Question 1

-The table above shows some data that describe Tom's T- Shirts' total product when Tom has one sewing machine. Diminishing marginal returns begin when the _______ is employed.
A) second worker
B) fourth worker
C) third worker
D) fifth worker

Accepted Answer

Diminishing marginal returns occur when each additional worker contributes less to total output than the previous worker. This typically starts when the third worker is employed, as the increase in output from the third worker is less than the increase from the second worker.

Question 2

-In the above table, the marginal product of the 7th worker is 6. What is the total product when 7 workers are employed?
A) 70
B) 76
C) 68
D) 72

Accepted Answer

The total product when 7 workers are employed is the sum of the marginal products of the first 7 workers. The marginal product of the 7th worker is 6, so the total product when 7 workers are employed is 70.

Question 3

Profit maximisation
A) makes a firm remain small in the long run.
B) leads a firm to become the target of a takeover.
C) increases the likelihood that a firm will survive.
D) makes a firm become as large as possible.

Accepted Answer

Profit maximisation increases a firm's financial stability and resources, enhancing its ability to survive and compete in the market.

Question 4

A firm's average total cost is $100, its average variable cost is $90, and its total fixed cost is $1,000. Its output is
A) between 70 and 120 units.
B) between 120 and 170 units.
C) more than 170 units.
D) less than 70 units.

Accepted Answer

The average total cost (ATC) is the sum of average variable cost (AVC) and average fixed cost (AFC). Given ATC = $100 and AVC = $90, AFC = $10. Total fixed cost (TFC) is $1,000, so output = TFC/AFC = $1,000/$10 = 100 units, which is between 70 and 120 units.

Question 5

-In the above figure, the long- run average cost curve exhibits diseconomies of scale
A) between 5 and 10 units per hour.
B) between 10 and 20 units per hour.
C) along the entire curve.
D) between 20 and 25 units per hour.

Accepted Answer

Diseconomies of scale occur when the long-run average cost curve slopes upward, indicating that costs per unit increase as output increases.

Question 6

The average product of labour is equal to the
A) slope of the marginal product of labour curve.
B) total number of workers hired divided by the total product.
C) total product divided by the total number of workers hired.
D) Both answers B and C are correct.

Accepted Answer

The average product of labor is calculated by dividing the total product by the total number of workers hired.

Question 7

"Diminishing marginal returns" refer to a situation in which the
A) average product of the next worker hired is less than the average product of the previous worker hired.
B) marginal product of the next worker hired is less than the marginal product of the previous worker hired.
C) average cost of the next worker hired is less than the average cost of the previous worker hired.
D) marginal cost of the next worker hired is less than the marginal cost of the previous worker hired.

Accepted Answer

Diminishing marginal returns occur when adding an additional factor of production results in a smaller increase in output than the previous addition, which is accurately described in option B regarding the marginal product of workers.

Question 8

As output increases, marginal cost will eventually
A) decrease because of the law of diminishing returns.
B) increase because of the law of increasing returns.
C) increase because of the law of diminishing returns.
D) decrease because of the law of increasing returns.

Accepted Answer

Marginal cost will eventually increase because of the law of diminishing returns. This economic principle states that as the quantity of a factor of production increases, holding all other inputs constant, the additional output (marginal product) generated by additional units of that input will eventually decrease. This leads to an increase in the cost of producing each additional unit, or marginal cost.

Question 9

-The above table shows the total product schedule for the campus bookshop. If employees are paid
$6 per hour and there are no other variable costs, then what is the marginal cost (MC) per book of increasing book sales from 83 to 87 books per hour?
A) $4.00
B) $6.00
C) $1.50
D) $2.07

Accepted Answer

The answer of 
-The above table shows the total product...

Question 10

The above table shows the total product of producing hats. The marginal product of the 4th worker is equal to
A) 25 baseball hats.
B) 7 baseball hats.
C) 21 baseball hats.
D) 6.25 baseball hats.

Accepted Answer

The answer of The above table shows the total product...

Question 11

Jefferson's Cleaners
 
-Using the above table, when Jefferson's Cleaners hires three workers,
A) the marginal product of labour is greater than the average product.
B) it has already experienced diminishing marginal returns.
C) the average product of labour is greater than the marginal product.
D) Both answers A and C are correct.

Accepted Answer

The marginal product of labour is greater than the average product when the average product is increasing. In this case, the average product is increasing from 10 to 12 when the number of workers increases from 2 to 3, so the marginal product must be greater than the average product.

