Question 1

Figure 11-18  
-Refer to Figure 11-18. A curve that connects points A, D, and E is called

Accepted Answer

A)  an input-output curve. 
B)  a total cost line. 
C)  an expansion path. 
D)  an indifference line. 
A)  an input-output curve. 
B)  a total cost line. 
C)  an expansion path. 
D)  an indifference line.

Question 2

A firm has successfully adopted a positive technological change when

Accepted Answer

A)  it can produce more output using the same inputs. 
B)  it produces less pollution in its production process. 
C)  it can pay its workers less yet increase its output. 
D)  it sees an increase in worker productivity. 
A)  it can produce more output using the same inputs. 
B)  it produces less pollution in its production process. 
C)  it can pay its workers less yet increase its output. 
D)  it sees an increase in worker productivity.

Question 3

Two stores-Lazy Guys and Ralph's Recliners-are located in the same city. Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same. Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production. Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

Accepted Answer

A)  Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guys' average fixed costs. 
B)  The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners. 
C)  Ralph's explicit costs are less because Ralph owns the land on which his building is located. Lazy Guys must make lease payments for the land on which its store is located. 
D)  The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys. 
A)  Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guys' average fixed costs. 
B)  The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners. 
C)  Ralph's explicit costs are less because Ralph owns the land on which his building is located. Lazy Guys must make lease payments for the land on which its store is located. 
D)  The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys.

Question 4

Figure 11-12  
-Refer to Figure 11-12. Which of the following statements about the input combinations shown in the diagram is false?

Accepted Answer

A)  The firm produces a higher output level when it uses input combination b compared to input combination a. 
B)  The firm produces a lower output level when it uses input combination d compared to input combination a. 
C)  The firm produces the same output level when it uses input combination a or c. 
D)  The firm incurs the same total cost when it uses input combination a or c to produce a given quantity of output. 
A)  The firm produces a higher output level when it uses input combination b compared to input combination a. 
B)  The firm produces a lower output level when it uses input combination d compared to input combination a. 
C)  The firm produces the same output level when it uses input combination a or c. 
D)  The firm incurs the same total cost when it uses input combination a or c to produce a given quantity of output.

Question 5

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true?

Accepted Answer

A)  The fixed cost of running the studio is $22,000. 
B)  The variable cost of running the studio is $22,000. 
C)  The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D)  The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. 
A)  The fixed cost of running the studio is $22,000. 
B)  The variable cost of running the studio is $22,000. 
C)  The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D)  The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.

Question 6

Which of the following is a fixed cost?

Accepted Answer

A)  payment to hire a security worker to guard the gate to the factory around the clock 
B)  wages to hire assembly line workers 
C)  payments to an electric utility 
D)  costs of raw materials 
A)  payment to hire a security worker to guard the gate to the factory around the clock 
B)  wages to hire assembly line workers 
C)  payments to an electric utility 
D)  costs of raw materials

Question 7

Figure 11-13  
-Refer to Figure 11-13. The lines shown in the diagram are isocost lines. A movement from CE to BD occurs when

Accepted Answer

A)  the price of capital increases while the price of labor remains unchanged. 
B)  the price of labor decreases while the price of capital remains unchanged. 
C)  the price of capital increases while the price of labor decreases. 
D)  the price of capital decreases while the price of labor increases. 
A)  the price of capital increases while the price of labor remains unchanged. 
B)  the price of labor decreases while the price of capital remains unchanged. 
C)  the price of capital increases while the price of labor decreases. 
D)  the price of capital decreases while the price of labor increases.

Question 8

The typical shape of an isoquant is

Accepted Answer

A)  convex towards the origin. 
B)  concave towards the origin. 
C)  linear and downward sloping. 
D)  linear and upward sloping. 
A)  convex towards the origin. 
B)  concave towards the origin. 
C)  linear and downward sloping. 
D)  linear and upward sloping.

Question 9

Figure 11-10  
-Refer to Figure 11-10. Identify the minimum efficient scale of production.

Accepted Answer

A)  Qa 
B)  Qb 
C)  Qc 
D)  Qd 
A)  Qa 
B)  Qb 
C)  Qc 
D)  Qd

Question 10

In the long run which of the following is true?

