Purdue
University North Central
Economics
251 -
Review Questions, Chapter 21 (6) -
The Costs of Production
(1) A production function:
(a) shows the cost
of producing any level of output.
(b) is a
technological relationship between factors of production and output.
(c) expresses the
least cost method of producing a given level of output.
(d) expresses the
maximum cost method for combining the inputs.
(2) Decisions which treat at least one
factor of production fixed are referred to as:
(a) long run decisions.
(b) short run
decisions.
(c) investment
decisions.
(d) none of the
above are true.
(3) Marginal physical product is:
(a) total output
divided by the quantity of input.
(b) input divided
by output.
(c) the change in
total output divided by the change in input quantity.
(d) the change in
costs divided by the change in quantity produced.
(4) The law of diminishing returns indicates
that marginal physical product of a factor declines as:
(a) more of the
factor is used, holding output constant.
(b) more of the
variable factor is used, given other inputs are fixed in the short run.
(c) labor wage
rates escalate as workers demand higher wages with increasing output.
(d) All of the above are true.
(5) If an additional unit of labor costs $10
and has a Marginal Physical Productivity of 40 units of output, the marginal
cost is:
(a) $0.25
(b) $0.40
(c) $4.00
(d) $400.00
(6) The shape of the marginal cost curve
reflects:
(a) the law of
diminishing returns.
(b) the law of
diminishing marginal utility.
(c) the law of
demand.
(d) increasing unit
costs due to rising wage rates.
Consider the data in the table below to answer Question (7).
Units
of labor Units
of output
0 0
1 10
2 25
3 35
4 43
(7) Considering the table above, what is the
marginal physical product of the first unit of labor?
(a) 0
(b) 10
(c) 25
(d) 15
Consider the data in the table below to answer Question (8).
Output
(units per day) 0 10 20 30
Total
cost (dollars per day) 30 42 50 70
(8) The marginal cost between 20 and 30
units of output in the table is:
(a) $1.00
(b) $2.00
(c) $3.00
(d) $10.00
Consider the data in the table below to answer Question (9).
Quantity Total Total Total Average Marginal
(Output) Fixed
Costs Variable Costs Costs Variable
Costs Costs
0 ------ ----- 10 ---- ----
1 ----- ----- 16 ---- ----
2 ---- ----- ---- ---- 4
3 ---- 12 ---- ---- -----
(9) In the table, total fixed costs are:
(a) $0 because the
problem involves the long run.
(b) $10.00
(c) $20.00
(d) $22.00
Consider Figure 1 below in answering Question (10).
Figure
1
ec251_files/image001.gif)
(10) Referring to
Figure 1, economies of scale occur in the following range of factory size:
(a) #1 to #2
(b) #1 to #3
(c) #3 only.
(d)
All the factories exhibit economies
of scale.