Question 1

If the cost of capital increases, the isocost line will

Accepted Answer

A) stay the same. 
B) shift outward in parallel fashion. 
C) rotate inward around the point where only labor is employed in production. 
D) shift inward in parallel fashion. 
A) stay the same. 
B) shift outward in parallel fashion. 
C) rotate inward around the point where only labor is employed in production. 
D) shift inward in parallel fashion.

Question 2

The slope of the isocost line tells the firm how much

Accepted Answer

A) capital must be reduced to keep total cost constant when hiring one more unit of labor. 
B) capital must be increased to keep total cost constant when hiring one more unit of labor. 
C) more expensive a unit of capital costs relative to a unit of labor. 
D) the isocost curve will shift outward if the firm wishes to produce more. 
A) capital must be reduced to keep total cost constant when hiring one more unit of labor. 
B) capital must be increased to keep total cost constant when hiring one more unit of labor. 
C) more expensive a unit of capital costs relative to a unit of labor. 
D) the isocost curve will shift outward if the firm wishes to produce more.

Question 3

A durable good is product that

Accepted Answer

A) holds up well under abuse. 
B) has had the same design over a long period of time. 
C) is purchased only once. 
D) is usable over a long period of time. 
A) holds up well under abuse. 
B) has had the same design over a long period of time. 
C) is purchased only once. 
D) is usable over a long period of time.

Question 4

If average cost is decreasing,

Accepted Answer

A) marginal cost equals average cost. 
B) marginal cost exceeds average cost. 
C) marginal cost is less than average cost. 
D) Not enough information is given. 
A) marginal cost equals average cost. 
B) marginal cost exceeds average cost. 
C) marginal cost is less than average cost. 
D) Not enough information is given.

Question 5

If the cost of labor increases the isocost line will

Accepted Answer

A) stay the same. 
B) shift outward in parallel fashion. 
C) rotate inward around the point where only capital is employed in production. 
D) shift inward in parallel fashion. 
A) stay the same. 
B) shift outward in parallel fashion. 
C) rotate inward around the point where only capital is employed in production. 
D) shift inward in parallel fashion.

Question 6

If producing more output has no effect on average cost then

Accepted Answer

A) there are diseconomies of scale. 
B) there are economies of scope. 
C) there are diseconomies of scope. 
D) there are no economies of scale. 
A) there are diseconomies of scale. 
B) there are economies of scope. 
C) there are diseconomies of scope. 
D) there are no economies of scale.

Question 7

Economic costs of an input include

Accepted Answer

A) only implicit costs. 
B) only explicit costs. 
C) both implicit and explicit costs. 
D) whatever management wishes to report to the shareholders. 
A) only implicit costs. 
B) only explicit costs. 
C) both implicit and explicit costs. 
D) whatever management wishes to report to the shareholders.

Question 8

A pizza parlor's rent is

Accepted Answer

A) sunk in the long run. 
B) fixed in the long run. 
C) avoidable in the short run. 
D) variable in the short run. 
A) sunk in the long run. 
B) fixed in the long run. 
C) avoidable in the short run. 
D) variable in the short run.

Question 9

If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

Accepted Answer

A) AFC is falling. 
B) AVC is rising. 
C) MC > AVC. 
D) All of the above. 
A) AFC is falling. 
B) AVC is rising. 
C) MC > AVC. 
D) All of the above.

Question 10

Tom is going to quit his job to pursue his PhD in economics, which will take him 6 years to complete. He currently makes $55,000 per year as a high school teacher. While going to school, he will receive a stipend of $24,000 per year plus $6,000 per year to help cover food and rent. His living expenses are the same regardless of what he does. What is Tom's opportunity cost of pursuing his PhD?

Accepted Answer

A) $150,000 
B) $180,000 
C) $186,000 
D) $330,000 
A) $150,000 
B) $180,000 
C) $186,000 
D) $330,000

Question 11

If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

Accepted Answer

A) AFC is rising. 
B) AVC is rising. 
C) MC > AVC. 
D) MPL is falling. 
A) AFC is rising. 
B) AVC is rising. 
C) MC > AVC. 
D) MPL is falling.

Question 12

Sarah earns $40,000 per year working for a large corporation. She is thinking of quitting this job to work full time in her own business. She will invest her savings of $50,000 (which currently has an annual 10% rate of return)into the business. Her annual opportunity cost of this new business is

Accepted Answer

A) $0. 
B) $40,000. 
C) $45,000. 
D) $90,000. 
A) $0. 
B) $40,000. 
C) $45,000. 
D) $90,000.

