Question 1

Exhibit 8-8  
-Refer to Exhibit 8-8. The shutdown point is when price falls to

Accepted Answer

A) $2. 
B) $4.50. 
C) a specific level between $2 and $4.50. 
D) $6. 
E) a specific level between $4.50 and $6. 
A) $2. 
B) $4.50. 
C) a specific level between $2 and $4.50. 
D) $6. 
E) a specific level between $4.50 and $6.

Question 2

We are looking at a graph with capital on the vertical axis and labor on the horizontal axis. If the price of labor increases, then the

Accepted Answer

A) isocost line becomes steeper. 
B) isoquants become steeper. 
C) isoquants become flatter. 
D) isocost line becomes flatter. 
E) isocost line and isoquants become flatter. 
A) isocost line becomes steeper. 
B) isoquants become steeper. 
C) isoquants become flatter. 
D) isocost line becomes flatter. 
E) isocost line and isoquants become flatter.

Question 3

The slope of an isocost line is constant.

Accepted Answer

A) True 
 B)False

Question 4

When more capital is used in production,

Accepted Answer

A) the average total cost curve shifts left. 
B) the average fixed cost curve shifts up. 
C) fixed costs do not change, by definition. 
D) only the respective fixed cost curves are affected. 
E) the average variable cost curve does not change. 
A) the average total cost curve shifts left. 
B) the average fixed cost curve shifts up. 
C) fixed costs do not change, by definition. 
D) only the respective fixed cost curves are affected. 
E) the average variable cost curve does not change.

Question 5

Average product

Accepted Answer

A) is a standard unit of measure for output. 
B) tells us how much output changes when input changes. 
C) equals Q/L. 
D) is another name for marginal product. 
E) is constant. 
A) is a standard unit of measure for output. 
B) tells us how much output changes when input changes. 
C) equals Q/L. 
D) is another name for marginal product. 
E) is constant.

Question 6

The shutdown point for a competitive firm is reached when market price falls to the minimum of average variable cost.

Accepted Answer

A) True 
 B)False

Question 7

A firm can experience economies of scope by reducing the variety of products it produces.

Accepted Answer

A) True 
 B)False

Question 8

A line that illustrates all the different combinations of two inputs that result in the same total cost is called a(n)

Accepted Answer

A) average total cost curve. 
B) isocost line. 
C) total cost line. 
D) budget line. 
E) isoquant. 
A) average total cost curve. 
B) isocost line. 
C) total cost line. 
D) budget line. 
E) isoquant.

Question 9

Exhibit 8A-1  
-Refer to Exhibit 8A-1. A cost-minimizing firm would prefer producing at point C to producing at

Accepted Answer

A) point D because point C represents a lower cost. 
B) point A because point C represents the same output at a lower cost. 
C) point B because point C represents the same output at a higher cost. 
D) point B because point C represents higher output at the same cost. 
E) point B because point C represents higher output with a lower cost. 
A) point D because point C represents a lower cost. 
B) point A because point C represents the same output at a lower cost. 
C) point B because point C represents the same output at a higher cost. 
D) point B because point C represents higher output at the same cost. 
E) point B because point C represents higher output with a lower cost.

Question 10

Which of the following formulas is correct?

Accepted Answer

A) AVC = ATC + AFC 
B) AFC = FC * Q 
C) ATC = AVC - AFC 
D) MC = AVC/Q 
E) TC/Q = VC/Q + FC/Q 
A) AVC = ATC + AFC 
B) AFC = FC * Q 
C) ATC = AVC - AFC 
D) MC = AVC/Q 
E) TC/Q = VC/Q + FC/Q

Question 11

Exhibit 8-7  
-Total profit is price times quantity.

Accepted Answer

A) True 
 B)False

Question 12

Consider the weight of the people in a theater. Suppose the first person you notice weighs 160 pounds, the second and third weigh 132 and 108 pounds, respectively.

Accepted Answer

The answer of Consider the weight of the people in...

Question 13

A firm that shuts down earns an economic loss equal to its

Accepted Answer

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

Question 14

Exhibit 8A-1  
-An isoquant indicates different combinations of outputs that can be used to yield the same amount of profits.

Accepted Answer

A) True 
 B)False

Question 15

Average fixed cost

Accepted Answer

A) increases as output rises. 
B) remains constant as output rises. 
C) equals marginal cost for the first unit of output. 
D) decreases as output rises. 
E) increases with rising output and then declines. 
A) increases as output rises. 
B) remains constant as output rises. 
C) equals marginal cost for the first unit of output. 
D) decreases as output rises. 
E) increases with rising output and then declines.

Question 16

The distance between the average total cost curve and the average variable cost curve is the amount of average fixed cost.

Accepted Answer

A) True 
 B)False

Question 17

Marginal product and marginal cost are not related in any particular way.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 8-2  
-Refer to Exhibit 8-2. The fixed cost is

Accepted Answer

A) $20. 
B) $100. 
C) $120. 
D) $185. 
E) $326. 
A) $20. 
B) $100. 
C) $120. 
D) $185. 
E) $326.

Question 19

Economies of scale

Accepted Answer

A) account for the downward-sloping portion of the long-run average cost curve. 
B) occur when an increase in resources causes a less-than-proportionate increase in output. 
C) suggest that the firm's marginal cost curve lies above its average cost curve. 
D) suggest that the firm's marginal cost curve is declining. 
E) are represented by the declining portion of the average fixed cost curve. 
A) account for the downward-sloping portion of the long-run average cost curve. 
B) occur when an increase in resources causes a less-than-proportionate increase in output. 
C) suggest that the firm's marginal cost curve lies above its average cost curve. 
D) suggest that the firm's marginal cost curve is declining. 
E) are represented by the declining portion of the average fixed cost curve.

Question 20

The U-shapes of the long-run and short-run average total cost curves

Accepted Answer

A) are due to diminishing marginal returns. 
B) occur only in rare circumstances. 
C) have the same cause. 
D) have different causes. 
E) must always occur. 
A) are due to diminishing marginal returns. 
B) occur only in rare circumstances. 
C) have the same cause. 
D) have different causes. 
E) must always occur.

Exam 8: Costs and the Changes at Firms Over Time

Exhibit 8-8 -Refer to Exhibit 8-8. The shutdown point is when price falls to

We are looking at a graph with capital on the vertical axis and labor on the horizontal axis. If the price of labor increases, then the

The slope of an isocost line is constant.

When more capital is used in production,

Average product

The shutdown point for a competitive firm is reached when market price falls to the minimum of average variable cost.

A firm can experience economies of scope by reducing the variety of products it produces.

A line that illustrates all the different combinations of two inputs that result in the same total cost is called a(n)

Exhibit 8A-1 -Refer to Exhibit 8A-1. A cost-minimizing firm would prefer producing at point C to producing at

Which of the following formulas is correct?

Exhibit 8-7 -Total profit is price times quantity.

Consider the weight of the people in a theater. Suppose the first person you notice weighs 160 pounds, the second and third weigh 132 and 108 pounds, respectively.

A firm that shuts down earns an economic loss equal to its

Exhibit 8A-1 -An isoquant indicates different combinations of outputs that can be used to yield the same amount of profits.

Average fixed cost

The distance between the average total cost curve and the average variable cost curve is the amount of average fixed cost.

Marginal product and marginal cost are not related in any particular way.

Exhibit 8-2 -Refer to Exhibit 8-2. The fixed cost is

Economies of scale

The U-shapes of the long-run and short-run average total cost curves

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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