Question 1

Average fixed costs:

Accepted Answer

Average fixed costs decrease as output increases because the total fixed costs are spread over a larger number of units, leading to a lower average fixed cost per unit.

Question 2

Assume a company is at a point in production where marginal product is below average product.Which of the following must be true?

Accepted Answer

If marginal product is below average product, then it suggests that the additional output produced by each additional unit of input is less than the average output per unit of input. This implies that the marginal product is falling, and this is due to the operation of the law of diminishing marginal returns. As more units of input are added to a fixed level of other inputs, the marginal product of the additional units will eventually decline. This decrease in marginal product will pull down the average product as well, since average product is the total output produced by all units of input divided by the number of units of input. Therefore, all three statements are true in this scenario.

Question 3

Average variable costs:

Accepted Answer

Average variable costs initially decrease as output increases due to the spreading of fixed costs over more units of output. However, at some point, additional units of output will require more variable inputs, causing average variable costs to increase. This is known as the "U-shaped" average variable cost curve.

Question 4

Average total cost:

Accepted Answer

Average total cost is the sum of average fixed costs and average variable costs (A), it is calculated as total cost divided by total output (B), and it is minimized when it equals marginal cost (C). Therefore, all statements are true.

Question 5

A bracelet making company has three employees,and together they produce 10 bracelets an hour.When a fourth worker joins them,the output for the company is now 11 bracelets an hour.Which of the following is true?

Accepted Answer

The total product is increasing because the addition of the fourth worker increased the total output from 10 to 11 bracelets per hour.

Question 6

Average total cost:

Accepted Answer

When output levels are low, fixed costs are spread over fewer units, resulting in a higher average total cost. As output increases, the fixed costs are spread over more units, resulting in a decrease in average total cost. However, as output continues to increase, the marginal cost of producing each additional unit may increase, ultimately leading to an increase in average total cost. This is known as the U-shaped ATC curve.

Question 7

A cigar factory employs 20 workers and produces 1,000 cigars a day.The company reduces the workforce to 19 workers and produces 912 cigars a day.The 20^th worker:

Accepted Answer

The answer of A cigar factory employs 20 workers and...

Question 8

Average product measures:

Accepted Answer

Average product is the output per unit of input. It is calculated by dividing the total output by the total input. It measures the average productivity of each unit of input.

Question 9

When marginal product __________ average product,average product must be ______________.

Accepted Answer

When the marginal product is greater than the average product, the average product is increasing because each additional unit of input is adding more to the output than the average, thus raising the average.

Question 10

Assume a company is at a point in production where marginal product is above average product.Which of the following must be true?

Accepted Answer

If marginal product is above average product, it means that each additional unit of input is adding more output than the previous unit, which implies that the average product is still improving. Therefore, choice C must be true. It is not necessary for marginal product to be rising or for diminishing marginal product to not have set in yet, so choices A and B are not necessarily true.

Question 11

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

Accepted Answer

The marginal product of the fifth worker is the additional output produced by hiring one more worker, which is 15 - 12 = 3 sandwiches.

Question 12

In general,the cost of an input:

Accepted Answer

The answer of In general,the cost of an input:
...

Question 13

The total cost curve:

Accepted Answer

The total cost curve is the sum of the variable cost curve and fixed cost curve. It is always above the variable cost curve and parallel to it.

Question 14

The fixed cost curve:

Accepted Answer

The fixed cost curve is a constant, flat line because fixed costs do not change with the level of output.

Question 15

Diminishing marginal product:

Accepted Answer

Diminishing marginal product refers to the decrease in output resulting from adding one more unit of input. As inputs increase, the additional output produced by each additional unit of input decreases, causing the variable cost curve to become steeper. This is because more inputs are required to produce the same amount of output, resulting in higher costs.

Question 16

Average variable costs:

Accepted Answer

Average variable costs are the variable costs per unit of output. When marginal product rises, it means that additional units of output are being produced at a lower cost, therefore reducing the average variable cost. On the other hand, when marginal product declines, it means that additional units of output are being produced at a higher cost, therefore increasing the average variable cost.