Question 13

Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AVC equals

Accepted Answer

A) q. 
B) q/10. 
C) 10/q. 
D) 1. 
A) q. 
B) q/10. 
C) 10/q. 
D) 1.

Question 14

Why might a police officer NOT pull over someone speeding two miles over the speed limit?

Accepted Answer

A) The explicit costs of stopping the driver are too high. 
B) The opportunity costs of stopping the driver are too high. 
C) The opportunity costs of stopping he driver are too low. 
D) The explicit costs of stopping the driver are too low. 
A) The explicit costs of stopping the driver are too high. 
B) The opportunity costs of stopping the driver are too high. 
C) The opportunity costs of stopping he driver are too low. 
D) The explicit costs of stopping the driver are too low.

Question 15

The marginal cost curve intersects the average fixed cost curve at its minimum.

Accepted Answer

A) True 
 B)False

Question 16

Average fixed cost (AFC)

Accepted Answer

A) is the fixed cost divided by the average sales price of the final good. 
B) is the fixed cost divided by the quantity of output produced. 
C) is $0 when no output is produced. 
D) is always less than average variable cost (AV
C) . 
A) is the fixed cost divided by the average sales price of the final good. 
B) is the fixed cost divided by the quantity of output produced. 
C) is $0 when no output is produced. 
D) is always less than average variable cost (AV
C) .

Question 17

Sue is taking an accounting job she was offered that pays $67,000 per year. She also had two other offers, a sales job paying $71,000 per year and a marketing job paying $65,000 per year. What is Sue's opportunity cost of taking the accounting job?

Accepted Answer

A) $65,000 
B) $67,000 
C) $71,000 
D) $136,000 
A) $65,000 
B) $67,000 
C) $71,000 
D) $136,000

Question 18

Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AFC equals

Accepted Answer

A) 0. 
B) 1. 
C) 10/q. 
D) It cannot be determined from the information provided. 
A) 0. 
B) 1. 
C) 10/q. 
D) It cannot be determined from the information provided.

Question 19

If a firm buys a delivery van for $18,000 and can resell it in 2 years for $7,500, the opportunity cost of using the van is

Accepted Answer

A) $10,500. 
B) $7,500. 
C) $18,000. 
D) $3,750. 
A) $10,500. 
B) $7,500. 
C) $18,000. 
D) $3,750.

Question 20

When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production?

Accepted Answer

A) $2 
B) $0.5 
C) $6 
D) $3 
A) $2 
B) $0.5 
C) $6 
D) $3

If the cost of capital increases, the isocost line will

The slope of the isocost line tells the firm how much

A durable good is product that

If average cost is decreasing,

If the cost of labor increases the isocost line will

If producing more output has no effect on average cost then

Economic costs of an input include

A pizza parlor's rent is

If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

Sarah earns $40,000 per year working for a large corporation. She is thinking of quitting this job to work full time in her own business. She will invest her savings of $50,000 (which currently has an annual 10% rate of return)into the business. Her annual opportunity cost of this new business is

Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AVC equals

Why might a police officer NOT pull over someone speeding two miles over the speed limit?

The marginal cost curve intersects the average fixed cost curve at its minimum.

Average fixed cost (AFC)

Sue is taking an accounting job she was offered that pays $67,000 per year. She also had two other offers, a sales job paying $71,000 per year and a marketing job paying $65,000 per year. What is Sue's opportunity cost of taking the accounting job?

Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AFC equals

If a firm buys a delivery van for $18,000 and can resell it in 2 years for $7,500, the opportunity cost of using the van is

When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production?

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

If the cost of capital increases, the isocost line will

The slope of the isocost line tells the firm how much

A durable good is product that

If average cost is decreasing,

If the cost of labor increases the isocost line will

If producing more output has no effect on average cost then

Economic costs of an input include

A pizza parlor's rent is

If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

Sarah earns $40,000 per year working for a large corporation. She is thinking of quitting this job to work full time in her own business. She will invest her savings of $50,000 (which currently has an annual 10% rate of return)into the business. Her annual opportunity cost of this new business is

Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AVC equals

Why might a police officer NOT pull over someone speeding two miles over the speed limit?

The marginal cost curve intersects the average fixed cost curve at its minimum.

Average fixed cost (AFC)

Sue is taking an accounting job she was offered that pays $67,000 per year. She also had two other offers, a sales job paying $71,000 per year and a marketing job paying $65,000 per year. What is Sue's opportunity cost of taking the accounting job?

Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AFC equals

If a firm buys a delivery van for $18,000 and can resell it in 2 years for $7,500, the opportunity cost of using the van is

When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production?

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