Question 12

In a diagram with the total cost curve and the total variable cost curve, as output increases, the vertical distance between these two curves
A) decreases.
B) increases.
C) is constant.
D) gets smaller and then bigger again.

Accepted Answer

The vertical distance between the total cost curve and the total variable cost curve remains constant as output increases because this distance represents the total fixed cost, which does not change with the level of output.

Question 13

-In the above figure, the intersection of curves A and B is the point at which
A) average total cost is minimised.
B) total product is maximised.
C) average variable cost is minimised.
D) average fixed cost is minimised.

Accepted Answer

The intersection of curves A and B typically represents the point where average total cost is minimized. This is because curve A often represents the average total cost (ATC) curve, and curve B could represent the marginal cost (MC) curve, which intersects the ATC at its lowest point.

Question 14

-In the above figure, the average fixed cost curve is curve
A) A.
B) B.
C) C.
D) D.

Accepted Answer

The answer of 
-In the above figure, the average fixed...

Question 15

-The above table shows the short- run total product schedule for the campus bookshop. When the fifth employee is hired, the marginal product is _______ and is _______ the average product.
A) increasing; greater than
B) decreasing; less than
C) decreasing; greater than
D) increasing; less than

Accepted Answer

The marginal product is decreasing because the increase in total product from the fourth to the fifth employee is less than the increase from the third to the fourth. It is greater than the average product because the marginal product is still adding more to the total product than the average contribution of all employees.

Question 16

Which of the following statements is correct?
A) Total fixed cost plus total variable cost equals total cost.
B) As output increases, total cost and total fixed cost increase by the same amount.
C) As output increases, total cost and total fixed cost increase but not necessarily by the same amount.
D) As output increases, total cost increases and total fixed cost decreases.

Accepted Answer

Total cost is the sum of total fixed cost and total variable cost. Fixed costs do not change with the level of output, while variable costs do. Therefore, as output changes, the total cost changes due to the variable cost component, not the fixed cost component.

Question 17

The average total cost curve
A) increases eventually because of diminishing returns.
B) diminishes initially because average fixed costs diminish.
C) is U- shaped.
D) All of the above answers are correct.

Accepted Answer

The average total cost curve is U-shaped due to initially decreasing average fixed costs and eventually increasing costs due to diminishing returns, encompassing all the given reasons.

Question 18

In the long run,
A) all inputs can be varied.
B) output is fixed.
C) some inputs are variable and other inputs are fixed.
D) all inputs are fixed.

Accepted Answer

In the long run, all inputs can be varied, allowing firms to adjust all factors of production to meet their output goals.

Question 19

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's total variable cost?
A) $800
B) $2,000
C) $1,600
D) $2,400

Accepted Answer

Ernie's total variable cost is calculated by subtracting the fixed cost from the total cost: $2,000 - $400 = $1,600.

Question 20

The most important goal of the firm is to
A) maximise its sales volume.
B) maximise its revenues.
C) minimise its costs.
D) maximise its profits.

Accepted Answer

The primary goal of a firm is to maximise its profits, which is achieved by balancing revenue generation and cost management to achieve the highest possible financial gain.

Quiz 13: Producer Choices and Constraints

-The table above shows some data that describe Tom's T- Shirts' total product when Tom has one sewing machine. Diminishing marginal returns begin when the _______ is employed.

-In the above table, the marginal product of the 7th worker is 6. What is the total product when 7 workers are employed?

Profit maximisation

A firm's average total cost is $100, its average variable cost is $90, and its total fixed cost is $1,000. Its output is

-In the above figure, the long- run average cost curve exhibits diseconomies of scale

The average product of labour is equal to the

"Diminishing marginal returns" refer to a situation in which the

As output increases, marginal cost will eventually

-The above table shows the total product schedule for the campus bookshop. If employees are paid $6 per hour and there are no other variable costs, then what is the marginal cost (MC) per book of increasing book sales from 83 to 87 books per hour?

The above table shows the total product of producing hats. The marginal product of the 4th worker is equal to

Jefferson's Cleaners -Using the above table, when Jefferson's Cleaners hires three workers,

In a diagram with the total cost curve and the total variable cost curve, as output increases, the vertical distance between these two curves

-In the above figure, the intersection of curves A and B is the point at which

-In the above figure, the average fixed cost curve is curve

-The above table shows the short- run total product schedule for the campus bookshop. When the fifth employee is hired, the marginal product is _ and is _ the average product.

Which of the following statements is correct?

The average total cost curve

In the long run,

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's total variable cost?

The most important goal of the firm is to