Econ 201 Tutorial #8
Date: Week of Mar. 15-21, 2010
Coverage: Chapter 8 Production and Costs
Multiple Choice Questions:
Firm A can produce a unit of output with 10 hours of labour and 5 units of material. Firm B can produce a unit of output with
5 hours of labor and 10 units of material. Firm C can produce a unit of output with 10 hours of labour and 10 units of material.
If the prices of labour and material are $10 and $5, respectively, which firm(s) is (are) economically efficient?
A and B.
A and C.
Suppose a car can be produced using $3,000 worth of capital and $4,000 worth of labour, whereas a radio can be produced
using $3 worth of capital and $4 worth of labour. Then the opportunity cost of producing a car is
$4,000 of labour.
$3,000 of capital.
The principle of diminishing returns states that, as more and more of an input is used, its marginal product must eventually
Rise, if all other inputs are held constant.
Rise, if more of other inputs are used.
Rise, if fewer other inputs are used.
Fall, if more of other inputs are used.
Fall, if all other inputs are held constant.
The ATC curve shifts up if
Factor prices rise.
A new and improved technology is introduced.
Fewer workers are hired.
All of the above.
None of the above.
Which of the following statements by a restaurant owner refers to the principle of diminishing returns?
“The higher the quality of the ingredients we use, the higher the cost of producing a meal.”
“If we double the size of our premises and double everything else – kitchen staff, serving staff, equipment – we can
increase the number of meals we serve, but not to double current levels.”
“We can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds fewer