AP Unit 3

With capital held constant, when Zane employs one additional worker, the marginal product of labor decreases by 5 units. Which economic concept best characterizes Zane’s production process?

• Diminishing marginal returns

• Increasing marginal returns

• 
  Constant returns to scale

• 
  Economies of scale

• Diseconomies of scale

The relationship in the graph above best illustrates the economic concept of

• opportunity cost

• diminishing marginal utility in consumption

• 
  diminishing marginal returns in production

• 
  production possibilities

• 
  comparative advantage

The table above shows the short-run production function for picking apples. Based on the production data, which of the following statements about the marginal product of the fifth worker is true?

• It is the maximum that can be attained.

• 
  It is greater than the marginal product of the first worker due to increasing returns.

• 
  It is greater than the combined marginal products of all the other workers.

• It is less than the marginal product of the third worker due to diminishing returns.

• 
  It is rising due to increasing marginal returns.

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to

• fall initially, but eventually rise

• rise initially, but eventually fall

• rise consistently due to diminishing return

• rise consistently due to the advantages of specialization

• rise consistently due to economies of scale

A firm’s short-run production function uses capital and labor as inputs. Assume the quantity of capital is fixed in the short run. The marginal product of labor will decrease as more labor is used in the short run because each unit of labor will have

• zero units of capital to work with

• fewer units of capital to work with

• an increase in the capital-to-labor ratio

• more units of capital to work with

• 
  an infinite number of units of capital to work with

Which of the following statements about short-run costs is always true as a firm increases its production?

• Average fixed cost decreases.

• Average variable cost decreases.

• Average total cost decreases.

• Marginal cost is lower than the average variable cost.

• 
  Marginal cost is lower than the average total cost.

In the short run, which of the following is true of a firm's average total cost of production?

• It is equal to marginal cost plus average variable cost.

• It is equal to marginal cost plus average fixed cost.

• 
  It is equal to average fixed cost plus average variable cost.

• It always increases when a firm increases production.

• It is zero if the firm shuts down.

Which of the following is always true of the relationship between average and marginal costs?

• 
  Average total costs are increasing when marginal costs are increasing.

• Marginal costs are increasing when average variable costs are higher than marginal costs.

• Average variable costs are increasing when marginal costs are increasing.

• 
  Average variable costs are increasing when marginal costs are higher than average variable costs.

• Average total costs are constant when marginal costs are constant.

Which of the following is true about a firm's average variable cost?

• It will rise if marginal cost is less than average variable cost.

• 
  It will never equal the firm's marginal cost.

• It will decline when the firm's marginal product declines.

• It will be negative if marginal revenue declines.

• It will equal average total cost when fixed costs are zero.

Which of the following MUST be true of the long run?

• It is at least one year in duration.

• All factors of production are variable.

• 
  At least one factor of production is fixed.

• Marginal costs are constant.

• 
  Average total costs are constant.