1. Production and Costs Sample Questions
AP Economics
Mr. Bordelon

2. Total Product and Marginal Product
Labor per Day
Total Products
(units per period) 1 10 2 30 3 70 4 90 5
100 6
107 7
110 8
105
The marginal product of the second worker is:
10.
15.
20.
30. 0.

3. Total Product and Marginal Product
Labor per Day
Total Products
(units per period) 1 10 2 30 3 70 4 90 5
100 6
107 7
110 8
105
The marginal product of the second worker is:
10.
15.
20.
30. 0.

4. Total Product and Marginal Product
Labor per Day
Total Products
(units per period) 1 10 2 30 3 70 4 90 5
100 6
107 7
110 8
105
Negative marginal returns begin when the _____ worker is added.
fifth
sixth
seventh
eighth
fourth

5. Total Product and Marginal Product
Labor per Day
Total Products
(units per period) 1 10 2 30 3 70 4 90 5
100 6
107 7
110 8
105
Negative marginal returns begin when the _____ worker is added.
fifth
sixth
seventh
eighth
fourth

6. Suppose that the first four units of a variable input generate corresponding total outputs per period of 200, 350, 450, and 500, respectively. The marginal product of the second unit of input is:
50.
100.
150.
200.
350.

7. Suppose that the first four units of a variable input generate corresponding total outputs per period of 200, 350, 450, and 500, respectively. The marginal product of the second unit of input is:
50.
100.
150.
200.
350.

8. When hiring units of labor between zero and L1 units of labor, which of the following statements is true?
The marginal product of labor is increasing.
The marginal product of labor is decreasing.
Total product is increasing at a diminishing rate.
Average product is decreasing.
Total product is increasing at a constant rate.

9. When hiring units of labor between zero and L1 units of labor, which of the following statements is true?
The marginal product of labor is increasing.
The marginal product of labor is decreasing.
Total product is increasing at a diminishing rate.
Average product is decreasing.
Total product is increasing at a constant rate.

10. Hiring L2 units of labor results in total product attaining a _____ and the marginal product of labor _____.
minimum; being equal to zero
maximum; being equal to zero
maximum; being positive
minimum; falling, but still being positive
maximum; being negative

11. Hiring L2 units of labor results in total product attaining a _____ and the marginal product of labor _____.
minimum; being equal to zero
maximum; being equal to zero
maximum; being positive
minimum; falling, but still being positive
maximum; being negative

12. You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a decision most likely to be made in the long run at your deli?
You order more breadsticks from the local bakery.
You ask your beverage distributor to deliver more soft drinks next week.
You decide to keep the deli open two more hours on the two busiest nights of the week.
You place a newspaper advertisement to attract part-time workers from the local college.
You renovate the second floor of your building to increasing the size of the dining room.

13. You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a decision most likely to be made in the long run at your deli?
You order more breadsticks from the local bakery.
You ask your beverage distributor to deliver more soft drinks next week.
You decide to keep the deli open two more hours on the two busiest nights of the week.
You place a newspaper advertisement to attract part-time workers from the local college.
You renovate the second floor of your building to increasing the size of the dining room.

14. Assuming that all other factors of production are held constant, marginal product is the change in _____ output resulting from a one-unit change in _____.
total; a variable input
total; a fixed input
total; average product
per unit; a fixed input
total; consumption

15. Assuming that all other factors of production are held constant, marginal product is the change in _____ output resulting from a one-unit change in _____.
total; a variable input
total; a fixed input
total; average product
per unit; a fixed input
total; consumption

16. For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____.
total cost; number of photographs
marginal cost; number of photographs
total cost; marginal product of photographs
average cost; number of photographs
average cost; price of photographs

17. For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____.
total cost; number of photographs
marginal cost; number of photographs
total cost; marginal product of photographs
average cost; number of photographs
average cost; price of photographs

18. When a cherry orchard in Oregon adds an additional worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is:
$40.
$19.
$4,000.
$24,000.
$60.

19. When a cherry orchard in Oregon adds an additional worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is:
$40.
$19.
$4,000.
$24,000.
$60.

