1			A production function measures the relation between…
			A)	input prices and output prices.
			B)	input prices and the quantity of output.
			C)	the quantity of inputs and the quantity of output.
			D)	the quantity of inputs and input prices.
2			A short-run production function assumes that…
			A)	the usage of at least one input is fixed.
			B)	the level of output is fixed.
			C)	all inputs are fixed inputs.
			D)	both a and b
			E)	both b and c
3			If average product is decreasing, then marginal product…
			A)	must be greater than average product.
			B)	must be less than average product.
			C)	must be increasing.
			D)	cannot be decreasing.
			E)	both a and c
4			Which of the following statements is TRUE?
			A)	A firm plans in the short run and operates in the long run.
			B)	In the long run a firm can change all but one input.
			C)	In the long run all inputs are variable.
			D)	In the short run all inputs are fixed.
5			Suppose you operate a sandwich shop and currently have two employees. If you hire a third employee, your output of sandwiches per day rises from 75 to 90. If you hire a fourth employee, output rises to 110 per day. A fifth and sixth employee would cause output to rise to 120 and 125 per day, respectively. Choose the correct statement:
			A)	Diminishing returns set have not yet set in because output is still increases.
			B)	Diminishing returns set in with the hiring of the fourth worker.
			C)	Diminishing returns set in with the hiring of the fifth worker.
			D)	Diminishing returns set in with the hiring of the sixth worker.
6			The marginal product of labor…
			A)	is less than the average product of labor when the average product of labor is decreasing.
			B)	measures how output changes as the wage rate changes.
			C)	is negative when adding another unit of labor decreases output.
			D)	both a and c
			E)	both b and c
7			Diminishing marginal productivity…
			A)	occurs when the marginal product curve begins to slope downward.
			B)	occurs eventually because each additional unit of the variable input has, on average, fewer units of the fixed input with which to work.
			C)	occurs when adding one more unit of the variable input reduces total product.
			D)	both a and b
			E)	both a and c
8			Diminishing returns refers to the decrease in…
			A)	long-run average cost that results from increases in output.
			B)	average total cost that results from decreases in input prices.
			C)	profit that results from increases in output.
			D)	average product that results from increases in the variable input.
			E)	marginal product that results from increases in the variable input.
9			If a firm is producing a given level of output in a technically-efficient manner, then it must be the case that…
			A)	it is choosing the lowest-cost method of producing that output.
			B)	this output level is the most that can be produced with the given levels of inputs.
			C)	each input is producing its maximum marginal product.
			D)	both a and b
			E)	both a and c
10			If a firm is producing a given level of output in an economically-efficient manner, then it must be the case that…
			A)	it is choosing the lowest-cost method of producing that output.
			B)	this output level is the most that can be produced with the given level of inputs.
			C)	each input is producing its maximum marginal product.
			D)	both a and b
			E)	both a and c
11			A short-run cost function assumes that…
			A)	the level of output is fixed.
			B)	all inputs are fixed.
			C)	at least one input is fixed.
			D)	both a and c
			E)	none of the above
12			Average total cost…
			A)	Decreases as output increases.
			B)	Increases as output increases.
			C)	Increases if marginal cost is increasing.
			D)	Increases if marginal cost is greater than average total cost
			E)	both b and d
13			Average fixed cost…
			A)	increases if marginal cost is increasing.
			B)	increases as output increases.
			C)	decreases as output increases.
			D)	increases if marginal cost is greater than average fixed cost.
14			Marginal cost…
			A)	is less than average cost when average cost is decreasing.
			B)	measures how total cost changes when one more unit of output is produced.
			C)	measures how total cost changes when input prices change.
			D)	both a and b
			E)	both b and c

The next 6 questions refer to the following:

The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,000. Fixed cost is $120,000.

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073402818/459495/clip_image002.jpg','popWin', 'width=526,height=405,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>

15			At what output does the firm reach minimum average variable cost?
			A)	80
			B)	100
			C)	600
			D)	6,000
			E)	8,000
16			What is AVC at its minimum?
			A)	$15
			B)	$25
			C)	$40
			D)	$80
			E)	$100
17			When the firm uses 60 units of labor, how much output does it produce?
			A)	60 units
			B)	360 units
			C)	3,600 units
			D)	5,400 units
			E)	none of the above
18			When the firm uses 60 units of labor, what is AVC at this level of output?
			A)	$22.22
			B)	$33.33
			C)	$60
			D)	$120
			E)	$2,000
19			When the firm uses 100 units of labor, what is marginal cost at this level of output?
			A)	$25
			B)	$33.33
			C)	$90
			D)	$180
			E)	$2000
20			When the firm uses 60 units of labor, what is average total cost at this output?
			A)	$44.44
			B)	$60
			C)	$66.66
			D)	$120