Econ 21 – Flashcards

Which of the following is a factor of production for the Little Biscuit Bread Company? a. Flour. b. Bread. c. Productivity. d. Money.

A production function shows a. How a firm's production increases as it adds more labor. b. How a firm's costs of production increase as it produces more goods. c. How production changes as its unit costs go up. d. How total costs increase as labor is added.

Labor productivity will increase in response to a. Lower wages. b. An increase in the amount of physical capital per worker. c. Higher resource costs. d. An increase in diminishing returns.

When a firm produces at a technically efficient output level, it is a. Producing the output at the minimum MC curve. b. Using the fewest resources to produce a good or service. c. Producing the output where the AVC curve is at a minimum. d. Producing the best combination of goods and services.

Which of the following statements is not true regarding the production function and the production possibilities curve? a. Both the production function and the production possibilities curve maximize the amount of output attainable. b. The production function describes the capacity of a single firm, whereas the production function summarizes the output capacity of the entire economy. c. A production function tells us the maximum amount of output attainable from the use of all resources. d. The production possibilities curve expresses the ability to produce various combinations of goods given the use of all resources.

The change in total output associated with one additional unit of input is the a. Opportunity cost of the output. b. Average productivity. c. Marginal physical product. d. Marginal cost.

Which of the following is the slope of the production function with respect to an input? a. The marginal physical product of the input. b. The average product of the input. c. The unit cost of the input. d. The input price.

Diminishing returns occur because a. Of inefficiency in the production process. b. Of the use of inferior factors of production. c. A firm increases the amount of a variable input without changing a fixed input. d. Of lower opportunity costs of the factors of production.

As an In and Out Burger restaurant increases the number of employees for a specific restaurant, a. Total production of hamburgers will fall. b. Costs of production will fall. c. Efficiency will suffer as the restaurant becomes too crowded with employees. d. The production function will increase.

The most desirable rate of output for a firm is the output that a. Minimizes total costs. b. Maximizes total profit. c. Minimizes marginal costs. d. Maximizes total revenue.

Marginal cost a. Is the change in total output from hiring one more factor of production. b. Is the change in total cost from producing one additional unit of output. c. Falls when there are diminishing returns. d. Is the change in the total cost when hiring one more factor of production.

The sum of fixed cost and variable cost at any rate of output is a. Total variable cost. b. Total cost. c. Average total cost. d. Average marginal cost.

In the short run, when a firm produces zero output, total cost equals a. Zero. b. Variable costs. c. Fixed costs. d. Marginal costs.

Which of the following is most likely a fixed cost? a. Raw materials cost. b. Labor cost. c. Energy cost. d. Property taxes.

At any given rate of output, the difference between total cost and fixed cost is a. Marginal cost. b. Average variable cost. c. Zero in the short run. d. Variable cost.

In the short run, which of the following is most likely a variable cost? a. Contractual lease payments. b. Labor and raw materials costs. c. Property taxes. d. Interest payments on borrowed funds.

In the long run, which of the following is likely to be a variable cost? a. Factory rental but not wage costs. b. Wage costs but not costs for equipment. c. Interest payments on borrowed funds but not utilities. d. Rent, wages, and all other costs are variable in the long run.

Which of the following is always downward-sloping? a. The marginal cost curve when it is below the average total cost curve. b. The marginal cost curve when it is above the average total cost curve. c. The average total cost curve when it is below the marginal cost curve. d. The average total cost curve when it is above the marginal cost curve.

The average variable cost curve slopes upward with a higher rate of output in the short run because of a. The effect of diminishing returns. b. The shape of the average fixed cost curve. c. Diseconomies of scale. d. Implicit but not explicit costs.

If the marginal cost curve is rising, which of the following must be true? a. The average total cost curve must be rising. b. The average total cost curve must be below the marginal cost curve. c. The average total cost curve must be above the marginal cost curve. d. Total costs must be rising.

The average total cost (ATC) curve will be negatively sloped so long as a. Average variable cost is less than average total cost. b. Marginal cost is greater than average total cost. c. Average fixed cost is less than average total cost. d. Marginal cost is less than average total cost.

Explicit costs a. Include only payments to labor. b. Are the sum of actual monetary payments made for resources used to produce a good. c. Include the market value of all resources used to produce a good. d. Are the total value of resources used to produce a good but for which no monetary payment is made.

Economic cost a. Includes both implicit and explicit costs. b. Is the sum of actual monetary payments made for resources used to produce a good. c. Includes only implicit costs. d. Decreases as the level of production increases.

Which of the following statements about the relationship between economic costs and accounting costs is true? a. Accounting costs are always less than or equal to economic costs. b. Accounting costs must always equal economic costs. c. Accounting costs are always greater than economic costs. d. Accounting costs are equal to or greater than economic costs.

The long-run average total cost curve is constructed from the a. Minimum points of the short-run marginal cost curves. b. Minimum points of the short-run average variable cost curves. c. Lowest average total cost for producing each level of output. d. Minimum points of the long-run marginal cost curves.

Economies of scale are reductions in average a. Total cost that result from declining average fixed costs. b. Fixed cost that result from reducing the firm's scale of operations. c. Total cost that result from using operations of larger size. d. Fixed cost resulting from improved technology and production efficiency.

When the size of a factory (and all its associated inputs) doubles and, as a result, output more than doubles, a. The law of diminishing returns must not apply in the smaller factory. b. Economies of scale must exist. c. The short-run ATC curve must be declining. d. Marginal costs must be declining.

Diseconomies of scale are reflected in a. The downward-sloping segment of the long-run average total cost curve. b. The downward-sloping segment of the long-run marginal cost curve. c. A downward shift of the long-run average total cost curve. d. The upward-sloping segment of the long-run average total cost curve.

When the wage rate is $10 per hour and the MPP of a worker is 15 units per hour, the unit labor cost is a. $0.67 per unit. b. $10.00 per hour. c. $15.00 per unit. d. $150.00 per hour.

Assuming labor is a variable input, an increase in labor productivity will result in a. A downward shift in the MPP curve. b. A downward shift in the MC curve. c. An upward shift in the ATC curve. d. A downward shift in the production function.

Higher education levels and better management a. Cause MPP to slope downward. b. Shift the long-run ATC curve downward. c. Lead to greater diseconomies of scale. d. Shift the MC curve upward.

Higher education levels and better management a. Cause MPP to slope downward. b. Shift the long-run ATC curve downward. c. Lead to greater diseconomies of scale. d. Shift the MC curve upward.

Higher education levels and better management a. Cause MPP to slope downward. b. Shift the long-run ATC curve downward. c. Lead to greater diseconomies of scale. d. Shift the MC curve upward.