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Chapter 8 PROD AND COST Multiple Choice Answers
Economic and Management Sciences Education Methodology Option: EMS SP I
(Central University of Technology)
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MULTIPLE CHOICE QUESTIONS TESTBANK –
CHAPTER 8
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MEMORANDUM
Answer the following questions by selecting the appropriate answer from the list below.
Question 1
Use the following data to answer Questions 1 and 2:
Quantity produced
1
2
3
4
5
Fixed costs
100
100
100
100
100
Variable costs
200
300
350
700
1 400
What is the average cost of producing 4 units?
A.
B.
C.
D.
E.
100
700
25
175
200
Question 2
What is the marginal cost of the third unit?
A.
B.
C.
D.
E.
100
300
50
700
850
Question 3
In economics, the short run is a period of time:
A.
B.
C.
D.
E.
of one year or less.
in which all inputs are variable.
in which all inputs are fixed.
in which the quantity of at least one input is fixed and the quantities of the other inputs can
be varied.
in which all inputs are variable but technology is fixed.
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Question 4
Use the following table which shows the short-run production function of a cricket ball manufacturer
and answer Questions 4 and 5.
Number of
machines
Number of
workers
Output
(Cricket balls/day)
8
0
0
8
1
60
8
2
140
8
3
230
8
4
300
8
5
340
8
6
360
What is the average product of labour when two workers are employed?
A.
B.
C.
D.
E.
30 cricket balls
70 cricket balls
80 cricket balls
140 cricket balls
280 cricket balls
Question 5
Diminishing marginal returns set in when the _______ worker is added to the production process.
A.
B.
C.
D.
E.
second
third
fourth
fifth
sixth
Question 6
The average total cost of producing cell phones in a factory is R300 at the current output level of 100
per week. If total fixed cost is R20 000 per week, then:
A.
B.
C.
D.
E.
average variable cost is R100.
average fixed cost is R400.
total cost is R10 000.
total variable cost is R30 000.
marginal cost is R300.
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Question 7
Consider a firm that manufactures surfboards. Presently the firm is hiring 5 workers at a wage rate of
R20/hour. The firm is able to produce 50 surfboards per hour. The firm decides to hire an additional
worker. The marginal product of that worker is 30 surfboards per hour. What is the marginal cost of
output associated with hiring the sixth worker?
A.
B.
C.
D.
E.
R20
R1,50
R0,67
R2
R30
Question 8
The vertical distance between the average total cost curve and the average variable cost curve:
A.
B.
C.
D.
E.
increases as output increases.
decreases as output increases.
is equal to total variable cost per unit of labour.
is equal to total variable cost.
is negative.
Question 9
The marginal cost curve intersects the:
A.
B.
C.
D.
E.
AC, AVC and AFC curves at their minimum points.
AC and AFC curves at their minimum points.
AVC and AFC curves at their minimum points.
AC and AVC curves at their minimum points.
TC and TVC curves at their minimum points.
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Question 10
Use the following table which represents the short-run total cost schedule of a mineral water
manufacturer and answer Questions (a) and (b).
Labour
(workers per day)
Output
(bottles of mineral
water per day
Total cost
(R)
0
1
2
3
4
5
0
30
80
120
140
150
400
700
1 000
1 300
1 600
1 900
Question (a)
When output increases from 30 to 80 bottles of mineral water, the marginal cost of
producing one of those 50 bottles of mineral water is:
A.
B.
C.
D.
E.
R5
R6
R12,50
R20
R30
Question (b)
The average variable cost to the firm when 30 bottles of mineral water are produced is:
A.
B.
C.
D.
E.
R10
R13,33
R23,33
R30
R70
Question 11
Suppose a firm produces 20 units of output per month and has a total variable cost of R3 000 per
month. If its average fixed costs are R400 per month, what are its total costs per month?
A.
B.
C.
R3 400
R3 800
R6 000
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D.
E.
R8 000
R11 000
Question 12
Which one of the following statements is correct?
A. The short run is a time period of one year or less.
B. The short run is a period of time during which the quantities of all inputs can be varied,
but technology is held constant.
C. The short run is a period of time during which the quantity of at least one input is fixed
and the quantities of the other inputs can be varied.
D. The long run is a period of time during which the quantities of all factor inputs are fixed.
E. The time period separating the short run from the long run is at least 3 months.
Question 13
When the marginal product of labour is less than the average product of labour:
A.
B.
C.
D.
E.
the average product of labour is decreasing.
total product is increasing at an increasing rate.
the marginal product of labour is increasing.
the marginal product of labour curve is positively sloped.
the firm is experiencing increasing marginal returns.
Question 14
Suppose that a shoe manufacturer that employs 6 workers is able to increase the average product of
labour from 5 pairs of shoes per hour to 6 pairs of shoes per hour by hiring a seventh worker. The
seventh worker’s hourly marginal product is:
A.
B.
C.
D.
E.
1 pair of shoes.
7 pairs of shoes.
11 pairs of shoes.
12 pairs of shoes.
30 pairs of shoes.
Question 15
Use the following table which describes the daily production possibilities facing a small brewery and
answer the question below.
Labour (L)
1
2
Average Product of Labour (APL)
(litres of juba)
3
6
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3
4
5
8
9,5
10
The marginal product of the third labourer is:
A.
B.
C.
D.
E.
2,67 litres of juba.
