Question 1

Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, the firm will experience

Accepted Answer

A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) The returns to scale cannot be determined from the information provided. 
A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) The returns to scale cannot be determined from the information provided.

Question 2

When the isocost line is tangent to the isoquant, then

Accepted Answer

A) MPL = MPK. 
B) the firm is producing that level of output at minimum cost. 
C) the firm has achieved the right economies of scale. 
D) All of the above. 
A) MPL = MPK. 
B) the firm is producing that level of output at minimum cost. 
C) the firm has achieved the right economies of scale. 
D) All of the above.

Question 3

Which of the following is a form of outsourcing?

Accepted Answer

A) Changing your own oil. 
B) Washing your clothes. 
C) Getting your fruits and vegetables from the farmers' market. 
D) Studying for your economics exam. 
A) Changing your own oil. 
B) Washing your clothes. 
C) Getting your fruits and vegetables from the farmers' market. 
D) Studying for your economics exam.

Question 4

A firm pays $5 for each unit of capital. Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter. Draw the isocost curves for total costs of $50 and $100.

Accepted Answer

@#IMG-DLM& See the a

Question 5

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would

Accepted Answer

A) shift the marginal cost curve up. 
B) shift the marginal cost curve down. 
C) shift the average fixed cost curve up. 
D) shift the average fixed cost curve down. 
A) shift the marginal cost curve up. 
B) shift the marginal cost curve down. 
C) shift the average fixed cost curve up. 
D) shift the average fixed cost curve down.

Question 6

If there are diseconomies of scale within a given range of output, which of following is(are)TRUE?

Accepted Answer

A) The short-run average cost curve must be upward sloping within that range of output. 
B) The long-run average cost curve must be upward sloping within that range of output. 
C) Long-run average cost must equal short-run average cost. 
D) All of the above. 
A) The short-run average cost curve must be upward sloping within that range of output. 
B) The long-run average cost curve must be upward sloping within that range of output. 
C) Long-run average cost must equal short-run average cost. 
D) All of the above.

Question 7

Isocost lines

Accepted Answer

A) are dependent upon the technical efficiency of the production function. 
B) are dependent upon the quantity of goods a firm wants to produce. 
C) are dependent upon the costs of a firm's inputs. 
D) are the same as budget lines. 
A) are dependent upon the technical efficiency of the production function. 
B) are dependent upon the quantity of goods a firm wants to produce. 
C) are dependent upon the costs of a firm's inputs. 
D) are the same as budget lines.

Question 8

Manisha could work for another firm making $10,000 per month, but she decides to open her own gourmet cheese store and pay herself $2,000 per month. In her first month of operations, she spends $6,000 on cheese, $1,000 on other items, and $2,500 on rent. She had a great opening month and brought in revenues of $14,500. According to her accountant, what are Manisha's profits?

Accepted Answer

A) $3,000 
B) $4,000 
C) -$5,000 
D) -$6,000 
A) $3,000 
B) $4,000 
C) -$5,000 
D) -$6,000

Question 9

An old friend takes you out to dinner and pays for your meal. Which of the following best represents your opportunity cost?

Accepted Answer

A) The amount of money you would have spent to pay for the dinner yourself. 
B) The money your friend could have made buying a winning lottery ticket. 
C) The money you could have made working overtime at your job. 
D) Both A and C 
A) The amount of money you would have spent to pay for the dinner yourself. 
B) The money your friend could have made buying a winning lottery ticket. 
C) The money you could have made working overtime at your job. 
D) Both A and C

Question 10

The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. If we assume that the firm's capital is fixed at 250 units and the rental rate of capital is $5 per unit, then average fixed cost is

Accepted Answer

A) $1250. 
B) $1250/q. 
C) 1.52L0.6(250)0.4. 
D) Unable to determine with information given. 
A) $1250. 
B) $1250/q. 
C) 1.52L0.6(250)0.4. 
D) Unable to determine with information given.

Question 11

Suppose MPL = 0.5 ∗ (q/L)and MPK = 0.5 ∗ (q/K). In the long run, the firm will hire equal amounts of capital and labor

Accepted Answer

A) all of the time. 
B) only when w = r. 
C) only when w = 0.5 ∗ r. 
D) at no point in time. 
A) all of the time. 
B) only when w = r. 
C) only when w = 0.5 ∗ r. 
D) at no point in time.

Question 12

Learning by doing will result in

Accepted Answer

A) an upward sloping long-run average cost curve. 
B) a long-run marginal cost that is larger than long-run average cost. 
C) a rotation in the isocost curves. 
D) long-run average costs that are lower than short-run average costs. 
A) an upward sloping long-run average cost curve. 
B) a long-run marginal cost that is larger than long-run average cost. 
C) a rotation in the isocost curves. 
D) long-run average costs that are lower than short-run average costs.

Question 13

Variable costs

Accepted Answer

A) decrease with increasing output. 
B) increase with decreasing output. 
C) decrease with decreasing output. 
D) might increase or decrease with increasing output. 
A) decrease with increasing output. 
B) increase with decreasing output. 
C) decrease with decreasing output. 
D) might increase or decrease with increasing output.