Question 17

Suppose that an accounting firm with 10 employees hires another accountant.By doing so,it goes from serving 30 customers each week to serving 32 customers each week.What is the marginal product of labor for the new accountant?

Accepted Answer

The marginal product of labor is the additional output produced by adding one more unit of labor. In this case, adding one accountant resulted in an increase of 2 customers served each week. Therefore, the marginal product of labor for the new accountant is 2.

Question 18

Total costs:

Accepted Answer

Total costs include both fixed and variable costs, as well as explicit and implicit costs. Total costs also increase as the firm produces more output. Therefore, all of the statements are true.

Question 19

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Accepted Answer

A) The marginal product of the seventh worker can be calculated as the difference between the output with all seven workers and the output with six workers: 
Marginal Product = 500 - 450 = 50 bottles 
B) The average product is total output divided by the number of workers. With seven workers, the average product is 500/7 = 71.43 bottles per worker. With six workers, the average product is 450/6 = 75 bottles per worker. Therefore, the reduction of the workforce caused the average product to fall. 
C) If the output fell when the seventh worker was removed, it means that their marginal product was higher than the average product of the other six workers. Therefore, the seventh worker had a higher marginal product than the sixth worker. 
So, all options are true, and the answer is D.

Question 20

Average product curve tells us:

Accepted Answer

The average product curve shows the level of inputs (e.g. labor, capital) that are most productive at a given level of output. It represents the relationship between the amount of input used and the average output per unit of input. It does not necessarily relate to cost minimization or profit maximization, which are determined by other factors such as marginal cost and marginal revenue.

Quiz 12: The Costs of Production

Average fixed costs:

Assume a company is at a point in production where marginal product is below average product.Which of the following must be true?

Average variable costs:

Average total cost:

A bracelet making company has three employees,and together they produce 10 bracelets an hour.When a fourth worker joins them,the output for the company is now 11 bracelets an hour.Which of the following is true?

Average total cost:

A cigar factory employs 20 workers and produces 1,000 cigars a day.The company reduces the workforce to 19 workers and produces 912 cigars a day.The 20^th worker:

Average product measures:

When marginal product average product,average product must be ____.

Assume a company is at a point in production where marginal product is above average product.Which of the following must be true?

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

In general,the cost of an input:

The total cost curve:

The fixed cost curve:

Diminishing marginal product:

Average variable costs:

Suppose that an accounting firm with 10 employees hires another accountant.By doing so,it goes from serving 30 customers each week to serving 32 customers each week.What is the marginal product of labor for the new accountant?

Total costs:

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Average product curve tells us:

Quiz 12: The Costs of Production

Average fixed costs:

Assume a company is at a point in production where marginal product is below average product.Which of the following must be true?

Average variable costs:

Average total cost:

A bracelet making company has three employees,and together they produce 10 bracelets an hour.When a fourth worker joins them,the output for the company is now 11 bracelets an hour.Which of the following is true?

Average total cost:

A cigar factory employs 20 workers and produces 1,000 cigars a day.The company reduces the workforce to 19 workers and produces 912 cigars a day.The 20th worker:

Average product measures:

When marginal product __________ average product,average product must be ______________.

Assume a company is at a point in production where marginal product is above average product.Which of the following must be true?

Suppose a sandwich shop currently employs four workers and the shop produces 12 sandwiches an hour.A fifth worker gets hired and the shop now produces 15 sandwiches per hour.Which of the following is true?

In general,the cost of an input:

The total cost curve:

The fixed cost curve:

Diminishing marginal product:

Average variable costs:

Suppose that an accounting firm with 10 employees hires another accountant.By doing so,it goes from serving 30 customers each week to serving 32 customers each week.What is the marginal product of labor for the new accountant?

Total costs:

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Average product curve tells us:

A cigar factory employs 20 workers and produces 1,000 cigars a day.The company reduces the workforce to 19 workers and produces 912 cigars a day.The 20^th worker:

When marginal product average product,average product must be ____.