20. When a firm produces a small amount of output, the spreading effect:
is stronger than the diminishing returns effect.
is weaker than the diminishing returns effect.
and diminishing returns effect are equal.
will be zero.
contributes to a vertical short-run average total cost curve.

21. When a firm produces a small amount of output, the spreading effect:
is stronger than the diminishing returns effect.
is weaker than the diminishing returns effect.
and diminishing returns effect are equal.
will be zero.
contributes to a vertical short-run average total cost curve.

22. The vertical difference between curve B and curve C at any quantity of output is:
marginal cost.
fixed cost.
average fixed cost.
average variable cost.
profit.

23. The vertical difference between curve B and curve C at any quantity of output is:
marginal cost.
fixed cost.
average fixed cost.
average variable cost.
profit.

24. When marginal cost is below average variable cost, average variable cost must be:
at its minimum.
at its maximum.
falling.
rising.
equal to zero.

25. When marginal cost is below average variable cost, average variable cost must be:
at its minimum.
at its maximum.
falling.
rising.
equal to zero.

26. Suppose Bonnie spends $300 per month to rent the building, $100 per month to pay for insurance for her business, and $100 per worker per month for every worker she hires. Given this information, Bonnie’s fixed costs equal:
$400.
$300.
$500.
$100.
$600.

27. Suppose Bonnie spends $300 per month to rent the building, $100 per month to pay for insurance for her business, and $100 per worker per month for every worker she hires. Given this information, Bonnie’s fixed costs equal:
$400.
$300.
$500.
$100.
$600.

28. Lindsey’s variable cost of production: stay constant. are equal to 10.
The table provides information about the production function for Lindsay’s Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.
Lindsey’s variable cost of production:
stay constant.
are equal to 10.
equal zero when she produces zero bushels of produce.
fall as soon as she starts producing.
equal $100 when 3 workers are employed.
Quantity of Land
Quantity of Labor
Quantity of Produce 10 1 50 2
100 3
140 4
170 5
190

29. Lindsey’s variable cost of production: stay constant. are equal to 10.
The table provides information about the production function for Lindsay’s Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.
Lindsey’s variable cost of production:
stay constant.
are equal to 10.
equal zero when she produces zero bushels of produce.
fall as soon as she starts producing.
equal $100 when 3 workers are employed.
Quantity of Land
Quantity of Labor
Quantity of Produce 10 1 50 2
100 3
140 4
170 5
190

30. When she hires 4 workers, Lindsey’s variable cost of production is:
The table provides information about the production function for Lindsay’s Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.
When she hires 4 workers, Lindsey’s variable cost of production is:
$50.
$20.
$200.
$250.
$170.
Quantity of Land
Quantity of Labor
Quantity of Produce 10 1 50 2
100 3
140 4
170 5
190

31. When she hires 4 workers, Lindsey’s variable cost of production is:
The table provides information about the production function for Lindsay’s Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.
When she hires 4 workers, Lindsey’s variable cost of production is:
$50.
$20.
$200.
$250.
$170.
Quantity of Land
Quantity of Labor
Quantity of Produce 10 1 50 2
100 3
140 4
170 5
190

32. The table provides information about the production function for Lindsay’s Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.
When Lindsay decides to produce 50 units of produce she finds her total cost is equal to:
$150.
$50.
$200.
$350.
$250.
Quantity of Land
Quantity of Labor
Quantity of Produce 10 1 50 2
100 3
140 4
170 5
190

33. The table provides information about the production function for Lindsay’s Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.
When Lindsay decides to produce 50 units of produce she finds her total cost is equal to:
$150.
$50.
$200.
$350.
$250.
Quantity of Land
Quantity of Labor
Quantity of Produce 10 1 50 2
100 3
140 4
170 5
190

34. Sunk costs:
are the losses associated with failed business ventures.
are an important component of marginal analysis.
are the same as fixed costs.
are costs that have already been incurred and are non-recoverable.
are the sum of fixed and variable costs.

35. Sunk costs:
are the losses associated with failed business ventures.
are an important component of marginal analysis.
are the same as fixed costs.
are costs that have already been incurred and are non-recoverable.
are the sum of fixed and variable costs.

