Question 1

The short run refers to a time period
A)of one year or less.
B)in which all factors of production are variable.
C)in which all factors of production are fixed.
D)in which some factors of production are variable, but at least one factor of production is fixed.
E)in which all factors of production are variable, but the technology is fixed.

Accepted Answer

The short run is defined as a time period in which some factors of production are variable, but at least one factor of production is fixed. This means that some inputs can be adjusted while others cannot, such as capital equipment or land. This creates constraints on a firm's ability to fully adjust its production to changing market conditions.

Question 2

Use the figure below to answer the following questions.
  
Figure 11.2.1
-Refer to Figure 11.2.1 which illustrates Tania's total product curve.Which one of the following statements is true?
A)The points above the curve are attainable and inefficient.
B)The points below the curve are attainable and inefficient.
C)The points below the curve are inefficient and unattainable.
D)The points on the curve are efficient and unattainable.
E)Marginal product is equal at every point on the total product curve.

Accepted Answer

The points below the curve are attainable but inefficient as they represent levels of output where resources are underutilized, while the points on the curve represent efficient levels of output where resources are fully utilized. The points above the curve are unattainable as it is not possible to produce more output than the maximum level represented by the curve.

Question 3

Plant refers to those factors of production
A)that are too expensive for the firm to purchase.
B)that must be held in storage for at least one year.
C)that are fixed in the short run.
D)that have a decreasing marginal product as more of the factor is used.
E)which can be purchased only in fixed quantity lots.

Accepted Answer

Plant refers to the fixed factors of production that cannot be varied in the short run. These include items such as buildings, land, and equipment that are essential to the production process but cannot be easily or quickly adjusted to changes in output.

Question 4

Use the information below to answer the following questions.
Fact 11.1.1
January 31, 2008: Starbucks will open 75 more stores abroad than originally predicted, for a total of 975.
February 25, 2008: For three hours on Tuesday, Starbucks will shut down every single one of its 7,100 stores so that baristas can receive a refresher course.
June 2, 2008: Starbucks replaces baristas with vending machines.
July 18, 2008: Starbucks is closing 616 stores by the end of March.
-Refer to Fact 11.1.1.The decisions made on ________ are long-run decisions because they ________.
A)June 2; are changes to labour which affect people for the long term
B)January 31 and July 18; change Starbucks' plant
C)February 25, June 2, and July 18; all deal with stores located in the United States
D)January 31 and February 25; are the earliest decisions
E)none of the above

Accepted Answer

The answer of Use the information below to answer the...

Question 5

Choose the statement that is incorrect.
A)Expenditure on a plant that has no resale value is a sunk cost.
B)A sunk cost is irrelevant to a firm's current decisions.
C)A cost that influences a firm's current decisions is the short-run cost of changing its labour inputs.
D)A cost that influences a firm's current decisions is the long-run cost of changing its plant.
E)The short run is a time frame in which a firm can change its plant.

Accepted Answer

The statement that "the short run is a time frame in which a firm can change its plant" is incorrect. The short run is a time frame in which a firm cannot change its plant, but can only change its variable inputs (such as labor and raw materials) to adjust its output. The long run is a time frame in which a firm can change both its variable and fixed inputs, including its plant size and technology.

Question 6

The short run is a time frame in which
A)the firm is not able to hire more workers.
B)the amount of output produced is fixed.
C)there is a shortage of most factors of production.
D)at least one factor of production is fixed.
E)there is not enough time to make all of the decisions necessary to maximize profit.

Accepted Answer

In the short run, at least one factor of production is fixed, meaning that the firm cannot adjust its usage of that factor. For example, a bakery may be able to vary the quantity of flour it uses (a variable factor), but it cannot quickly build a new oven (a fixed factor) to increase its capacity.

Question 7

When the demand for electricity peaks during the hottest days of summer, Hydro One can generate more electricity by using more fuel and increasing the working hours of many of its employees.The company cannot, however, increase electric power production by building additional generating capacity.This means that the company is operating in the
A)market run.
B)intermediate run.
C)long run.
D)immediate run.
E)short run.

