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Question 3
MULTIPLE CHOICE QUESTIONS TESTBANK – Use the following table which shows the short-run production function of a cricket ball manufacturer
and answer Questions 4 and 5.
CHAPTER 9
Number of Number of Output
Go back to Testbank machines workers (Cricket balls/day)
8 0 0
MEMORANDUM 8 1 60
Answer the following questions by selecting the appropriate answer from the list below. 8 2 140
8 3 230
Question 1 8 4 300
8 5 340
Use the following data to answer Questions 1 and 2:
8 6 360
Quantity produced 1 2 3 4 5
Fixed costs 100 100 100 100 100
What is the average product of labour when two workers are employed?
Variable costs 200 300 350 700 1 400
A. 30 cricket balls
B. 70 cricket balls
What is the average cost of producing 4 units? C. 80 cricket balls
D. 140 cricket balls
A. 100
B. 700 E. 280 cricket balls
C. 25
D. 175 Question 4
E. 200
Diminishing marginal returns set in when the _______ worker is added to the production process.
Question 1 A. second
B. third
What is the marginal cost of the third unit?
C. fourth
A. 100 D. fifth
B. 300 E. sixth
C. 50
D. 700
E. 850 Question 5
The average total cost of producing cell phones in a factory is R300 at the current output level of 100
Question 2 per week. If total fixed cost is R20 000 per week, then:
In economics, the short run is a period of time: A. average variable cost is R100.
A. of one year or less. B. average fixed cost is R400.
B. in which all inputs are variable. C. total cost is R10 000.
C. in which all inputs are fixed. D. total variable cost is R30 000.
D. in which the quantity of at least one input is fixed and the quantities of the other inputs can E. marginal cost is R300.
be varied.
E. in which all inputs are variable but technology is fixed.

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Question 6
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 Question (a)
worker. The marginal product of that worker is 30 surfboards per hour. What is the marginal cost of When output increases from 30 to 80 bottles of mineral water, the marginal cost of
output associated with hiring the sixth worker? producing one of those 50 bottles of mineral water is:
A. R20 A. R5
B. R1,50 B. R6
C. R0,67 C. R12,50
D. R2 D. R20
E. R30 E. R30

Question 7 Question (b)

The vertical distance between the average total cost curve and the average variable cost curve: The average variable cost to the firm when 30 bottles of mineral water are produced is:
A. increases as output increases. A. R10
B. decreases as output increases. B. R13,33
C. is equal to total variable cost per unit of labour. C. R23,33
D. is equal to total variable cost. D. R30
E. is negative. E. R70

Question 8
The marginal cost curve intersects the:
A. AC, AVC and AFC curves at their minimum points. Question 10
B. AC and AFC curves at their minimum points.
Suppose a firm produces 20 units of output per month and has a total variable cost of R3 000 per
C. AVC and AFC curves at their minimum points.
month. If its average fixed costs are R400 per month, what are its total costs per month?
D. AC and AVC curves at their minimum points.
E. TC and TVC curves at their minimum points. A. R3 400
B. R3 800
C. R6 000
Question 9
D. R8 000
Use the following table which represents the short-run total cost schedule of a mineral water E. R11 000
manufacturer and answer Questions (a) and (b).
Labour Output Total cost Question 11
(workers per day) (bottles of mineral (R)
water per day Which one of the following statements is correct?
A. The short run is a time period of one year or less.
0 0 400 B. The short run is a period of time during which the quantities of all inputs can be varied,
1 30 700 but technology is held constant.
2 80 1 000 C. The short run is a period of time during which the quantity of at least one input is fixed
3 120 1 300 and the quantities of the other inputs can be varied.
4 140 1 600 D. The long run is a period of time during which the quantities of all factor inputs are fixed.
5 150 1 900 E. The time period separating the short run from the long run is at least 3 months.

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Question 12 Question 15
When the marginal product of labour is less than the average product of labour: The vertical distance between the total cost and the total variable cost curves:
A. the average product of labour is decreasing. A. decreases as output increases.
B. total product is increasing at an increasing rate. B. increases as output increases.
C. the marginal product of labour is increasing. C. is equal to average fixed cost.
D. the marginal product of labour curve is positively sloped. D. is equal to total fixed cost
E. the firm is experiencing increasing marginal returns. E. is equal to marginal cost.

Question 13 Question 16
Suppose that a shoe manufacturer that employs 6 workers is able to increase the average product of When the marginal cost curve is above the average total cost curve:
labour from 5 pairs of shoes per hour to 6 pairs of shoes per hour by hiring a seventh worker. The
A. the average fixed cost curve is rising.
seventh worker’s hourly marginal product is:
B. the average fixed cost curve is horizontal.
A. 1 pair of shoes. C. the marginal cost curve is falling.
B. 7 pairs of shoes. D. the marginal cost curve reaches a minimum.
C. 11 pairs of shoes. E. the average total cost curve is rising.
D. 12 pairs of shoes.
E. 30 pairs of shoes. Question 17
Marginal cost is the amount that:
A. total cost increases when one more labourer is hired.
Question 14
B. fixed cost increases when one more labourer is hired.
Use the following table which describes the daily production possibilities facing a small brewery and C. variable cost increases when one more labourer is hired.
answer the question below. D. total cost increases when one more unit of output is produced.
E. fixed cost increases when one more unit of output is produced.
Labour (L) Average Product of Labour (APL)
(litres of juba) Question 18
1 3
2 6 Use the table below to answer Questions (a) to (c). The fixed cost to the firm is R500.
3 8
4 9,5 Cocaine (total product) Total Variable Cost (TVC)
5 10 (units) (rands)

The marginal product of the third labourer is: 1 200

2 360
A. 2,67 litres of juba. 3 500
B. 2 litres of juba. 4 700
C. 8 litres of juba. 5 1 000
D. 12 litres of juba. 6 1 800
E. 24 litres of juba.

Question (a)
The average variable cost to the firm when 4 units of cocaine are produced is:

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