Question 1

If marginal cost is above average total cost, average total cost must be falling, whether marginal cost is rising or falling.

Accepted Answer

If marginal cost is above average total cost, then average total cost must be rising. This is because marginal cost intersects average total cost at its lowest point, so if it is above average total cost, then average total cost must be increasing.

Question 2

Diminishing marginal returns are responsible for the positive slope of the marginal product curve.

Accepted Answer

Diminishing marginal returns actually cause the marginal product curve to slope downwards, not upwards, as each additional unit of input results in a smaller increase in output.

Question 3

If marginal cost is less than average total cost, then average total cost is decreasing.

Accepted Answer

When the marginal cost is less than the average total cost, then producing additional units of output will have a lower cost than what has already been produced, which will decrease the average cost of production. Therefore, the statement that "average total cost is decreasing" is true.

Question 4

The total product curve indicates the quantity of inputs needed to produce a given level of output.

Accepted Answer

The answer of The total product curve indicates the quantity...

Question 5

Marginal cost must cross average variable cost at its minimum.

Accepted Answer

This statement is true. The minimum point of the average variable cost curve represents the point at which the marginal cost curve intersects it. This is because, at that point, any additional unit of production will cost exactly the same as the average cost of producing all the previous units. Consequently, the marginal cost curve must cross the average variable cost curve at its minimum.

Question 6

If marginal product is less than average product, average product must be rising.

Accepted Answer

If marginal product is less than average product, it means that the marginal product is decreasing. This can result in the average product either rising or falling, depending on whether the decrease in marginal product is large enough to bring down the overall average. Therefore, it is not necessarily true that average product must be rising if marginal product is less than average product.

Question 7

Diminishing marginal returns occurs when marginal product is falling and below zero.

Accepted Answer

Diminishing marginal returns occurs when marginal product is falling, but it is still above zero. When marginal product falls below zero, it is known as negative marginal returns.

Question 8

In the long run all costs are variable.

Accepted Answer

In the long run, all costs can be adjusted and are thus variable. This is in contrast to the short run, where some costs may be fixed and cannot be easily adjusted.

Question 9

If marginal cost is rising, average variable cost must be rising.

Accepted Answer

Marginal cost can rise while average variable cost is falling, as long as the marginal cost is below the average variable cost. This is because the average variable cost will continue to decrease until the marginal cost equals the average variable cost, at which point the average variable cost will start to rise if the marginal cost continues to increase.

Question 10

In the range of diminishing marginal returns total product is still increasing.

Accepted Answer

In the range of diminishing marginal returns, total product is still increasing, but at a decreasing rate. This means that as input increases, the additional output gained from each additional unit of input decreases, but total output is still increasing.

Question 11

Total cost is constant because fixed cost is constant.

Accepted Answer

Total cost varies with the level of output because it includes both fixed costs, which remain constant, and variable costs, which change with the level of production.

Question 12

Marginal cost is the slope of the average total cost curve.

Accepted Answer

Marginal cost is the slope of the total cost curve, not the average total cost curve. It represents the change in total cost that arises from producing one additional unit of a good or service.

Question 13

Firms are organizations that produce goods and services.

Accepted Answer

Firms are organizations that produce goods and services for consumers, making them an integral part of the economy.

Question 14

Assume that the units of variable input in a coal-production process are 1, 2, 3, 4, and 5 and the corresponding total outputs (in tons) are 10, 19, 26, and 31, respectively.The marginal product of the third unit of input must be 7 tons.

Accepted Answer

The marginal product of the third unit of input is calculated as the change in total output when the third unit of input is added. From the data, adding the third unit of input increases total output from 19 tons to 26 tons, which is an increase of 7 tons.

Question 15

If the total costs per day of producing 96, 97, 98, 99, and 100 T-shirts are $200, $217, $237, $255, and $280, respectively, the marginal cost of the 100th T-shirt is $280.

Accepted Answer

The marginal cost of the 100th T-shirt is the additional cost to produce the 100th shirt compared to the 99th, which is $280 - $255 = $25.

Question 16

If marginal product is less than average product, average product must be falling.

Accepted Answer

When marginal product is less than average product, it pulls the average product down, causing the average product to fall.

Question 17

If marginal product is greater than average product, then average product must be rising.

Accepted Answer

Marginal product measures the additional output produced by adding one more unit of a factor of production. Average product measures the output per unit of the factor of production. If the marginal product is greater than the average product, it means that adding another unit of the factor of production is increasing the overall output by more than the average. This implies that the average product is rising.

Question 18

Marginal cost rises over the range of increasing marginal returns and falls over the range of diminishing marginal returns.

Accepted Answer

Marginal cost rises over the range of diminishing marginal returns and falls over the range of increasing marginal returns. When marginal returns are increasing, the cost of producing additional units decreases because the fixed cost is spread over more units. However, when marginal returns diminish, the marginal cost of producing additional units starts to increase since it requires more input to produce each additional unit.

Question 19

In the short run, at least one input is variable and one input is fixed.

Accepted Answer

This statement is true as it reflects one of the key assumptions of the short run production function - that there is at least one input (usually labor) that can be varied in the short run while at least one input (usually capital) remains fixed.

Question 20

Total cost is equal to the quantity of output multiplied by the sum of fixed cost and variable cost.

Accepted Answer

Total cost is equal to the sum of fixed cost and variable cost, but it is not calculated by multiplying the quantity of output by the sum of fixed and variable costs. Total cost is directly the sum of fixed and variable costs without considering the quantity of output in the calculation.

Quiz 8: Production and Cost