Chapter 5 PE

Refer to Figure 1. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

• ATCA

• ATCB

• ATCC

• ATCD

The marginal product of labor is equal to the

• incremental cost associated with a one unit increase in labor.

• incremental profit associated with a one unit increase in labor.

• increase in output obtained from a one unit increase in labor.

• increase in labor necessary to generate a one unit increase in output.

Some costs do not vary with the quantity of output produced. Those costs are called

• fixed costs.

• average costs.

• marginal costs.

• explicit costs.

Please consider the following Figure. The graph illustrates a typical

• total-cost curve.

• production function.

• production possibilities frontier.

• marginal product of labor curve.

Why doesn't the total cost curve begin at the origin (the point 0,0)?

• Because variable costs are positive when output is zero

• Because fixed costs are positive when output is zero

• Because the firm is producing at the efficient scale

• Because the firm is maximizing profits

When marginal cost is less than average total cost,

• marginal cost must be falling.

• average variable cost must be falling.

• average total cost is falling.

• average total cost is rising.

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

• average fixed cost is 50 cents.

• average variable cost is $2.

• average total cost is $2.50.

• average total cost is 50 cents.

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

• 8 units of output.

• 10 units of output.

• 122 units of output.

• 132 units of output.

Which of the following can be inferred from the figure above?

• Marginal cost is increasing at all levels of output, and marginal product is increasing at low levels of output

• Marginal product is increasing at low level of output and decreasing at high level of output

• Marginal cost is increasing at all levels of output, and marginal product is decreasing at high level of output

• Marginal product is increasing at all levels of output

At which number of workers does diminishing marginal product begin?

• 1

• 2

• 3

• 4