Question 1

What is an indivisible setup cost? Give an example.

Accepted Answer

An indivisible setup cost is the cost of

Question 2

The reason for the merger of two businesses that sell unrelated goods but can share business practices and sales forces might best be explained by:

Accepted Answer

A) indivisible costs. 
B) learning by doing. 
C) economies of scope. 
D) economies of scale. 
A) indivisible costs. 
B) learning by doing. 
C) economies of scope. 
D) economies of scale.

Question 3

In the long run:

Accepted Answer

A) all inputs are fixed. 
B) all inputs are variable. 
C) some inputs are not variable. 
D) per-unit costs are fixed. 
A) all inputs are fixed. 
B) all inputs are variable. 
C) some inputs are not variable. 
D) per-unit costs are fixed.

Question 4

Positive expected profits:

Accepted Answer

A) discourage people from supplying goods. 
B) encourage people to supply goods. 
C) have no effect on supply decisions. 
D) increase product demand. 
A) discourage people from supplying goods. 
B) encourage people to supply goods. 
C) have no effect on supply decisions. 
D) increase product demand.

Question 5

Refer to the graph shown. If a firm expected to produce 900 units when it built its plant but now desires to reduce its output to 600 units in the short run, it will use the plant size represented by:

Accepted Answer

A) SATC1. 
B) SATC2. 
C) SATC3. 
D) SATC4. 
A) SATC1. 
B) SATC2. 
C) SATC3. 
D) SATC4.

Question 6

Refer to the graph shown. A firm can produce the same amount of output at points:

Accepted Answer

A) A and B. 
B) E and C. 
C) B and C. 
D) A and C. 
A) A and B. 
B) E and C. 
C) B and C. 
D) A and C.

Question 7

Isoquants slope downward because:

Accepted Answer

A) average total costs decline. 
B) as less of one input is used, more of another must be used if output is to remain constant. 
C) as less of one input is used, more of another must be used if costs are to remain constant. 
D) the marginal rate of substitution increases. 
A) average total costs decline. 
B) as less of one input is used, more of another must be used if output is to remain constant. 
C) as less of one input is used, more of another must be used if costs are to remain constant. 
D) the marginal rate of substitution increases.

Question 8

An economically efficient method of production produces a given level of output at the lowest possible cost.

Accepted Answer

A) True 
 B)False

Question 9

"For-benefit" corporations are created to pursue multiple goals, such as profitability, social responsibility, and value for the broader society. These firms provide examples of:

Accepted Answer

A) non-entrepreneurial thinking. 
B) long-run efficiency. 
C) technical inefficiency. 
D) social entrepreneurship. 
A) non-entrepreneurial thinking. 
B) long-run efficiency. 
C) technical inefficiency. 
D) social entrepreneurship.

Question 10

The Edge Corporation manufactures gas powered water pumps.Each pump can be produced in two hours using either of two production processes: with one worker and 10 tools or with 2 workers and 6 tools.Each worker earns $12.00 per hour and each tool has an implicit rental rate of $1.50 per hour.Could both combinations of inputs be technically efficient? What is the economically efficient input combination? Explain.

Accepted Answer

Both input combinations can be technical

Question 11

At one time, sea lions were depleting the stock of steelhead trout. One idea to scare sea lions away from the Washington coast was to launch fake killer whales, which are predators of sea lions. The cost of making the first whale is $16,000 ($5,000 for materials and $11,000 for the mold). The mold can be reused to make additional whales, and so additional whales cost $5,000 each. Based on these numbers, the production of fake killer whales exhibits:

Accepted Answer

A) diminishing marginal product. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) decreasing returns to scale. 
A) diminishing marginal product. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) decreasing returns to scale.

Question 12

Refer to the graph shown. If the firm's total cost is $375, labor must cost:

Accepted Answer

A) $62.50 per unit. 
B) $75 per unit. 
C) $5 per unit. 
D) $6 per unit. 
A) $62.50 per unit. 
B) $75 per unit. 
C) $5 per unit. 
D) $6 per unit.

Question 13

If a machine cost $50,000 initially and is expected to last for 20 years but is worth $60,000 after one year because it is in short supply, an accountant most likely would say that:

Accepted Answer

A) the machine's cost for each of its 20 years of existence is $2,500. 
B) the machine's cost for each of its 20 years of existence is $3,000. 
C) during the first year the machine had no cost; it provided a revenue to the firm. 
D) the value of the machine will continue to increase 20 percent per year for the next 20 years. 
A) the machine's cost for each of its 20 years of existence is $2,500. 
B) the machine's cost for each of its 20 years of existence is $3,000. 
C) during the first year the machine had no cost; it provided a revenue to the firm. 
D) the value of the machine will continue to increase 20 percent per year for the next 20 years.

