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WorksheetsCOST AND FACTOR OF PRODUCTION
Total questions: 80
Worksheet time: 34mins
Economists usually assume that ________ is a fixed input in the ________ run.
labor; short
capital; short
labor; long
capital; long
Total variable cost ________ as output increases, and total fixed cost ________ as output increases.
increases; increases
increases; decreases
increases; does not change
does not change; does not change
Total cost is calculated as
the sum of total fixed cost and total variable cost.
the product of average total cost and price.
the sum of all the firm's explicit costs.
the sum of average fixed cost and average variable cost.
A firm will begin to experience diminishing returns at the point where
A. marginal cost increases.
B. marginal cost decreases.
C. marginal product increases.
Both B and C are correct.
Marginal cost is ________ average variable cost when ________.
equal to; average total cost is minimized
less than; total cost is maximized
greater than; average fixed cost is minimized
equal to; average variable cost is minimized.
Because marginal cost is always ________ in the short run, total variable cost always ________ when output increases.
increasing; increasing
decreasing; increasing
increasing; decreasing
decreasing; decreasing
Based on the theory of production, economic efficiency refers to _____________________.
the combination of inputs that will maximize outputs
the combination of inputs that involves decreasing costs
the combination of inputs that involves minimal costs
the combination of inputs that involves a constant cost
Which of the following statement BEST describes the short run economy?
It is a period of one year or less
It is a period of time where firms are free to change all their inputs
It is a period of time where at least one of the firm's inputs is fixed
It is a period of time where fixed inputs become variable inputs because of depreciation
Which of the following combination is TRUE about factors of production?
Capital - Interest
Labor - Profit
Land - Output
Entrepreneur - Dividend
When the marginal product is negative, the total product is ________________
decreasing
positive
negative
maximum
Which of the following factors of production is likely to be variable in the short run?
The size of the firm's plant
The location of the firm
The number of workers
The amount of machinery used
Long run refers to time period in which
all inputs cannot be increased
all inputs can be increased
there is at least one variable input
there is at least one fixed inputs
"When one input of variable input is added to fixed input, it will decrease the production."
This situation can be described as ________________
law of marginal return
law of negative marginal return
law of increasing marginal return
law of decreasing marginal return
The average product exceeds the marginal product in the production function refers to level starting from __________
zero up to maximum marginal product
marginal product until to maximum
maximum average product and continues
maximum total product and continues
You own a restaurant and every month you must pay your water bill. However, you never know how much that bill will be because the amount changes based upon how much water your business uses. This is a...
fixed cost
variable cost
If you own a home, you must pay for electricity you use. The amount you pay changes every month depending on how much you use. This is an example of a...
fixed cost
variable cost
Total Variable Cost/Quantity [TVC/Q] = _______
•Implicit cost are reported or recorded in the books of accounts Cannot be easily measured as they are not incurred in monetary terms.
True
False
The best definition for fixed costs is
Costs that do not depend on the level of production
Costs that do not change
Costs that increase when you produce more
Time period in which at least one of the costs is fixed cost?
Wages and salaries paid to workers are an example of implicit costs of production.
True
False
Which of the following is a variable cost in the short run?
rent of the factory
wages paid to factory workers
interest payments on borrowed financial capital
salaries paid to upper management
Change in Total Cost/Change in Quantity ΔTR/ΔQ = _____
In the short run, when the output of a firm increase, its average fived cost:
Increase
Decrease
Remain constant
Decrease and rises
The best definition for fixed costs is
Costs that do not depend on the level of production
Costs that do not change
Costs that increase when you produce more
Change in Total Cost/Change in Quantity ΔTR/ΔQ = _____
Which of the following statement BEST describes the short run economy?
It is a period of one year or less
It is a period of time where firms are free to change all their inputs
It is a period of time where at least one of the firm's inputs is fixed
It is a period of time where fixed inputs become variable inputs because of depreciation
Which of the following inputs are variable in the long run?
Labour
Capital and equipment
Plant size
all of above
The marginal product of an input is:
total product divided by the amount of the input used to produce this amount of output.
the addition to total output that adds nothing to total revenue.
the addition to total output that adds nothing to profit.
the addition to total output due to the addition of one unit of all other inputs.
the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.
According to the law of diminishing returns:
the total product of an input will eventually be negative.
the marginal product of an input will eventually be negative.
the marginal product of an input will eventually decline.
the total product of an input will eventually decline.
none of the above
What is the most efficient stage of production?
stage 1
stage 2
stage 3
stage 4
Long run refers to a time period in which
all inputs cannot be increased
all inputs can be increased
there is at least one variable input
there is at least one fixed input
TP reach its maximum point, when
AP maximum
MP maximum
AP and MP are intersect
MP equal to zero
Which one of the following is NOT a variable input?
factory worker
raw materials
efficient managers
offices
When plotting marginal and average product curves, the ______ product curve always crosses the ______ product curve at its ______.
average variable; marginal; maximum
average variable; average total; minimum
marginal; average total; maximum
marginal; average variable; minimum
The law of diminishing returns indicates that
extra units of a variable resource are added to fixed resource the extra or marginal product will decline beyond some point
because the economics and diseconomies of scale a competitive firm's long-run average cost curve will be U-shaped
the demand for goods produced by purely competitively industries is downsloping
beyond some point the extra utility derived from additional units of product will yield the consumer smaller and smaller extra amounts of satisfaction
As output increases, average fixed costs will ________________
decrease
increase
remain constant
initially it is decreases and then it increases
A firm will experience lower long run average costs when its production increases. This is because _____________
fixed factors are utilized efficiently
the firm can prevent other firms from entering the market
the firm enjoys the benefits of economic of scale
the firm receives financial assistance from the government
Diseconomies of scale is reflected by the ____________
decrease in the long run average cost
increase in the long run average cost
increase in short run marginal cost
decrease in long run price
Economics of scales describes relationship between _____________
the increased costs per unit of production and efficiency
the decreased cost per unit of production and efficiency
the increased costs per unit of production and inefficiency
the reduction cost per unit of production and inefficiency
Which of the following does NOT contribute to the internal economy of scale?