Question 14

When buying a piece of equipment, it is always best for the firm to pay cash instead of borrowing the funds since this renders the equipment less costly.

Accepted Answer

A) True 
 B)False

Question 15

If an isocost line crosses the isoquant twice, a cost minimizing firm will

Accepted Answer

A) use a different isocost line to select the bundle of inputs. 
B) use the input bundle associated with the intersection on the higher point of the isoquant. 
C) use the input bundle associated with the intersection on the lower point of the isoquant. 
D) Both B and C. 
A) use a different isocost line to select the bundle of inputs. 
B) use the input bundle associated with the intersection on the higher point of the isoquant. 
C) use the input bundle associated with the intersection on the lower point of the isoquant. 
D) Both B and C.

Question 16

Which of the following is most likely to have increasing opportunity costs?

Accepted Answer

A) A riding lawnmower. 
B) An office building in Tokyo. 
C) A large copy machine. 
D) A pizza oven. 
A) A riding lawnmower. 
B) An office building in Tokyo. 
C) A large copy machine. 
D) A pizza oven.

Question 17

What are the functions for MC and AC if TC = 100q + 100q2? Are the returns to scale increasing, decreasing, or constant?

Accepted Answer

MC = 100 + 200q
AC = 100 + 100

Question 18

In the long run, fixed costs are

Accepted Answer

A) sunk. 
B) avoidable. 
C) larger than in the short run. 
D) not included in production decisions. 
A) sunk. 
B) avoidable. 
C) larger than in the short run. 
D) not included in production decisions.

Question 19

Economies of scale and Increasing Returns to Scale are the same thing looked at from either the production or cost perspective.

Accepted Answer

A) True 
 B)False

Question 20

Learning by doing is represented by

Accepted Answer

A) a decrease in the average total cost curve. 
B) an increase in the average total cost curve. 
C) no change in the average total cost curve. 
D) an increase in the average total cost curve and a decrease in the marginal cost curve. 
A) a decrease in the average total cost curve. 
B) an increase in the average total cost curve. 
C) no change in the average total cost curve. 
D) an increase in the average total cost curve and a decrease in the marginal cost curve.

Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, the firm will experience

When the isocost line is tangent to the isoquant, then

Which of the following is a form of outsourcing?

A firm pays $5 for each unit of capital. Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter. Draw the isocost curves for total costs of $50 and $100.

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would

If there are diseconomies of scale within a given range of output, which of following is(are)TRUE?

Isocost lines

An old friend takes you out to dinner and pays for your meal. Which of the following best represents your opportunity cost?

The Cobb-Douglas production function for a beer manufacturer is q=1.52L^0.6K^0.4. If we assume that the firm's capital is fixed at 250 units and the rental rate of capital is $5 per unit, then average fixed cost is

Suppose MPL = 0.5 ∗ (q/L)and MPK = 0.5 ∗ (q/K). In the long run, the firm will hire equal amounts of capital and labor

Learning by doing will result in

Variable costs

When buying a piece of equipment, it is always best for the firm to pay cash instead of borrowing the funds since this renders the equipment less costly.

If an isocost line crosses the isoquant twice, a cost minimizing firm will

Which of the following is most likely to have increasing opportunity costs?

What are the functions for MC and AC if TC = 100q + 100q²? Are the returns to scale increasing, decreasing, or constant?

In the long run, fixed costs are

Economies of scale and Increasing Returns to Scale are the same thing looked at from either the production or cost perspective.

Learning by doing is represented by

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 6: Costs

Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, the firm will experience

When the isocost line is tangent to the isoquant, then

Which of the following is a form of outsourcing?

A firm pays $5 for each unit of capital. Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter. Draw the isocost curves for total costs of $50 and $100.

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would

If there are diseconomies of scale within a given range of output, which of following is(are)TRUE?

Isocost lines

An old friend takes you out to dinner and pays for your meal. Which of the following best represents your opportunity cost?

The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. If we assume that the firm's capital is fixed at 250 units and the rental rate of capital is $5 per unit, then average fixed cost is

Suppose MPL = 0.5 ∗ (q/L)and MPK = 0.5 ∗ (q/K). In the long run, the firm will hire equal amounts of capital and labor

Learning by doing will result in

Variable costs

When buying a piece of equipment, it is always best for the firm to pay cash instead of borrowing the funds since this renders the equipment less costly.

If an isocost line crosses the isoquant twice, a cost minimizing firm will

Which of the following is most likely to have increasing opportunity costs?

What are the functions for MC and AC if TC = 100q + 100q2? Are the returns to scale increasing, decreasing, or constant?

In the long run, fixed costs are

Economies of scale and Increasing Returns to Scale are the same thing looked at from either the production or cost perspective.

Learning by doing is represented by

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

The Cobb-Douglas production function for a beer manufacturer is q=1.52L^0.6K^0.4. If we assume that the firm's capital is fixed at 250 units and the rental rate of capital is $5 per unit, then average fixed cost is

What are the functions for MC and AC if TC = 100q + 100q²? Are the returns to scale increasing, decreasing, or constant?