Question 1

As a firm increases production in the short run, the marginal cost of output increases because the marginal product of the variable input decreases.

Accepted Answer

This is a common phenomenon known as the law of diminishing marginal returns, which states that in the short run, as a firm increases the quantity of a variable input (such as labor) with a given quantity of fixed inputs (such as capital), the marginal product of the variable input will eventually decrease. This means that each additional unit of the variable input will add less to total output than the previous unit. As a result, the firm will have to increase the quantity of the variable input at an increasing rate to produce each additional unit of output, leading to a rising marginal cost curve.

Question 2

The short-run average total cost curve is  -shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect, while at high output levels the reverse is true.

Accepted Answer

The answer of The short-run average total cost curve is...

Question 3

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 5 cakes?

Accepted Answer

The average fixed cost is calculated by dividing the total fixed costs by the number of units produced. Here, the fixed cost is $10, and the number of cakes is 5. So, $10/5 = $2.

Question 4

In the long run, every input available to a manufacturer is a fixed input.

Accepted Answer

In the long run, all inputs are considered variable inputs as manufacturers can adjust their inputs and production levels over time. Fixed inputs are those that cannot be easily adjusted in the short term, such as buildings, land, and capital equipment. However, in the long run, manufacturers can sell off, lease, or purchase new fixed inputs to adjust their production levels as needed.

Question 5

The total product curve for the Wallmark Greeting Card Company shows how the quantity of output depends on the quantity of the variable input for a given amount of the fixed inputs.

Accepted Answer

This is a correct statement about the total product curve. It illustrates the relationship between the quantity of output and the quantity of the variable input, while holding the amount of the fixed inputs constant.

Question 6

Joan adds one more employee to her construction company. The additional output produced by this employee represents the average product of this employee.

Accepted Answer

The additional output produced by the new employee represents the marginal product, not the average product. The average product is calculated by dividing the total output by the total number of employees.

Question 7

If average total cost is declining, marginal cost cannot be increasing.

Accepted Answer

It is possible for marginal cost to increase even if average total cost is declining. As long as marginal cost remains below average total cost, the average will continue to decline. Therefore, average total cost and marginal cost can move in opposite directions.

Question 8

When returns are diminishing, the marginal cost curve is upward-sloping.

Accepted Answer

When returns are diminishing, it means that producing one additional unit of output costs more than producing the previous unit. This leads to an upward slope in the marginal cost curve.

Question 9

The slope of the total product curve is equal to the average product of labor.

Accepted Answer

The slope of the total product curve is equal to the marginal product of labor, not the average product of labor.

Question 10

Farmers in the United States grow about three times as much wheat per acre as do farmers in Western Europe.

Accepted Answer

Farmers in Western Europe typically achieve higher wheat yields per acre compared to those in the United States, due to factors like more intensive farming practices, better varieties of wheat, and differences in climate and soil fertility.

Question 11

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average total cost of 4 cakes?

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 12

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the marginal cost of the fifth cake?

Accepted Answer

The marginal cost is the change in total cost when one more unit is produced. If the fixed cost is $10, the total cost for the first four cakes and the fifth cake must be compared to find the change. The marginal cost of the fifth cake is the difference in total cost between producing four cakes and five cakes.

Question 13

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average total cost of 5 cakes?

Accepted Answer

To find the average total cost, add the fixed costs to the total variable costs for 5 cakes, then divide by the number of cakes. If fixed costs are $10 and the total cost for 5 cakes is $50, the average total cost is ($10 + $50) / 5 = $12.

Question 14

In the short run, if marginal cost is higher than average total cost, producing an extra unit of output must raise average total cost.

Accepted Answer

If marginal cost is higher than average total cost, producing an extra unit of output means that the additional cost is higher than the current average cost. This will cause the average total cost to increase.

Question 15

Scott operates a business that takes people on boat tours in Crystal River, Florida. The amount of fuel Scott uses each day is a variable input.

Accepted Answer

The amount of fuel Scott uses each day is not fixed, and can vary depending on the number of tours he conducts and the distance he travels. Therefore, it is a variable input.

Question 16

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average variable cost of 5 cakes?

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 17

If the average total cost curve and the average variable cost curve are both U-shaped, then the minimum point of the average total cost curve must lie above the minimum point of the average variable cost curve.

Accepted Answer

The average total cost curve includes both fixed and variable costs, while the average variable cost curve includes only variable costs. The fixed costs cause the average total cost curve to be higher, and its minimum point occurs at a higher level of output than the minimum point of the average variable cost curve.

Question 18

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the marginal cost of the fourth cake?

Accepted Answer

The marginal cost is the change in total cost when one more unit is produced. If fixed costs are $10, the total cost for the first three cakes minus the total cost for the first four cakes gives the marginal cost of the fourth cake.

Question 19

As more labor is added to a fixed amount of capital, eventually the marginal product of labor decreases.

Accepted Answer

This is due to the law of diminishing returns. When additional units of labor are added to a fixed amount of capital, there comes a point where the efficiency of each additional worker decreases, resulting in a decrease in the marginal product of labor.

Question 20

In the short run, the average total cost curve always lies above the average variable cost curve.

Accepted Answer

The average total cost includes both fixed and variable costs, while the average variable cost includes only variable costs. Therefore, the average total cost curve is always above the average variable cost curve in the short run.

Quiz 11: Behind the Supply Curve: Inputs and Costs

As a firm increases production in the short run, the marginal cost of output increases because the marginal product of the variable input decreases.

The short-run average total cost curve is -shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect, while at high output levels the reverse is true.

Use the following to answer questions: -(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 5 cakes?