC) curve. This means that the same level of output can be produced at a lower cost, leading to a shift downward of the long-run ATC curve.

Question 15

When the wage rate is $10 per hour and the MPP of a worker is 15 units per hour, the unit labor cost is

Accepted Answer

Unit labor cost = Wage rate/MPP
Unit labor cost = $10/15 units per hour
Unit labor cost = $0.67 per unit.

Question 16

Complete Table 21.5:  The total variable cost of the first unit of output in Table 21.5 is

Accepted Answer

Looking at the table, the total variable cost for the first unit of output is $8.00. This can be seen in the first row where the total costs are listed for each level of production. The other answer choices are not supported by the information provided in the table.

Question 17

According to the World View article titled "United States Gains Cost Advantage," during the last decade, unit labor costs in the United States declined

Accepted Answer

The article explains that the decline in unit labor costs in the United States was due to productivity advances that outpaced wage increases. This means that the United States was able to produce goods and services more efficiently, reducing the cost of each unit of output. This trend led to a cost advantage for the United States in global markets.

Question 18

The productivity of any input is independent and is not affected by the other resources that are used.

Accepted Answer

The productivity of any input can be affected by the other resources that are used, such as the quality of raw materials or the skill level of employees. Different resources can have synergistic or inhibiting effects on each other.

Question 19

One In the News article titled "Funeral Giant Moves In on Small Rivals" reports that profit for a Houston-based funeral giant is 31 cents on every dollar versus a profit of 12 cents for the funeral industry in general. Such profits are most likely the result of

Accepted Answer

This is because the higher profit margin for the Houston-based funeral giant indicates that they are benefiting from economies of scale, which is the cost advantage that comes from a higher level of production.

Question 20

In Figure 21.4, a firm that produces between 600 and 800 units per period should choose a plant with a short-run average total cost function of

Accepted Answer

The answer of  In Figure 21.4, a firm that...

Quiz 7: Inflation