LSUS MBA 701 Exam 3: Questions With Logical
Solutions
A change in the wage rate paid to the variable factor (labor) will shift the
Correct Answer - ATC, AVC, and MC curves
A short-run production function assumes that Correct Answer - at least
one input is a fixed input.
Diminishing marginal product refers to the decrease in Correct Answer -
marginal product that results from increase in the variable input
If a firm is producing a given level of output in an economically efficient
manner, then it must be the case that Correct Answer - both "this is the
lowest-cost method of producing that output" and "this output level is the
most that can be produced with the given level of inputs"
If average product is increasing, then marginal product Correct Answer -
must be greater than average product
Suppose that the firm's only variable input is labor. When 50 workers are
used, the average product of labor is 50 and the marginal product of labor is
75. The wage rate is $80 and the total cost of the fixed input is $500. Which of
the following is true? Correct Answer - average variable cost is
decreasing
Suppose you run a pizza shop and currently have two employes. If you hire a
third employee, your output of pizzas per day rises from 55 to 65. If you hire a
fourth employee, output rises to 80 per day. A fifth and sixth employee would
cause output to rise to 90 and 95 per day, respectively. Pick the correct
statement Correct Answer - Diminishing marginal product of labor sets
in with the hiring of the fifth worker
The marginal cost (MC) curve intersects the Correct Answer - ATC and
AVC curves at their minimum points
Solutions
A change in the wage rate paid to the variable factor (labor) will shift the
Correct Answer - ATC, AVC, and MC curves
A short-run production function assumes that Correct Answer - at least
one input is a fixed input.
Diminishing marginal product refers to the decrease in Correct Answer -
marginal product that results from increase in the variable input
If a firm is producing a given level of output in an economically efficient
manner, then it must be the case that Correct Answer - both "this is the
lowest-cost method of producing that output" and "this output level is the
most that can be produced with the given level of inputs"
If average product is increasing, then marginal product Correct Answer -
must be greater than average product
Suppose that the firm's only variable input is labor. When 50 workers are
used, the average product of labor is 50 and the marginal product of labor is
75. The wage rate is $80 and the total cost of the fixed input is $500. Which of
the following is true? Correct Answer - average variable cost is
decreasing
Suppose you run a pizza shop and currently have two employes. If you hire a
third employee, your output of pizzas per day rises from 55 to 65. If you hire a
fourth employee, output rises to 80 per day. A fifth and sixth employee would
cause output to rise to 90 and 95 per day, respectively. Pick the correct
statement Correct Answer - Diminishing marginal product of labor sets
in with the hiring of the fifth worker
The marginal cost (MC) curve intersects the Correct Answer - ATC and
AVC curves at their minimum points
