21) Which of the following is an example of specialization?
A) The output of workers in a chocolate factory doubled when a new manager was appointed.
B) The cost of production of a light making factory decreased as its capacity increased.
C) Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process.
D) Import of better technology and machinery from developed countries greatly increased the number of laser printers that a company was manufacturing.
22) The law of diminishing marginal returns states that:
A) successive increases in inputs eventually leads to less additional output.
B) successive increases in product prices leads to a fall in revenue.
C) the demand for a good decreases as the price of the good increases.
D) the net benefits of a perfectly competitive firm decreases as more firms enter the market.
23) Which of the following statements is true of the marginal product of an input?
A) The marginal product of an input is given by the ratio of the firm’s total output to the units of the input hired.
B) The marginal product of an input increases as more and more inputs are hired.
C) The marginal product of an input can take negative values.
D) The marginal product of the first unit of a variable input is zero.
24) Which of the following refers to diminishing marginal returns?
A) The revenue of a cell phone manufacturer decreased when it increased its product price.
B) The additional output produced in a firm decreased as more workers were hired.
C) The profits of an entrepreneur increased substantially after he fired a few of his employees.
D) The total output of a firm decreased as more workers were hired.
The following table shows the total output of bread produced by different numbers of workers in a bakery.
Number of Loaves
Number of workers
0
0
12
1
26
2
40
3
50
4
58
5
60
6
59
7
25) Refer to the table above. Diminishing marginal returns sets in when:
A) the second worker is hired.
B) the fourth worker is hired.
C) the fifth worker is hired.
D) the seventh worker is hired.
26) Refer to the table above. The marginal product of workers falls below zero when the ________ worker is hired.
A) first
B) fourth
C) sixth
D) seventh
27) What a firm must pay for its inputs is referred to as its:
A) production value.
B) cost of production.
C) opportunity cost.
D) loss in production.
28) Which of the following statements identifies the difference between variable costs and fixed costs?
A) Variable costs are the costs incurred on variable factors of production, whereas fixed costs are the costs incurred on all factors of production.
B) Variable costs of a firm are zero after it shut downs, whereas it continues to incur the fixed costs of production in the short run.
C) Variable costs exist even when the production is zero, whereas fixed costs exist only when there is some positive production.
D) Variable costs are incurred only in the long run, whereas a firm incurs some fixed cost in both short run and long run.
29) Total cost of production refers to the:
A) sum of variable costs and fixed costs.
B) product of variable costs and fixed costs.
C) difference between variable costs and fixed costs.
D) ratio of variable costs to fixed costs.
30) In the short run, when a firm is about to begin production it pays only:
A) variable costs.
B) opportunity costs.
C) sunk costs.
D) fixed costs.
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