Table 5 Template for Multiple Choice Questions (1)

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Department of Economics, Justice, and Policy Studies 4825 Mount Royal Gate SW, Calgary, AB, Canada T3E 6K6 mtroyal.ca/ejps ECON 1101-003 Template for Multiple Choice Questions – Dec. 2, 2019 Instructor: Dr. David R. Sabiston Fall 2019 Group Members Names: PART A: Multiple Choice Questions 1. Short run production relationships focus on… a. Labour input, given a fixed plant capacity b. Labour output, given a fixed plant capacity c. Labour input, given a variable plant d. Labour output, given a variable plant 2. The table below represents the short-run production of Timmy’s Coffee House. Using the data in the table which of the following represents the profit-maximizing quantity of workers. Number of workers Wage (per week $) Quantity of ____ produced each week Price of each ($) 0 200 0 1.50 1 200 250 1.50 2 200 320 1.50 3 200 380 1.50 4 200 430 1.50

5 200 470 1.50 a) 0 b) 1 c) 4 d) 5 3. Total cost (TC) can be determined using which formula? a. TC = TVC+TFC b. TC = AVC+AFC c. TC = ATC-AVC d. None of the above 4. The Law of diminishing returns states that a. Output will increase by diminishing amounts as more variable factors are added b. Output will decrease by diminishing amounts as more variable factors are added c. Output will increase by diminishing amounts as more variable factors are removed d. Input will increase by diminishing amounts as more variable factors are removed 5. With factor prices, when the prices of fixed input increase AVC and MC are left unchanged, while AFC and ATC a. Shift to the right b. Shift to the left c. Shift upwards d. Shift downwards 6. When marginal costs (MC) exceeds average total costs (ATC), ATC will _______.Conversely when MC is less than ATC, ATC will _______ respectively. a. Fall, rise b. Rise, fall c. Rise, rise d. Fall, fall

Multiple Choice Answers: 1. B 6. B 11. 16. 21. 2. B 7. 12. 17. 22. 3. A 8. 13. 18. 23. 4. A 9. 14. 19. 24. 5. C 10. 15. 20. 25.

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a) At what quantity should the company continue to produce even if they suffer a loss? Explain why? Answer: For it to make sense for the company to continue production they will have to produce a quantity of 6 (MC = AVC) . This is because to have to continue operation you need to be making more than if you were to shut down, therefore your revenue would have to be higher the Average variable cost b) At what quantity they will have break-even point, explain why? Answer: 6.5, because break-even point is marginal cost intersects with average total cost, which is the point where they can begin to turn a profit. c) Does the total fixed cost vary with the produced quantity (short-term) ? And how does the average fixed cost vary when increase or decrease the quantity produced Answer: No because total fixed cost always remains the same in the short-run, as it remains the same AFC increases when produced quantity decreases and the other way around.

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