Question 14

The law of diminishing marginal productivity does not apply in the long run because:

Accepted Answer

A) some inputs are fixed in the long run. 
B) some inputs are variable in the long run. 
C) no inputs are fixed in the long run. 
D) all inputs are fixed in the long run. 
A) some inputs are fixed in the long run. 
B) some inputs are variable in the long run. 
C) no inputs are fixed in the long run. 
D) all inputs are fixed in the long run.

Question 15

Some children in Siliguri, India, work as low-wage professional rock breakers. The rocks they break with a hammer are used in buildings and roads. In terms of the idea of efficiency, having children break rocks with hammers:

Accepted Answer

A) is not efficient because modern equipment could crush stone with far less effort. 
B) is technically efficient but not economically efficient because the job does not pay a living wage. 
C) is economically efficient but not technically efficient because it uses too much labor relative to capital. 
D) could be efficient given the extremely low price of labor and high price of capital. 
A) is not efficient because modern equipment could crush stone with far less effort. 
B) is technically efficient but not economically efficient because the job does not pay a living wage. 
C) is economically efficient but not technically efficient because it uses too much labor relative to capital. 
D) could be efficient given the extremely low price of labor and high price of capital.

Question 16

Economies of scale do not exist in the presence of indivisible setup costs.

Accepted Answer

A) True 
 B)False

Question 17

Refer to the graph shown. A firm that produces 900 units of output using the plant size associated with SATC2 minimizes:

Accepted Answer

A) both long-run and short-run average total cost. 
B) long-run average total cost only. 
C) short-run average total cost only. 
D) neither long-run nor short-run average total cost. 
A) both long-run and short-run average total cost. 
B) long-run average total cost only. 
C) short-run average total cost only. 
D) neither long-run nor short-run average total cost.

Question 18

Refer to the graph shown. If the seller expects a price of $52, the minimum amount the firm must produce to be profitable is:

Accepted Answer

A) 15. 
B) 16. 
C) 17. 
D) 18. 
A) 15. 
B) 16. 
C) 17. 
D) 18.

Question 19

Are diminishing marginal productivity and diseconomies of scale the same thing? Explain why or why not.

Accepted Answer

The two are not the same.Diminishing mar

Question 20

At one time, sea lions were depleting the stock of steelhead trout. One idea to scare sea lions away from the Washington coast was to launch fake killer whales, which are predators of sea lions. The cost of making the first whale is $16,000 ($5,000 for materials and $11,000 for the mold). The mold can be reused to make additional whales, and so additional whales cost $5,000 each. Based on these numbers, the average total cost of making five fake killer whales would be:

Accepted Answer

A) $5,000. 
B) $11,000. 
C) $7,200. 
D) $36,000. 
A) $5,000. 
B) $11,000. 
C) $7,200. 
D) $36,000.

Exam 12: Production and Cost Analysis II

What is an indivisible setup cost? Give an example.

The reason for the merger of two businesses that sell unrelated goods but can share business practices and sales forces might best be explained by:

In the long run:

Positive expected profits:

Refer to the graph shown. If a firm expected to produce 900 units when it built its plant but now desires to reduce its output to 600 units in the short run, it will use the plant size represented by:

Refer to the graph shown. A firm can produce the same amount of output at points:

Isoquants slope downward because:

An economically efficient method of production produces a given level of output at the lowest possible cost.

"For-benefit" corporations are created to pursue multiple goals, such as profitability, social responsibility, and value for the broader society. These firms provide examples of:

Refer to the graph shown. If the firm's total cost is $375, labor must cost:

If a machine cost $50,000 initially and is expected to last for 20 years but is worth $60,000 after one year because it is in short supply, an accountant most likely would say that:

The law of diminishing marginal productivity does not apply in the long run because:

Some children in Siliguri, India, work as low-wage professional rock breakers. The rocks they break with a hammer are used in buildings and roads. In terms of the idea of efficiency, having children break rocks with hammers:

Economies of scale do not exist in the presence of indivisible setup costs.

Refer to the graph shown. A firm that produces 900 units of output using the plant size associated with SATC2 minimizes:

Refer to the graph shown. If the seller expects a price of $52, the minimum amount the firm must produce to be profitable is:

Are diminishing marginal productivity and diseconomies of scale the same thing? Explain why or why not.

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

Refer to the graph shown. A firm that produces 900 units of output using the plant size associated with SATC₂ minimizes: