Practice Test

Name: ________________________ ID: A
____ 19. Diminishing marginal returns occur when:
a. each additional unit of a variable factor adds more to total output than the previous unit.
b. an additional variable factor adds less to total output than the previous unit.
c. the marginal product of a variable factor is increasing, but at a decreasing rate.
d. total product decreases.
e. an additional variable factor adds the same amount to total output as the previous unit.
Quantity
of Labor
(workers)
Marginal
Product
of Labor
(cabinets per
worker)
0
Quantity of
Cabinets Q
0
1 5 5
2 11 6
3 16 5
4 20 4
5 23 3
6 25 2
7 26 1
8 25 -1
Table 54-3: Production of Cabinets
____ 20. (Table 54-3: Production of Cabinets) The table shows how many cabinets your firm can make with a variable
quantity of labor hired. After which worker does the firm first begin to experience diminishing returns to
labor?
a. first
b. second
c. third
d. fourth
e. fifth
____ 21. The marginal product of labor is the change in:
a. labor divided by the change in total product.
b. total output divided by the change in the quantity of labor.
c. average output divided by the change in the quantity of labor.
d. total costs divided by the change in the quantity of labor.
e. total costs divided by the change in the quantity of output.
____ 22. Austin's total fixed cost is $3,600. Austin employs 20 workers and pays each worker $60. The average
product of labor is 30, and the marginal product of the twentieth worker is 12. What is the marginal cost of
the last unit produced by the last worker Austin hired?
a. $0.20
b. $5
c. $240
d. $720
e. $60
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