Question 1

The law of diminishing returns states that if increasing quantities of a variable factor are applied to a given quantity of fixed factors,then

Accepted Answer

The law of diminishing returns states that as more units of a variable input are added to a fixed input, the marginal product (MP) of the variable input will eventually decline, meaning that each additional unit of input will produce fewer units of output. As a result, the average product (AP) of the variable input will also decline, since it is calculated as total output divided by the number of units of input. Therefore, choice A is the best answer. Choices B, C, D, and E are incorrect because they misstate the relationship between MP and AP, or do not accurately describe the outcome of the law of diminishing returns.

Question 2

The point of diminishing marginal productivity is the point where

Accepted Answer

The point of diminishing marginal productivity is where the marginal product reaches its maximum and starts to decline.

Question 3

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

Accepted Answer

The answer of Consider a basket-producing firm with fixed capital.If...

Question 4

Suppose sport-fishermen on the Campbell River in British Columbia are catching fewer fish and are having to fish many more hours to catch them.However,the total number of fish caught on the river continues to increase.The river is experiencing

Accepted Answer

The fact that fishermen are having to fish many more hours to catch fewer fish indicates that the river is experiencing diminishing marginal returns. However, the total number of fish caught on the river continuing to increase suggests that the overall productivity of the river is still increasing, leading to a larger total catch despite diminishing marginal returns for individual fishermen.

Question 5

Consider a house-construction firm with fixed capital.The firm can build 8 houses per year with 16 workers and 8.8 houses per year with 17 workers.If it is currently building 8.8 houses per year,which of the following is true?

Accepted Answer

The answer of Consider a house-construction firm with fixed capital.The...

Question 6

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.The average total cost of producing 75 units of output is

Accepted Answer

The answer of The following data show the total output...

Question 7

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.The average total cost for 250 units of output is approximately

Accepted Answer

The answer of The following data show the total output...

Question 8

A firm's short-run cost curves,as conventionally drawn,show that

Accepted Answer

The conventional shape of the short-run cost curves shows that as output increases, the average total cost (ATC) initially decreases due to spreading fixed costs over a larger output. However, as output continues to increase, the ATC eventually increases due to diminishing marginal returns to variable inputs. Therefore, choice E is the correct option. The other options are incorrect as AFC may decrease as output increases, ATC is the sum of TFC and TVC not equal to them, AVC may initially decrease but will eventually increase as output continues to increase, and the intersection of MC, AVC, and ATC curves will occur at their minimum points, not maximum points.

Question 9

Diminishing marginal product of labour is said to exist when there is

Accepted Answer

Diminishing marginal product of labour occurs when the input of one factor of production (labor) is increased while keeping all other factors of production constant, causing a successively smaller increase in output. Therefore, choice E is the best answer.

Question 10

In the short run time horizon for a firm,total fixed costs

Accepted Answer

In the short run, total fixed costs are fixed and do not vary with changes in output. Only variable costs change with the level of output.

Question 11

When a firm's total-product curve is increasing at a decreasing rate

Accepted Answer

When the total-product curve is increasing at a decreasing rate, it means that the marginal product is still positive but declining. This is because the additional output being produced by each additional unit of input is still positive but not as much as before. Thus, the best choice is B.

Question 12

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.Average fixed costs for 305 units of output is approximately

Accepted Answer

Average fixed costs are calculated by dividing total fixed costs by the number of units produced. In this case, total fixed costs are $100 and 305 units were produced, so average fixed costs are $100 / 305 = $0.33, or approximately 33 cents.

Question 13

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.The total fixed cost of producing 305 units of output is

Accepted Answer

The total fixed cost is constant and does not change with the level of output. It is given as $100 in the table.

Question 14

If increasing quantities of a variable factor are applied to a given quantity of fixed factors,then the law of diminishing returns tells us that

Accepted Answer

The law of diminishing returns states that as more units of a variable input are added to a fixed input, the marginal product (additional output produced by each additional unit of the variable input) will eventually decrease. This means that the average product (total output divided by total input) will also eventually decrease, since marginal product is a component of average product. Therefore, choice A is the correct one.

Question 15

Marginal cost is defined as the

Accepted Answer

Marginal cost is the cost of producing one additional unit of output. It is calculated as the change in total cost resulting from the production of an additional unit of output. It takes into account both the variable and fixed costs associated with production.

Question 16

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.The total cost of producing 175 units of output is

Accepted Answer

The answer of The following data show the total output...

Question 17

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.The total variable cost of producing 305 units of output is

Accepted Answer

The answer of The following data show the total output...

Question 18

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month
2.raw material costs of $5000 per month
3.a one-year lease on a building of $12 000

Accepted Answer

A fixed cost is a cost that does not vary with the level of production or sales. Option 1 (labour costs) is a variable cost as the amount will depend on the level of production. Option 2 (raw material costs) is also a variable cost as the amount will depend on how much widget Jodi produces. Option 3 (building lease) is a fixed cost as the amount will not change regardless of the level of production. Hence, the answer is C) 3 only.

Question 19

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100.
  TABLE 7-4
-Refer to Table 7-4.Average variable costs for 175 units of output is approximately

Accepted Answer

Average variable cost (AVC) is calculated by dividing total variable cost by the quantity of output. In this case, we can calculate total variable cost by subtracting the cost of capital ($100) from the total cost for each level of output.

For example, at 6 units of labor, the total cost is $175, so the total variable cost is $75 ($175 - $100). Dividing $75 by the quantity of output (175) gives an average variable cost of approximately 43 cents per unit ($0.43).

We can repeat this calculation for each level of output to find that the average variable cost for 175 units of output is closest to 43 cents, which is answer choice C.

Question 20

In economics,the term "fixed costs" means

Accepted Answer

Fixed costs are costs that do not vary with the level of output produced. Examples of fixed costs include rent, salaries, and insurance premiums.

Quiz 7: Producers in the Short Run

The law of diminishing returns states that if increasing quantities of a variable factor are applied to a given quantity of fixed factors,then

The point of diminishing marginal productivity is the point where

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

Suppose sport-fishermen on the Campbell River in British Columbia are catching fewer fish and are having to fish many more hours to catch them.However,the total number of fish caught on the river continues to increase.The river is experiencing

Consider a house-construction firm with fixed capital.The firm can build 8 houses per year with 16 workers and 8.8 houses per year with 17 workers.If it is currently building 8.8 houses per year,which of the following is true?

A firm's short-run cost curves,as conventionally drawn,show that

Diminishing marginal product of labour is said to exist when there is

In the short run time horizon for a firm,total fixed costs

When a firm's total-product curve is increasing at a decreasing rate

If increasing quantities of a variable factor are applied to a given quantity of fixed factors,then the law of diminishing returns tells us that

Marginal cost is defined as the

Jodi recently went into business producing widgets.Which of the following would be a fixed cost for her firm? 1.labour costs of $1000 per month 2.raw material costs of $5000 per month 3.a one-year lease on a building of $12 000

In economics,the term "fixed costs" means