1) A farm can produce 1,000 bushels of wheat per year with 2workers and 1,300 bu

Question

1) A farm can produce 1,000 bushels of wheat per year with 2workers and 1,300 bushels of wheat per year with 3 workers. Themarginal product of the third worker is:
a) 100 bushels
b) 300 bushels
c) 1,300 bushels
d) 2,300 bushels

2) At 47 units of labor, a firm finds that average product of laborequals 39.6 and marginal product of labor equals 32.9. We canconclude that the average product curve at 47 units of laboris:
a) upward-sloping
b) horizontal
c) vertical
d) downward-sloping

3) At 76 units of labor, a firm finds that average product of laborequals 39.6 and marginal product of labor equals 42.9. We canconclude that the average product curve is 76 units of laboris:
a) upward-sloping
b) downward-sloping
c) vertical
d) horizontal

4) The change in total output resulting from a 1-unit increase inthe quantity of a factor of production used, holding the quantitiesof all other factors of production constant, is:
a) average cost
b) average product
c) marginal cost
d) marginal product

5) If a consumer purchases a combination of commodities a and bsuch that MUa/Pa=40 and MUb/Pb=60, to maximize utility, theconsumer should buy:
a) less of both a and b
b) less of a and more of b
c) more of both a and b
d) more of a an less of b

6) If the marginal benefit received from a good is equal to themarginal cost of production, then:
a) society's well-being cannot be improved by changingproduction
b) society's well-being can be improved if production decreases
c) society's well-being can be improved if production increases
d) the market is producing too much of the good

7) If the marginal benefit received from a good is less than themarginal cost of production, then:
a) society's well-being can be improved if production increases
b) society's well-being can be improved if production decreases
c) society's well-being cannot be improved by changingproduction
d) the market is producing too little of the good

8) If the marginal benefit received from a good is greater than themarginal cost of production, then:
a) society's well-being can be improved if production increases
b) society's well-being can be improved if production decreases
c) society's well-being cannot be improved by changingproduction
d) the market is producing too much of the good

9) If an activity generates external costs, the decisionmakersgenerating the activity will:
a) be faced with its full cost
b) be faced with no costs
c) not be faced with its full costs
d) be faced with excessive costs

Explanation / Answer

1. B 300 bushels since the marginal product is the extragood producted by an additional worker (1300-1000=300) 2. D downward sloping since the average is lower than themarginal. It's like having a 90% average GPA, and then having a 75%on a new course. This will drop your average GPA. 3. A upward sloping, opposite reason with regards to #3. 4 D marginal product, same reasoning as #1 5. B the marginal utility as a ratio of price is higher forgood B. You would always want to purchase goods such that the MU isequal for both products. Due to marginal utility, MU will fall asquantity increases. 6. A MR=MC is when net utility is maxmized. 7. B, MR<MC, we are over producing. It's better to countdown production such that MC drops to MR. 8. A MR>MC, we should produce more for the two toequalize. 9. C The external costs are borne by the society, not theparties involved in the specific transaction

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