Accepted Answer

A)  Total cost = fixed cost + variable cost. 
B)  The size of a firm's physical plant can be changed but the firm cannot adopt new technology. 
C)  There are no fixed costs. 
D)  The firm can vary its explicit costs but not its implicit costs. 
A)  Total cost = fixed cost + variable cost. 
B)  The size of a firm's physical plant can be changed but the firm cannot adopt new technology. 
C)  There are no fixed costs. 
D)  The firm can vary its explicit costs but not its implicit costs.

Question 11

To improve delivery, Joe's Pizza Emporium made a change that involved taking better account of traffic to avoid delays in delivering pizzas. This is an example of

Accepted Answer

A)  positive technological change. 
B)  increasing marginal returns. 
C)  a reduction in fixed costs. 
D)  diseconomies of scale. 
A)  positive technological change. 
B)  increasing marginal returns. 
C)  a reduction in fixed costs. 
D)  diseconomies of scale.

Question 12

Which of the following is not a source of technological advancement for a producer?

Accepted Answer

A)  better trained workers 
B)  more efficient physical capital 
C)  higher skill level of managers 
D)  outsourcing some aspect of production 
A)  better trained workers 
B)  more efficient physical capital 
C)  higher skill level of managers 
D)  outsourcing some aspect of production

Question 13

Accounting costs exclude implicit costs.

Accepted Answer

A) True 
 B)False

Question 14

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

Accepted Answer

Yes. As long as the marginal c

Question 15

The basic activity of a firm is

Accepted Answer

A)  to set the prices of its products as high as possible. 
B)  to compete with other firms that produce similar products. 
C)  to provide jobs for its employees. 
D)  to use inputs to produce outputs of goods and services. 
A)  to set the prices of its products as high as possible. 
B)  to compete with other firms that produce similar products. 
C)  to provide jobs for its employees. 
D)  to use inputs to produce outputs of goods and services.

Question 16

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50, this is evidence of

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  the law of supply. 
A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  the law of supply.

Question 17

The law of diminishing marginal returns

Accepted Answer

A)  explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B)  explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run. 
C)  causes average total cost to rise at a decreasing rate as output increases. 
D)  causes the difference between average total cost and average variable cost to get smaller as output increases. 
A)  explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B)  explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run. 
C)  causes average total cost to rise at a decreasing rate as output increases. 
D)  causes the difference between average total cost and average variable cost to get smaller as output increases.

Question 18

The slope of an isoquant is equal to the ratio of the price of the input on the horizontal axis divided by the price of the input on the vertical axis, multiplied by -1.

Accepted Answer

A) True 
 B)False

Question 19

In economics, what is the difference between the short run and the long run?

Accepted Answer

In economics, the short run refers to th

Question 20

The division of labor and specialization explain

Accepted Answer

A)  why, when the marginal product of labor increases, so does the average product of labor. 
B)  why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C)  why the marginal product of labor rises as a firm hires its first units of labor. 
D)  why firms may find it profitable to use more workers when the marginal product of labor is negative. 
A)  why, when the marginal product of labor increases, so does the average product of labor. 
B)  why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C)  why the marginal product of labor rises as a firm hires its first units of labor. 
D)  why firms may find it profitable to use more workers when the marginal product of labor is negative.

Exam 11: Technology, Production, and Costs

Figure 11-18 -Refer to Figure 11-18. A curve that connects points A, D, and E is called

A firm has successfully adopted a positive technological change when

Figure 11-12 -Refer to Figure 11-12. Which of the following statements about the input combinations shown in the diagram is false?

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true?

Which of the following is a fixed cost?

Figure 11-13 -Refer to Figure 11-13. The lines shown in the diagram are isocost lines. A movement from CE to BD occurs when

The typical shape of an isoquant is

Figure 11-10 -Refer to Figure 11-10. Identify the minimum efficient scale of production.

In the long run which of the following is true?

To improve delivery, Joe's Pizza Emporium made a change that involved taking better account of traffic to avoid delays in delivering pizzas. This is an example of

Which of the following is not a source of technological advancement for a producer?

Accounting costs exclude implicit costs.

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

The basic activity of a firm is

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50, this is evidence of

The law of diminishing marginal returns

The slope of an isoquant is equal to the ratio of the price of the input on the horizontal axis divided by the price of the input on the vertical axis, multiplied by -1.

In economics, what is the difference between the short run and the long run?

The division of labor and specialization explain

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