2 litres of juba.
8 litres of juba.
12 litres of juba.
24 litres of juba.
Question 16
The vertical distance between the total cost and the total variable cost curves:
A.
B.
C.
D.
E.
decreases as output increases.
increases as output increases.
is equal to average fixed cost.
is equal to total fixed cost
is equal to marginal cost.
Question 17
When the marginal cost curve is above the average total cost curve:
A.
B.
C.
D.
E.
the average fixed cost curve is rising.
the average fixed cost curve is horizontal.
the marginal cost curve is falling.
the marginal cost curve reaches a minimum.
the average total cost curve is rising.
Question 18
Marginal cost is the amount that:
A.
B.
C.
D.
E.
total cost increases when one more labourer is hired.
fixed cost increases when one more labourer is hired.
variable cost increases when one more labourer is hired.
total cost increases when one more unit of output is produced.
fixed cost increases when one more unit of output is produced.
Question 19
Use the table below to answer Questions (a) to (c). The fixed cost to the firm is R500.
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Cocaine (total product)
(units)
Total Variable Cost (TVC)
(rands)
1
2
3
4
5
6
200
360
500
700
1 000
1 800
Question (a)
The average variable cost to the firm when 4 units of cocaine are produced is:
A.
B.
C.
D.
E.
R175
R200
R300
R700
None of the above.
Question (b)
The average total cost to the firm when 4 units of cocaine are produced is:
A.
B.
C.
D.
E.
R175
R200
R300
R700
None of the above.
Question (c)
The marginal cost of the sixth unit of cocaine is:
A.
B.
C.
D.
E.
R200
R300
R700
R800
None of the above.
Question 20
A situation where average variable cost is at a minimum can be associated with a situation where:
A.
B.
C.
D.
average total cost is at a minimum.
marginal cost is at a minimum.
average product is at a maximum.
marginal product is at a maximum.
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E. total product is at a maximum.
Question 21
We can associate a situation where average variable costs fall with a situation where:
A.
B.
C.
D.
E.
the total product curve decreases.
the total product curve is at the point of inflection.
the marginal product curve is above the average product curve.
total costs fall.
total costs increase at an increasing rate.
Question 22
Which of the following cost curves does not have a shape that is explained by the law of diminishing
marginal returns?
A.
B.
C.
D.
E.
Total variable costs
Total costs
Average total costs
Average fixed costs
Average variable costs
Question 23
If the marginal cost curve is below the average cost curve, we can say that:
A.
B.
C.
D.
E.
total costs are falling.
the total cost curve has already reached its maximum.
the average cost curve has not yet reached its minimum.
average product is falling.
diminishing returns have not yet set in.
Question 24
Suppose a firm produces 15 units of output per month and has a total variable cost of R5 000 per
month. If its average fixed costs are R350 per month, what are its total costs per month?
A.
B.
C.
D.
R350
R5 000
R5 250
R5 350
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E. R10 250
Question 25
Complete the following table and use the data to answer the questions below.
Quantity
Total revenue
Average revenue
1
Marginal revenue
10
2
16
3
2
4
5
5
20
6
-2
Question (a)
The total revenue of four units is:
A.
B.
C.
D.
E.
10
16
18
20
14
Question (b)
The average revenue of six units is:
A.
F.
G.
H.
I.
8
6
5
4
3
Question (c)
The marginal revenue of four units is:
A.
J.
K.
L.
0
2
4
6
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M. -1
Question 26
Complete the following table and use the data to answer the questions below.
0
1
2
3
4
5
Output
Total cost
Marginal cost
(units)
(R)
(R)
Average
fixed cost
(R)
Average
variable cost
(R)
100
110
130
166
220
300
Question (a)
The marginal cost of the fourth unit is:
A.
N.
O.
P.
Q.
10
20
36
54
80
Question (b)
The average fixed cost of the fifth unit is:
A.
R.
S.
T.
U.
10
20
25
50
100
Question (c)
The average variable cost of the third unit is:
A.
V.
W.
X.
11
22
33
30
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Average
total cost
(R)
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Y. 40
Question (d)
The average total cost of the second unit is:
A. 55
Z. 60
AA. 65
BB. 100
CC. 110
Question 27
Complete the following table and use the data to answer the questions below.
Output
(units)
1
2
3
4
5
6
Total revenue
(R)
10
Average revenue
(R)
Marginal revenue
(R)
15
6
10
42,5
2,5
Question (a)
The total revenue of six units is:
A. 10
DD.30
EE. 40
FF. 45
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GG.50
Question (b)
The average revenue of three units is:
A. 7,5
HH.10
II. 12
JJ. 15
KK. 6
Question (c)
The marginal revenue of five units is:
A. 2,5
LL. 4
MM. 5
NN. 6
OO. 10
Question 28
Complete the following table and use the data to answer the questions below.
Units of labour
(N)
1
2
3
4
5
6
Total product
(TP)
Average product
(AP)
Marginal product
(MP)
20
45
66
21
100
14
Question (a)
The total product of four units is:
A. 20
PP. 50
QQ. 80
RR. 84
SS. 114
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Question (b)
The average product of six units is:
A. 19
TT. 20
UU.21
VV. 22
WW. 22,5
Question (c)
The marginal product of five units is:
A. 14
XX. 16
YY. 18
ZZ. 20
AAA. 25
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