Question 1

Which inputs can be altered in the short run?

Accepted Answer

In the short run, firms can alter variable inputs such as the number of hours that existing employees work, but they cannot easily change fixed inputs like heavy machinery, plant capacity, or the total number of plants in operation.

Question 2

Which situation would best describe a long-run production decision?

Accepted Answer

Long-run production decisions often involve significant changes to a business's capacity or scale, such as opening a new location, which requires substantial investment and planning.

Question 3

A wedding planner determines that one waiter can serve 30 guests, two waiters can serve 70 guests, three waiters can serve 120 guests, four waiters can serve 160 guests, and five waiters can serve 180 guests. The marginal product of the third waiter is _____ guests.

Accepted Answer

The marginal product of the third waiter is the additional number of guests served by adding the third waiter. Two waiters can serve 70 guests, and three waiters can serve 120 guests. Therefore, the marginal product of the third waiter is 120 - 70 = 50 guests.

Question 4

Justin owns a home entertainment installation company. One employee can complete two installations per month; two employees can complete five installations, three employees can complete nine installations, four employees can complete twelve installations, and five employees can complete eleven installations. Diminishing marginal returns begin with the _____ worker.

Accepted Answer

Diminishing marginal returns begin when adding an additional worker results in a smaller increase in output than the previous worker added. The third worker adds 4 installations (from 5 to 9), but the fourth worker adds only 3 installations (from 9 to 12), indicating diminishing returns start with the fourth worker.

Question 5

Travis's Basketball Training Camp currently has five trainers and a total product of 38 personal training sessions per day. When Travis hires its sixth trainer, total product rises to 42 sessions per day. What is the average product and marginal product when the sixth trainer is hired?

Accepted Answer

The average product when the sixth trainer is hired is the total product divided by the number of trainers, which is 42 sessions divided by 6 trainers, equaling 7 sessions per trainer. The marginal product is the increase in total product from hiring the sixth trainer, which is the difference between 42 sessions and 38 sessions, equaling 4 sessions.

Question 6

Which statement describes a situation in which negative returns to labor occur?

Accepted Answer

Negative returns to labor occur when the addition of one more unit of labor results in a decrease in total output, which is when the marginal product of labor falls below zero.

Question 7

Sandra's Coffee Shop uses robots to make coffee. Each robot is identical and is able to fill exactly 20 coffee orders per hour. If there are 5 robots, the total product is _____ and the marginal product of each robot is _____.

Accepted Answer

The total product is the total output produced by the robots, which is 5 robots * 20 orders per hour = 100 orders per hour. The marginal product is the additional output generated by adding one more robot, which remains 20 orders per hour since each robot's capacity is identical.

Question 8

Which statement is TRUE regarding the total product and marginal product curves?

Accepted Answer

The total product curve reaches its peak when the marginal product is zero because at this point, adding more units of labor does not increase total output, indicating the maximum output has been reached.

Question 9

David earns three hits in the first baseball game, one hit in the second game, and five hits in the third. What was his average number of hits based on these three games?

Accepted Answer

David's total number of hits is 3 (first game) + 1 (second game) + 5 (third game) = 9 hits. To find the average, divide the total hits by the number of games: 9 hits / 3 games = 3 hits per game.

Question 10

If a firm's average product is rising, which statement must be TRUE?

Accepted Answer

When the average product is rising, it means that each additional unit of input is producing more output than the average of the previous units. This can only happen if the marginal product (the output from the latest unit of input) is higher than the average product at that point.

Question 11

In the following table, diminishing marginal returns begin with the addition of the _____ worker.
$\begin{array}{|l|l|}
\hline \text { Labor } & \text { Quantity of Chairs Produced } \
\hline 1 & 8 \
\hline 2 & 19 \
\hline 3 & 34 \
\hline 4 & 43 \
\hline 5 & 49 \
\hline 6 & 51 \
\hline 7 & 50 \
\hline
\end{array}$

Accepted Answer

Diminishing marginal returns occur when the addition of a worker results in a smaller increase in output than the previous worker added. From the table, the increase in chairs produced decreases for the first time with the addition of the fourth worker (from 34 to 43, an increase of 9 chairs, compared to the previous increase of 15 chairs from the second to the third worker).

Question 12

If a firm is producing in the downward-sloping portion of its total product curve, this means that the firm is experiencing _____ marginal returns.

Accepted Answer

The answer of If a firm is producing in the...

Question 13

If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is

Accepted Answer

The marginal cost of the fourth unit is calculated by subtracting the total cost of 3 units ($40) from the total cost of 4 units ($50), which equals $10.

Question 14

If the total cost of producing five water heaters is $800 and the total cost of producing six water heaters is $900, the marginal cost of the sixth water heater is _____ and the average total cost of six water heaters is _____.

Accepted Answer

The marginal cost of the sixth water heater is the difference in total cost when producing six water heaters instead of five, which is $900 - $800 = $100. The average total cost of six water heaters is the total cost divided by the number of water heaters, which is $900 / 6 = $150.

Question 15

If the total variable cost of producing three wickets is $30, while the average fixed cost of producing three wickets is $25, then the total cost of producing three wickets is

Accepted Answer

The answer of If the total variable cost of producing...

Question 16

Mizumi's Sushi has a fixed cost of $8,000 and a total cost of $11,000 when the quantity produced is 2,000 sushi rolls. At this quantity, what is Mizumi's average variable cost (AVC) and average total cost (ATC)?

Accepted Answer

AVC = $1.50 and ATC = $5.50AVC is calculated by dividing the variable cost by the quantity produced. In this case, the variable cost is $11,000 - $8,000 = $3,000. So, AVC = $3,000 / 2,000 = $1.50.ATC is calculated by dividing the total cost by the quantity produced. In this case, the total cost is $11,000. So, ATC = $11,000 / 2,000 = $5.50.

Question 17

The value of U in the chart below is
$\begin{array}{|l|l|l|l|l|l|l|}
\hline \text { Quantity } & F C & V C & T C & M C & \text { AVC } & \text { ATC } \
 \hline & & \text { U } & 24 & -. & & 8 \
\hline 4 & 12 & & & 4 & & Z \
\hline
\end{array}$

Accepted Answer

The Total Cost (TC) is the sum of Fixed Cost (FC) and Variable Cost (VC). Given that TC is 24 and FC is 12, VC (U) must be 12.

Question 18

The following shows the costs associated with the number of pets groomed by Janee's Mobile Pet Grooming Service. What is the value of X?
$\begin{array}{|l|l|l|l|l|l|l|l|}
\hline \text { Quantity of Pets } & \boldsymbol{F C} & \boldsymbol{V C} & \boldsymbol{T C} & \boldsymbol{M C} & \boldsymbol{A V C} & \boldsymbol{A T C} \
\hline 0 & & & 50 & - & - & - \
\hline 1 & & & & \mathrm{Y} & & 60 \
\hline 2 & 50 & & \mathrm{X} & 6 & & \
\hline 3 & & & & & 11 & \
\hline
\end{array}$

Accepted Answer

The answer of The following shows the costs associated with...

Question 19

Which short-run cost curves can never rise with increased production?

Accepted Answer

Average Fixed Cost (AFC) decreases as production increases because fixed costs are spread over a larger number of units, making the cost per unit decrease.

Question 20

Walmart is able to order huge quantities of shovels and rakes at very low prices from many different factories in China as it opens more stores. This BEST represents

Accepted Answer

Walmart's ability to order large quantities of goods at lower prices due to opening more stores is an example of long-run economies of scale, where costs per unit decrease as output increases over time.

Quiz 7: Production and Costs