Download exam one -- summer 2001 - Portland State University

PORTLAND STATE UNIVERSITY
EC 201 - PRINCIPLES OF MICROECONOMICS
Additional Practice Questions for Production & Cost -- Fall 2003
Jack Richards, Instructor
Name: __________________
1. Which of the firms below would have the longest run?
A.
B.
C.
D.
E.
A company that provided electricity
A local grocery store
A law firm
The cookie company you run of your kitchen
None of the above are correct.
2. For a wheat farmer in the middle of harvesting system, a fixed input would be
A. Workers hired
B. Combines rented
C. The land that had been planted
D. Trucks rented to haul the wheat
E. None of the above are correct.
3. A firm is making zero economic profits. From this, we know that
A. The firm is going to go out of business
B. Implicit costs are zero
C. The firm is going to stay in business, but will not be able to attract new financial capital.
D. The firm will stay in business since it is covering all relevant opportunity costs
E. None of the above are correct.
4. The difference between the short run and the long run is
A. Economic profits are negative in the short run and positive in the long run.
B. Economic and accounting profits are not equal in the short run but are equal in the long run
C. That in the short run at least one factor of production cannot be varied while in the long run
all factors of production can be varied.
D. The short fun is a period less than a year while the long run is a period greater than a year.
E. Both C and D are correct.
5. Which of the firms below would have the longest long run?
A. Sears
B. McDonald’s
C. Law firm
D. General Motors
E. None of the above are correct.
6. The production function
A. Gives the maximum amount of output for a given level of inputs
B. Gives the implicit costs for all inputs
C. Gives the amount of time necessary to reach the long run
D. Allows us to compute the difference between accounting and economic profits.
E. Both A and D are correct.
For Question 7:
Quantity of Labor
1
2
3
4
5
6
Total Product
22
52
81
100
115
126
Average Product
22
26
27
25
23
21
Marginal Product
22
30
29
19
15
11
7. Refer to the above table. At what quantity of labor does the benefit from specialization run out?
A. After 1 units.
B. After 2 units.
C. After 3 units.
D. After 6 units.
E. None of the above are correct.
8. If marginal product is zero, we know that
A. Total product is also zero
B. Average product is also zero
C. Total output is constant
D. Average product is constant
E. None of the above are correct.
9. Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a
decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that
A. Marginal product is increasing from workers 1-50 and then becomes negative after worker 51
B. Marginal product is increasing from workers 1-50, decreasing after 51 workers, and becomes
negative after the 101st worker.
C. Marginal product is decreasing from workers 1-101, becoming negative at 102nd worker.
D. Marginal product is increasing from workers 1-50, constant from workers 51 to 101, and is
decreasing after that.
E. None of the above are correct.
For question 10:
Quantity of Labor
1
2
3
4
Total Product
Average Product
320
335
Marginal Product
338
320
10. Refer to the above schedule. What does total product equal when 2 units of labor are used?
A. 320
B. 335
C. 350
D. 670
E. None of the above are correct.
11. When the minimum efficient scale occurs at a high level of industry output
A. The firms in the industry will be producing in the diseconomies of scale portion of the curve
B. There is only be a few firms in the industry
C. The government will have to take over the production of the good since it will be
unprofitable for firms.
D. There will be a lot of firms in this industry
E. Both A and B are correct.
For Question 12, 13:
Quantity of Labor
1
2
3
4
5
6
Total Product
22
52
81
100
115
126
Average Product
22
26
27
25
23
21
Marginal Product
22
30
29
19
15
11
12. Refer to the above table. At what quantity of labor does the marginal cost curve start to increase?
A. After 1 unit
B. After 2 units
C. After 3 units
D. After 6 units
E. None of the above are correct.
13. Refer to the table above. At what quantity of labor does the average variable cost curve start to
increase?
A. After 1 unit
B. After 2 units
C. After 3 units
D. After 6 units
E. None of the above are correct.
14. If the marginal product curve is intersecting the average product curve, we know that
A. The average variable cost curve is intersecting the average total cost curve.
B. The marginal cost curve is intersecting the average fixed cost curve
C. The average total cost curve lies above the marginal cost curve
D. The marginal cost curve is intersecting the average total cost curve
E. None of the above are correct.
Use this graph for Question 15-18:
15. Refer to the figure above. Economies of scale exist
A. Over the entire range of output
B. From output Q2 to Q5.
C. Up to output Q2
D. After output Q5.
E. None of the above are correct.
16. Refer to the above figure. Diseconomies of scale exist
A. Over the entire range of output
B. From output Q2 to Q5
C. Up to output Q2
D. After output Q5.
E. None of the above are correct.
17. Refer to the above figure. Constant returns to scale exist
A. Up to output Q2
B. From Q2 to Q5
C. After Q5
D. Over the entire long-run average cost curve
E. None of the above are correct.
18. Refer to the above figure. Minimum efficient scale is at output rate
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
19. The total cost of the firm
A. Includes explicit costs but excludes implicit costs
B. Includes implicit costs but excludes explicit costs
C. Includes implicit and explicit costs
D. Includes implicit and explicit costs but excludes a normal rate of return on investment.
E. None of the above are correct.
20. Which of the following statements is not true for a perfectly competitive firm?
A. A firm’s demand curve is horizontal
B. The firm can influence its demand curve by advertising its product
C. The firm’s demand curve is perfectly elastic
D. The market demand and supply curves determine the market price
E. All of the above are false.
21. A perfectly competitive firm is maximizing profits in the short run. This implies that it is
A. Making the most profits possible and that profits are positive
B. Making the most profits possible and that profits are either zero or positive
C. Making the most profits possible, which can be positive, negative, or zero.
D. Making the most profits possible, which is where price equals average total cost.
E. Both A and B are correct.
22. The perfectly competitive firm maximizes profits when
A. It produces and sells the quantity at which the differences between marginal revenue and
marginal cost is the greatest
B. It produces and sells the quantity at which marginal revenue and marginal cost are equal
C. It produces and sells the quantity at which the differences between average revenue and
average cost is the greatest.
D. It produces and sells the quantity at which the difference between price and average cost it
the greatest
E. None of the above are correct.
Answers
1. D
6. A
11. B
16. D
21. B
2. C
7. C
12. B
17. B
22. B
3. D
8. C
13. C
18. B
4. C
9. B
14. C
19. C
5. D
10. D
15. C
20. B