36. The long-run average total cost curve is tangent to an infinite number of:
short-run total cost curves.
short-run marginal cost curves.
short-run average variable cost curves.
short-run average total cost curves.
short-run marginal product curves.

37. The long-run average total cost curve is tangent to an infinite number of:
short-run total cost curves.
short-run marginal cost curves.
short-run average variable cost curves.
short-run average total cost curves.
short-run marginal product curves.

38. A university that benefits from lower costs per unit as it grows is an example of:
economies of scale.
diseconomies of scale.
increasing opportunity costs.
scale reduction.
sunk costs.

39. A university that benefits from lower costs per unit as it grows is an example of:
economies of scale.
diseconomies of scale.
increasing opportunity costs.
scale reduction.
sunk costs.

40. Output per period in the region from 0 to A indicates that firm is experiencing:
diseconomies of scale.
constant returns to scale.
decreasing returns to scale.
negative costs of production.
economies of scale.

41. Output per period in the region from 0 to A indicates that firm is experiencing:
diseconomies of scale.
constant returns to scale.
decreasing returns to scale.
negative costs of production.
economies of scale.

42. A firm that is experiencing diminishing returns in management’s ability to use and disseminate information as it increases production in the long run is an example of:
economies of scale.
diseconomies of scale.
being too small for the relevant market.
not having enough managers.
a perfectly competitive firm.

43. A firm that is experiencing diminishing returns in management’s ability to use and disseminate information as it increases production in the long run is an example of:
economies of scale.
diseconomies of scale.
being too small for the relevant market.
not having enough managers.
a perfectly competitive firm.

44. The long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output is experiencing:
economies of scale.
diseconomies of scale.
constant returns to scale.
diminishing marginal returns.
increasing returns to scale.

45. The long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output is experiencing:
economies of scale.
diseconomies of scale.
constant returns to scale.
diminishing marginal returns.
increasing returns to scale.

46. Assume a firm employs two inputs, A and B
Assume a firm employs two inputs, A and B. The optimal hiring of inputs occurs when which of the following is true?
TPA/PA = TPB/PB
MPA/PA = MPB/PB
TCA = TCB
MPA = MPB
(MPA)(PA) = (MPB)(PB)

47. Assume a firm employs two inputs, A and B
Assume a firm employs two inputs, A and B. The optimal hiring of inputs occurs when which of the following is true?
TPA/PA = TPB/PB
MPA/PA = MPB/PB
TCA = TCB
MPA = MPB
(MPA)(PA) = (MPB)(PB)

48. Max employs both labor and capital to produce his trinkets
Max employs both labor and capital to produce his trinkets. Currently the last unit of labor employed has a marginal product of 100 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $25 per unit and the price of capital is $10 per unit. Max should:
increase the hiring of both labor and capital.
increase the hiring of labor and decrease the hiring of capital.
decrease the hiring of labor and increase the hiring of capital.
do nothing; he is hiring the optimal quantity of labor and capital.
decrease the hiring of both labor and capital.

49. Max employs both labor and capital to produce his trinkets
Max employs both labor and capital to produce his trinkets. Currently the last unit of labor employed has a marginal product of 100 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $25 per unit and the price of capital is $10 per unit. Max should:
increase the hiring of both labor and capital.
increase the hiring of labor and decrease the hiring of capital.
decrease the hiring of labor and increase the hiring of capital.
do nothing; he is hiring the optimal quantity of labor and capital.
decrease the hiring of both labor and capital.

50. A firm is hiring labor and capital in the cost-minimizing combination
A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring of both labor and capital?
Demand for the product being produced increases by 5%.
The price of capital and labor both increase by 5%.
The productivity of labor increases by 5%.
The price of capital increases by 5%.
The price of labor increases by 5%.

51. A firm is hiring labor and capital in the cost-minimizing combination
A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring of both labor and capital?
Demand for the product being produced increases by 5%.
The price of capital and labor both increase by 5%.
The productivity of labor increases by 5%.
The price of capital increases by 5%.
The price of labor increases by 5%.