Question 1

Marginal product of labor is the change in output divided by a change in labor input.

Accepted Answer

A) True 
 B)False

Question 2

Sketch a typical isocost line and isoquant where a firm is minimizing total cost for a given quantity of output. Suppose the price of labor rises and the price of capital doesn't change. What does the firm do to maintain the original level of output? How does its input use change?

Accepted Answer

If the price of labor rises, the firm wi

Question 3

Economies of scale and economies of scope are related and occur for the same reason.

Accepted Answer

A) True 
 B)False

Question 4

If a profit-maximizing firm is producing at the tangency between an isoquant and an isocost line, then a movement along the current isocost line

Accepted Answer

A) decreases total cost. 
B) increases total cost. 
C) decreases output. 
D) increases output. 
E) keeps output constant. 
A) decreases total cost. 
B) increases total cost. 
C) decreases output. 
D) increases output. 
E) keeps output constant.

Question 5

Average total cost increases as long as marginal cost

Accepted Answer

A) is greater than average cost. 
B) is less than average cost. 
C) increases faster than average cost. 
D) increases more slowly than average cost. 
E) increases. 
A) is greater than average cost. 
B) is less than average cost. 
C) increases faster than average cost. 
D) increases more slowly than average cost. 
E) increases.

Question 6

The scale of a firm increases when

Accepted Answer

A) only one input increases while other inputs remain constant. 
B) one input remains constant while other inputs increase. 
C) some inputs increase while other inputs decrease. 
D) all inputs remain constant. 
E) all inputs increase. 
A) only one input increases while other inputs remain constant. 
B) one input remains constant while other inputs increase. 
C) some inputs increase while other inputs decrease. 
D) all inputs remain constant. 
E) all inputs increase.

Question 7

Exhibit 8-2  
-Marginal cost equals

Accepted Answer

A) total costs divided by output. 
B) fixed costs minus variable costs. 
C) total costs minus fixed costs. 
D) fixed costs plus variable costs. 
E) the change in total cost given a one-unit change in output. 
A) total costs divided by output. 
B) fixed costs minus variable costs. 
C) total costs minus fixed costs. 
D) fixed costs plus variable costs. 
E) the change in total cost given a one-unit change in output.

Question 8

Which of the following is characteristic of short-run costs associated with increasing levels of output?

Accepted Answer

A) The difference between average total cost and average variable cost decreases. 
B) Average variable cost typically increases. 
C) Average total cost is equal to the difference between average variable cost and average fixed cost. 
D) Average fixed cost is constant. 
E) Marginal cost is equal to the difference between total cost and total variable cost. 
A) The difference between average total cost and average variable cost decreases. 
B) Average variable cost typically increases. 
C) Average total cost is equal to the difference between average variable cost and average fixed cost. 
D) Average fixed cost is constant. 
E) Marginal cost is equal to the difference between total cost and total variable cost.

Question 9

Exhibit 8-6  
-Refer to Exhibit 8-6. If the market price is $10, the firm's profits are

Accepted Answer

A) $450. 
B) $1,200. 
C) $3,000. 
D) -$1,200. 
E) -$450. 
A) $450. 
B) $1,200. 
C) $3,000. 
D) -$1,200. 
E) -$450.

Question 10

When a one-unit increase in input increases output more than the previous unit of input, we say that there are

Accepted Answer

A) increasing returns. 
B) increasing costs. 
C) diseconomies of scale. 
D) decreasing returns. 
E) constant returns to scale. 
A) increasing returns. 
B) increasing costs. 
C) diseconomies of scale. 
D) decreasing returns. 
E) constant returns to scale.

Question 11

Fill in the table below for a competitive firm that can sell its product for $7 a unit.

Accepted Answer

The answer of Fill in the table below for a...

Question 12

The slope of an isoquant depends on the ratio of

Accepted Answer

A) the output prices. 
B) the input prices. 
C) the marginal products of inputs. 
D) an input price over an output price. 
E) total profits over total costs. 
A) the output prices. 
B) the input prices. 
C) the marginal products of inputs. 
D) an input price over an output price. 
E) total profits over total costs.

Question 13

Marginal cost is total costs divided by output.

Accepted Answer

A) True 
 B)False

Question 14

Capital expansion can be shown as a shift in the average total curve.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 8-5  
-Refer to Exhibit 8-5. At an output level of L, average fixed cost is

Accepted Answer

A) $D - $B. 
B) $B. 
C) $D - $C. 
D) $E - $C. 
E) $A. 
A) $D - $B. 
B) $B. 
C) $D - $C. 
D) $E - $C. 
E) $A.

Question 16

Exhibit 8-4  
-Refer to Exhibit 8-4. Calculate the average variable cost for the fifth unit of output.

Accepted Answer

$30.40
AVC = (TC-FC)

Question 17

Exhibit 8-5  
-Refer to Exhibit 8-5. The curve marked II is the firm's

Accepted Answer

A) marginal cost curve. 
B) average fixed cost curve. 
C) total cost curve. 
D) average total cost curve. 
E) average variable cost curve. 
A) marginal cost curve. 
B) average fixed cost curve. 
C) total cost curve. 
D) average total cost curve. 
E) average variable cost curve.

Question 18

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their fixed costs.

Accepted Answer

A) True 
 B)False

Question 19

When total revenue is equal to total cost, the firm is

Accepted Answer

A) breaking even. 
B) not earning a normal profit. 
C) earning an economic profit. 
D) suffering an economic loss. 
E) maximizing profit. 
A) breaking even. 
B) not earning a normal profit. 
C) earning an economic profit. 
D) suffering an economic loss. 
E) maximizing profit.

Question 20

Fixed costs never decline.

Accepted Answer

A) True 
 B)False

Exam 8: Costs and the Changes at Firms Over Time

Marginal product of labor is the change in output divided by a change in labor input.

Sketch a typical isocost line and isoquant where a firm is minimizing total cost for a given quantity of output. Suppose the price of labor rises and the price of capital doesn't change. What does the firm do to maintain the original level of output? How does its input use change?

Economies of scale and economies of scope are related and occur for the same reason.

If a profit-maximizing firm is producing at the tangency between an isoquant and an isocost line, then a movement along the current isocost line

Average total cost increases as long as marginal cost

The scale of a firm increases when

Exhibit 8-2 -Marginal cost equals

Which of the following is characteristic of short-run costs associated with increasing levels of output?

Exhibit 8-6 -Refer to Exhibit 8-6. If the market price is $10, the firm's profits are

When a one-unit increase in input increases output more than the previous unit of input, we say that there are

Fill in the table below for a competitive firm that can sell its product for $7 a unit.

The slope of an isoquant depends on the ratio of

Marginal cost is total costs divided by output.

Capital expansion can be shown as a shift in the average total curve.

Exhibit 8-5 -Refer to Exhibit 8-5. At an output level of L, average fixed cost is

Exhibit 8-4 -Refer to Exhibit 8-4. Calculate the average variable cost for the fifth unit of output.

Exhibit 8-5 -Refer to Exhibit 8-5. The curve marked II is the firm's

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their fixed costs.

When total revenue is equal to total cost, the firm is

Fixed costs never decline.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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