AP Economics Unit 3 Quiz

What is the definition of Marginal Product (MP)?

• The total output produced by all workers.

• The additional output resulting from adding one more unit of labor, holding all other inputs constant.

• The decrease in output when one more unit of labor is added.

• The total cost of production divided by the number of workers.

What does the Law of Diminishing Returns state?

• As more units of labor are added, total output always increases.

• As more units of labor are added, the additional output from each new worker eventually decreases.

• As more units of labor are added, the cost of production decreases.

• As more units of labor are added, the efficiency of production increases.

Which of the following is a Fixed Cost (FC)?

• Raw materials

• Electricity

• Labor costs

• Rent

How is Average Variable Cost (AVC) calculated?

• AVC = VC / Q

• AVC = TC / Q

• AVC = MC / Q

• AVC = FC / Q

What happens to the Marginal Cost (MC) curve as diminishing returns set in?

• MC remains constant.

• MC decreases.

• MC increases.

• MC becomes zero.

In the Long-Run, what is true about inputs?

• All inputs can be varied.

• Only capital input can vary.

• Only labor input can vary.

• All inputs are fixed.

What are Economies of Scale?

• As production increases, total costs decrease.

• As production increases, average costs decrease.

• As production increases, average costs increase.

• As production increases, total costs remain constant.

What is the Long-Run Average Total Cost Curve (LRATC)?

• It reflects the total cost of production divided by the number of units produced.

• It reflects the highest possible cost for any given level of output.

• It reflects the lowest possible cost for any given level of output when all inputs are variable.

• It reflects the average cost of production in the short run.

What is Accounting Profit?

• Revenue minus total costs.

• Revenue minus opportunity costs.

• Revenue minus explicit costs.

• Revenue minus both explicit and implicit costs.

What is the relationship between Marginal Cost (MC) and Average Total Cost (ATC)?

• MC intersects ATC at its lowest point.

• MC is always above ATC.

• MC is always below ATC.

• MC intersects ATC at its highest point.