1) Technology improves output such that at every level of labor and capital a firm can produce three times as much as before. If the marginal cost of increasing output from 200 to 210 units was 60 before the technology advancement, what is it now?

Numeric Answer

2) Two firms initially have identical production capabilities. One firm then hires a manager who helps increase the productivity of workers. What happens to the production for the firm that hires the new manager?

a Production per worker increases.

b Marginal product of labor increases.

c Marginal cost decreases.

d All of the above.

3) A toxic work environment lowers the productivity of all workers. What happens to the average costs?

a Average cost increases.

b Average cost decreases.

c Average cost stays constant.

d Not enough information to say.

4) If the average cost is always falling, which of the following must be true?

a Marginal cost is below the average cost.

b Diminishing marginal returns.

c Marginal cost is above the average cost.