Economics: Principles and Policies, 9e: Chapter: Production, Inputs, and Cost

Chapter: Production, Inputs, and Cost: Building Blocks for Supply Analysis

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1. The short run is: a. the time period during which all of the firm's costs are fixed.
b. the time period before the value of the firm's assets starts to decay.
c. the time period during which the firm can adjust all inputs freely.
d. the time period during which some of the firm's input decisions are constrained by previous commitments.

2. Of the graphs in Figure 1, which best represents marginal physical product? Figure 1: a. 1
b. 2
c. 3
d. 4

3. The optimum quantity of an input occurs when: a. diminishing returns set in.
b. marginal revenue product equals input price.
c. marginal physical product equals input price.
d. marginal revenue product equals output price.

4. Average cost curves have the same shape as: a. total cost.
b. marginal cost.
c. fixed cost.
d. average fixed cost.

5. Of the graphs in Figure 2, which represents total fixed cost? Figure 2: a. 1
b. 2
c. 3
d. 4

6. If a firm has a U-shaped long-run average cost curve,: a. its fixed cost rises as output rises.
b. it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production.
c. it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production.
d. the firm can maximize its output by operating at the point of minimum long-run average cost.

7. If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should: a. reduce the labor used and increase the machinery used if labor costs half as much as machinery.
b. reduce the labor used and increase the machinery used if labor and machinery cost the same amount.
c. reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery.
d. reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery.

8. If economies of scale exist for a particular production function, long-run average costs: a. will rise.
b. will fall.
c. will first rise and then fall.
d. will be unaffected since there is no direct relationship between the two.

9. A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n): a. analytical cost curve.
b. long-run cost curve.
c. historical cost curve.
d. theoretical cost curve.

10. Which of the following statements must be true when a firm makes choices that put it at A in Figure 3? Figure 3: a. The firm is minimizing its cost of producing 100 units of output.
b. The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land.
c. The firm first decided how much output to produce and then decided how to produce it.
d. All of the above are true.