Accepted Answer

In the short run, Hydro One can increase its electricity production by using more fuel and increasing the working hours of its employees. However, building additional generating capacity would require a longer planning and construction process, and therefore, would fall under the category of the long run. The intermediate run refers to a period of time between the short run and the long run, where some adjustments can be made but not all. Therefore, the best choice for this scenario is the short run.

Question 8

The long run refers to a time period
A)of one year or less.
B)in which all factors of production are variable.
C)in which labour is variable, but plant is fixed.
D)when there is at least one variable factor of production.
E)of at least 5 years.

Accepted Answer

The long run refers to a time period in which all factors of production are variable. This means that in the long run, firms are able to adjust their input levels, including labor and capital, to produce at their most efficient level. This choice is the best because it is the most accurate definition of the long run. Choices A, C, D, and E are incorrect because they do not accurately describe the time period or factors of production in the long run.

Question 9

Which of the following factors are fixed in the long run?
A)labour
B)capital
C)land
D)entrepreneurship
E)No factors of production are fixed in the long run.

Accepted Answer

In the long run, all factors of production are variable, meaning businesses can adjust the amount of labor, capital, land, and entrepreneurship they use. This flexibility allows for adjustments in production capacity and operations to meet changing economic conditions.

Question 10

In the long run, a firm can vary
A)all of its factors of production.
B)labour but not capital.
C)capital but not labour.
D)labour and capital but not land.
E)labour, capital and entrepreneurship but not land.

Accepted Answer

In the long run, a firm can vary all of its factors of production, including labor, capital, land, and entrepreneurship, as there are no fixed inputs in the long run.

Question 11

A cost that has been incurred and cannot be recovered is a
A)marginal cost.
B)sunk cost.
C)variable cost.
D)business cost.
E)significant cost.

Accepted Answer

A sunk cost refers to a cost that has already been incurred and cannot be recovered, regardless of present or future decisions. Marginal costs are the costs of producing an additional unit. Variable costs change with changes in the level of output, while business costs and significant costs are not specific cost categories.

Question 12

Use the information below to answer the following question.
Fact 11.1.2 A Bakery on the Rise
Some 500 customers a day line up to buy Avalon's breads, scones, muffins, and coffee. Staffing and management are worries. Avalon now employs 35 and plans to hire 15 more. Its payroll will climb by 30 percent to 40 percent. The new CEO has executed an ambitious agenda that includes the move to a larger space, which will increase the rent from $3,500 to $10,000 a month.
Source: Fortune, April 14, 2008
-Refer to Fact 11.1.2.Avalon's decision to ________ is a short-run decision.Avalon's decision to ________ is a long-run decision.
A)serve 500 customers a day; hire 15 more people
B)move to a larger space; hire 15 more people
C)hire 15 more people; serve 500 customers a day
D)hire 15 more people; move to a larger space
E)pay more for rent; have a larger payroll

Accepted Answer

The answer of Use the information below to answer the...

Question 13

In the long run, a firm has no factors of production that are
A)variable.
B)marginal.
C)significant.
D)taxable.
E)fixed.

Accepted Answer

In the long run, all factors of production can be varied, and therefore all factors are variable. Therefore, E is the correct answer. A, B, C, and D are incorrect because all factors of production can be affected by these factors.

Question 14

Use the information below to answer the following questions.
Fact 11.1.1
January 31, 2008: Starbucks will open 75 more stores abroad than originally predicted, for a total of 975.
February 25, 2008: For three hours on Tuesday, Starbucks will shut down every single one of its 7,100 stores so that baristas can receive a refresher course.
June 2, 2008: Starbucks replaces baristas with vending machines.
July 18, 2008: Starbucks is closing 616 stores by the end of March.
-Refer to Fact 11.1.1.The decisions made on ________ are short-run decisions because they ________.
A)January 31 and July 18; change the number of stores but not necessarily the number of employees
B)February 25 and June 2; change a variable factor of production but not a fixed factor of production
C)February 25, June 2, and July 18; deal with stores located in the United States
D)June 2 and July 18; are the more recent decisions
E)none of the above

Accepted Answer

The decisions made on February 25 and June 2 are short-run decisions because they involve changing a variable factor of production (baristas) but not a fixed factor of production (the actual stores themselves). The decision made on July 18 is a long-run decision as it involves closing stores, which could potentially impact both the number of stores and employees in the long-term. Choice A is incorrect because the decision made on July 18 does impact the number of stores and could impact the number of employees. Choice C is incorrect because the decisions made on February 25 and June 2 involve stores both in the United States and abroad. Choice D is incorrect as the timing of the decisions does not necessarily determine if they are short-run or long-run decisions.

