| 1. |
Resources, as defined broadly by economists, are |
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| A. |
land and labor. |
| B. |
land, labor, and workers. |
| C. |
land, workers, and firms. |
| D. |
capital, land, and natural resources. |
| E. |
land, labor, and capital. |
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| 2. |
The transformation of resources into economic goods and services is called |
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| A. |
technical efficiency. |
| B. |
resourcing. |
| C. |
production. |
| D. |
increasing returns. |
| E. |
output. |
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| 3. |
In economic theory, economists use the circular flow diagram to describe |
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| A. |
consumers who lack any preference. |
| B. |
an indifference curve. |
| C. |
the relationship between output and resources. |
| D. |
the household sector. |
| E. |
the business sector. |
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| 4. |
Marginal physical product is |
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| A. |
always increasing. |
| B. |
the maximum output that can be produced from different quantities of a variable resource. |
| C. |
the maximum output that can be produced from different quantities of a fixed resource. |
| D. |
the additional output produced from one more unit of a variable resource, holding other inputs constant. |
| E. |
None of the above. |
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| 5. |
Which of the following statements best represents the definition of marginal physical product? |
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| A. |
The additional quantity that is produced when one additional unit of a resource is used in combination with the same quantities of all other resources |
| B. |
The total quantity that is produced when one additional unit of a resource is used in combination with the same quantities of all other resources |
| C. |
The total quantity that is produced when all additional units of a resource are used in combination with the same quantities of all other resources |
| D. |
The total amount produced in a specified time period |
| E. |
The additional quantity that is produced when all combinations of a resource are tried as an experiment |
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| 6. |
Every firm (and every individual and nation as well) is faced with the law of diminishing marginal returns. The law is a physical property rather than an economic one, but it is important to economics because |
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| A. |
it defines the relationship between costs and output in the long run. |
| B. |
it defines the relationship between costs and output in the short run. |
| C. |
it defines the relationship between average costs and output in the long run. |
| D. |
it defines the relationship between marginal costs and output in the long run. |
| E. |
it defines the relationship between total revenue and output in the long run. |
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| 7. |
For any firm, it is always true that |
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| A. |
as output rises, average fixed costs decline because the total fixed cost is divided by a larger and larger number of units produced. |
| B. |
as output rises, average fixed costs rise equally because of more intense resource utilization. |
| C. |
as output rises, average fixed costs quickly drop to zero. |
| D. |
as output rises, average fixed costs become a vertical line. |
| E. |
as output rises, average fixed costs decline and ultimately become negative. |
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| 8. |
Average fixed cost |
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| A. |
is constant as output rises. |
| B. |
decreases as output rises. |
| C. |
increases with rising output and then declines. |
| D. |
intersects with average variable cost at the lowest average variable cost. |
| E. |
equals marginal cost at the lowest point of marginal cost. |
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| 9. |
Overhead costs are |
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| A. |
identical to fixed costs. |
| B. |
the costs of variable inputs. |
| C. |
those costs that are not directly attributable to the production process. |
| D. |
the costs of labor inputs in the short run but not in the long run. |
| E. |
the costs associated with getting in over your head. |
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| 10. |
The sum of the prices that firms must pay for resources used in production times the quantity of resources used, for each quantity of output produced, is known as the firm’s |
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| A. |
total resource schedule. |
| B. |
total physical product schedule. |
| C. |
average physical product schedule |
| D. |
total cost schedule. |
| E. |
average total cost schedule. |
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