9) When a firm increases its employment from four to five workers, with no other
ID: 1209300 • Letter: 9
Question
9) When a firm increases its employment from four to five workers, with no other change, its total output rises from 1,000 to 1,500. For this change in employment, the marginal product of labor is ____.
A) 100
B) 200
C) 205
D) 300
E) 500
10) The long run for a business firm is defined as a time period during which at least one of its inputs is variable (TRUE/FALSE)
11) As output increases in the short run, average fixed cost always declines. (TRUE/FALSE)
12) A plywood firm uses three inputs: labor, lumber, and saws. Although it can vary its labor each week, it must order its lumber six months in advance. Further, it woould take the firm a year to sell its saws, or acquire new saws, For this firm, the long run is____
A) any time period longer than one year
B) any time period longer than one week
C) any time period longer than one week and shorter than six months
D) any time period longer than six months
E) any time period longer than six months and shorter than one year.
13) If a firm doubles its output, but finds that its LRTC less than doubles, the firm is experiencing ____
A) Constant returns to scale
B) economies of scale
C) diseconomies of scale
D) increasing returns to labor
E) Diminishing returns to labor
14) The law of diminishing (marginal) returns tells us that as the firm increases its output by varying all of its inputs together, the average cost of production will rise (TRUE/FALSE)
15) In making a decison, all cost-whether sunk or not- should be considered (TRUE/FALSE)
Explanation / Answer
9. E) 500. MPL = TPL+1 - TPL i.e., 1500 -1000
10. False. IN long run all factors of production are variable.
11. False. AFC declines and become constant at very high level of output
12. A) any time period longer than one year. All inputs will vary in 1 year.
13. E) Diminishing returns to labor
14. False. Law of diminishing returns is concerned wih 1 input.
15. True
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