Specialization can increase the efficiency of labor
The scarcity of raw materials happens because the average cost starts rising
Large firms can provide scholarships or donations to society
A large firm can easily obtain loans from the financial institutions
Which of the following is an example of a fixed input?
The acreage of a farmer's land.
Machinery.
The size of a firm's plant.
All of the above
Variable inputs are defined as any resource that _____________
varies with the size of the firm's plant.
cannot be changed as output changes.
can be changed as output changes.
can be increased or decreased hourly.
The short run is a period of time ___________
in which a firm uses at least one fixed input.
that is long enough to permit changes in the firm's plant size.
in which production occurs within one year.
in which production occurs within six months.
During the short run, a firm has enough time to adjust ___________
its technology.
its fixed inputs
its variable inputs.
all of its inputs-both fixed and variable.
The long run is a period of time ______________
that is too short to change the size of a firm's plant.
that is long enough to permit changes in all the firm's inputs, both fixed and variable.
in which production occurs beyond one year.
in which production occurs beyond five years.
Marginal product measures the change in ____________
total cost brought about by changing production by one unit.
product price brought about by changing production by one unit.
a firm’s revenue brought about by changing production by one unit.
the firm’s output brought about by employing one additional unit of input
Marginal product measures the change in ____________
total cost brought about by changing production by one unit.
product price brought about by changing production by one unit.
a firm’s revenue brought about by changing production by one unit.
the firm’s output brought about by employing one additional unit of input
The law of diminishing marginal returns implies that, in the short run __________
output must fall beyond a certain point.
price must fall beyond a certain point.
the marginal product of the variable input must eventually decrease.
wages of workers must eventually increase
The law of diminishing marginal returns implies that, in the short run __________
output must fall beyond a certain point.
price must fall beyond a certain point.
the marginal product of the variable input must eventually decrease.
wages of workers must eventually increase
In order for the law of diminishing returns to be present, we must have _________
at least one factor of production to be fixed.
output decreasing as more laborers are hired.
the price of labor increasing as more workers are hired
simultaneous changes in labor and capital
Which of the following is NOT a factor of production?
land and natural resources
labor
capital
food chain
Q7 How is Average Total Cost composed?
ATC = MC + AVC
ATC = AVC + AFC
ATC = AFC - AVC
ATC + AFC = AVC
when MP is zeo, what can you say about the TP?
TP is increasing
TP is maximum
TP is falling
Marginal product refers to addition to total output when one more:
unit is produced
unit is sold
unit is consumed
unit of variable factor is employed.
When production increases average total cost tends to do what?
Increases
Decreases
Remains the same
Decreases then increases
Identity curve number 3
Fixed cost
Variable cost
Total cost
Marginal cost
Identity curve number 2
Fixed cost
Variable cost
Total cost
Marginal cost
The best definition for fixed costs is
Costs that do not depend on the level of production
Costs that do not change
Costs that increase when you produce more
Which of the following are fixed costs?
Rent
Cost of part time labour
Material costs
Loan payments
You own a restaurant and every month you must pay your water bill. However, you never know how much that bill will be because the amount changes based upon how much water your business uses. This is a...
fixed cost
variable cost
If you own a home, you must pay for electricity you use. The amount you pay changes every month depending on how much you use. This is an example of a...
fixed cost
variable cost
Total Variable Cost/Quantity [TVC/Q] = _______
•Implicit cost are reported or recorded in the books of accounts Cannot be easily measured as they are not incurred in monetary terms.
True
False
The best definition for fixed costs is
Costs that do not depend on the level of production
Costs that do not change
Costs that increase when you produce more
Time period in which at least one of the costs is fixed cost?
Wages and salaries paid to workers are an example of implicit costs of production.
True
False
Change in Total Cost/Change in Quantity ΔTR/ΔQ = _____
In the short run, when the output of a firm increase, its average fived cost:
Increase
Decrease
Remain constant
Decrease and rises
A production function shows the relationship between_________________.
inputs and cost.
outputs and cost.
products and cost.
inputs and outputs.
In the concept of production, industries refer to ____________________.
large firms.
firms with a large capital.
a group of firms that produce the same type of goods.
a group of firms competing among each other.
Production function shows the relationship between _________________.
cost and input.
wages and profit.
cost and output.
input and output.
Q5 Marginal product of an input factor normally
Is zero at equilibrium
Is less than zero
Increases
Decreases
Q7 How is Average Total Cost composed?
ATC = MC + AVC
ATC = AVC + AFC
ATC = AFC - AVC
ATC + AFC = AVC
Q8 The form of the Average Fixed Cost curve is
Quadratic
Linear
Hyperbolic
Constant
Q10 In the long run ATC
Is larger
Is smaller
Has a larger sector of constant return to scale
Is constant
A firm will begin to experience diminishing returns at the point where
A. marginal cost increases.
B. marginal cost decreases.
C. marginal product increases.
Both B and C are correct.
Marginal cost is ________ average variable cost when ________.
equal to; average total cost is minimized
less than; total cost is maximized
greater than; average fixed cost is minimized
equal to; average variable cost is minimized.