Question 15

The long run is a time frame in which
A)the firm can hire all the workers it wants to employ, but it does not have sufficient time to buy more equipment.
B)the firm is able to maximize revenue.
C)the firm may want to build a bigger plant, but cannot do so.
D)economic efficiency is achieved.
E)the quantities of all factors of production can be varied.

Accepted Answer

The long run is the time frame in which the quantities of all factors of production can be varied. This means that a firm can adjust its inputs to achieve optimal production and maximize profits in the long run. The other choices are not necessarily true in the long run.

Question 16

After constructing a new factory, the cost of building the factor is a
A)past cost.
B)variable cost.
C)significant cost.
D)taxable cost.
E)sunk cost.

Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. The cost of building the factory is a sunk cost because it has already been spent and cannot be undone. It is not a past cost because it is not related to previous periods, not a variable cost because it is not dependent on production levels, not a significant cost because the significance of a cost is subjective, and not a taxable cost because it is not related to taxes.

Question 17

Use the figure below to answer the following questions.
  
Figure 11.2.1
-Refer to Figure 11.2.1 which illustrates Tania's total product curve.Which one of the following statements is false?
A)All the points above the curve are unattainable.
B)All the points below the curve are attainable.
C)All the points below the curve are inefficient.
D)The cost of producing at point B equals the cost of producing at point C.
E)All the points on the curve are attainable.

Accepted Answer

The statement "The cost of producing at point B equals the cost of producing at point C" is false. The cost of producing at point B is lower than the cost of producing at point C because at point B, fewer inputs are used to produce the same output as at point C.

Question 18

A firm's total product curve describes
A)the minimum cost of producing a given amount of output.
B)the maximum output that a given quantity of labour can produce.
C)how the maximum attainable output varies as the size of the firm's plant varies, given the quantity of labour employed.
D)how the management of the firm makes decisions over the short run.
E)how the amount of labour varies as the amount of output varies.

Accepted Answer

The total product curve represents the maximum output that can be produced with a given quantity of labor, assuming other factors remain constant. It shows the relationship between the quantity of labor and the quantity of output.

Question 19

Choose the correct statement.
A)The long run is a period of time in which the quantity of at least one input is fixed.
B)The short run is a period of time in which the firm has sufficient time to change all its inputs.
C)The long run is a time frame that lasts for 10 years.
D)In the short run, the firm's plant is fixed.
E)A firm always has plenty of time to make decisions about changing its inputs no matter if it is in a short run or long run position.

Accepted Answer

In the short run, at least one input (usually the plant or capital) is fixed and cannot be changed.

Question 20

The total product curve is a graph that shows the
A)minimum cost of producing a given amount of output using a given technology.
B)maximum profit from each unit of output sold.
C)maximum output that a given quantity of labour can produce.
D)maximum output that can be produced as technology advances.
E)change in total product for a given change in marginal product.

Accepted Answer

The total product curve shows the maximum output that a given quantity of labor can produce. It illustrates the relationship between the inputs of labor and the resulting level of output. It is a graphical representation of the short-run production function. So, option C is the correct answer.

Quiz 11: Output and Costs

The short run refers to a time period

Use the figure below to answer the following questions. Figure 11.2.1 -Refer to Figure 11.2.1 which illustrates Tania's total product curve.Which one of the following statements is true?

Plant refers to those factors of production

Choose the statement that is incorrect.

The short run is a time frame in which

The long run refers to a time period

Which of the following factors are fixed in the long run?

In the long run, a firm can vary

A cost that has been incurred and cannot be recovered is a

In the long run, a firm has no factors of production that are

The long run is a time frame in which

After constructing a new factory, the cost of building the factor is a

Use the figure below to answer the following questions. Figure 11.2.1 -Refer to Figure 11.2.1 which illustrates Tania's total product curve.Which one of the following statements is false?

A firm's total product curve describes

Choose the correct statement.

The total product curve is a graph that shows the