MBA 701 ECON final exam questions
& answers rated A+
economies of scale - ANS ✔✔when long-run average total costs decrease as output increases.
increasing the size of operation decreases the minimum average cost
diseconomies of scale - ANS ✔✔when the long run average total cost increases as output rises
constant returns to scale - ANS ✔✔when the long run average total cost remains constant as
output increases
if the last unit of input increases total product, it indicates that.. - ANS ✔✔the marginal product
is positive
if the last unit of input decreases total product, it indicates that.. - ANS ✔✔the marginal product
is negative
in general, as the usage of an input increases, marginal product of labor initially.. - ANS
✔✔increases then begins to decline and eventually becomes negative
firm managers should use inputs at levels where the: - ANS ✔✔marginal benefit equals
marginal cost & value marginal product of labor equals wage.
how to find how many workers you should hire - ANS ✔✔(cost per unit x change in output =
VMPL)
, Once VMPL drops below the wage the worker earns is when you should stop hiring. You want
VMPL to stay at or above wage
MPK (marginal product of capital) formula - ANS ✔✔change in Q / change in K
You are the manager of University Lube, a manufacturing firm that uses K and L as inputs. The
firm produces and sells a given output. If w = $30, r = $10, MPL = 10, and MPK = 20, then
according to you the firm ____. [Cost minimization: employ inputs up to the point that
MPL/w=MPK/r]. - ANS ✔✔A producer minimizes the cost of producing a given level of output
when the marginal product per dollar spent on all inputs is equal, which means when
MPL/w=MPK/r. In this example, MPL/w = 10/30 < 20/10. Hence, the firm should use more
capital (because capital relatively more productive here) and less labor, to minimize cost (if the
marginal product per dollar spent on labor is less than the marginal product per dollar spent on
labor, then in order to minimize costs, the firm should use less labor and more capital.
The correct answer is: should use less L and more K to cost minimize
When marginal cost curve is below the average total cost curve, the average total cost is ____. -
ANS ✔✔When the marginal cost is below the average total cost (the cost of additional unit is
below the per unit cost), the average total cost is declining (the per unit cost is decreasing) with
more output produced.
For example, if you earn a lower grade in this course than your average grade, your GPA
declines. If you earn a higher grade in this course than your average grade, then your GPA
increases.
The correct answer is: declining with output
Suppose you are a manager of a factory. You purchase five (5) new machines at one million
dollars each. If you can resell two of the machines for $500,000 and three of the machines for
$200,000, what are the sunk costs of purchasing the machines? - ANS ✔✔You bought the
& answers rated A+
economies of scale - ANS ✔✔when long-run average total costs decrease as output increases.
increasing the size of operation decreases the minimum average cost
diseconomies of scale - ANS ✔✔when the long run average total cost increases as output rises
constant returns to scale - ANS ✔✔when the long run average total cost remains constant as
output increases
if the last unit of input increases total product, it indicates that.. - ANS ✔✔the marginal product
is positive
if the last unit of input decreases total product, it indicates that.. - ANS ✔✔the marginal product
is negative
in general, as the usage of an input increases, marginal product of labor initially.. - ANS
✔✔increases then begins to decline and eventually becomes negative
firm managers should use inputs at levels where the: - ANS ✔✔marginal benefit equals
marginal cost & value marginal product of labor equals wage.
how to find how many workers you should hire - ANS ✔✔(cost per unit x change in output =
VMPL)
, Once VMPL drops below the wage the worker earns is when you should stop hiring. You want
VMPL to stay at or above wage
MPK (marginal product of capital) formula - ANS ✔✔change in Q / change in K
You are the manager of University Lube, a manufacturing firm that uses K and L as inputs. The
firm produces and sells a given output. If w = $30, r = $10, MPL = 10, and MPK = 20, then
according to you the firm ____. [Cost minimization: employ inputs up to the point that
MPL/w=MPK/r]. - ANS ✔✔A producer minimizes the cost of producing a given level of output
when the marginal product per dollar spent on all inputs is equal, which means when
MPL/w=MPK/r. In this example, MPL/w = 10/30 < 20/10. Hence, the firm should use more
capital (because capital relatively more productive here) and less labor, to minimize cost (if the
marginal product per dollar spent on labor is less than the marginal product per dollar spent on
labor, then in order to minimize costs, the firm should use less labor and more capital.
The correct answer is: should use less L and more K to cost minimize
When marginal cost curve is below the average total cost curve, the average total cost is ____. -
ANS ✔✔When the marginal cost is below the average total cost (the cost of additional unit is
below the per unit cost), the average total cost is declining (the per unit cost is decreasing) with
more output produced.
For example, if you earn a lower grade in this course than your average grade, your GPA
declines. If you earn a higher grade in this course than your average grade, then your GPA
increases.
The correct answer is: declining with output
Suppose you are a manager of a factory. You purchase five (5) new machines at one million
dollars each. If you can resell two of the machines for $500,000 and three of the machines for
$200,000, what are the sunk costs of purchasing the machines? - ANS ✔✔You bought the
