Question 1

Ford Motor Company started producing the Model A at plants scattered around the United States

Accepted Answer

A) to save on transport costs. 
B) because diseconomies of scale at its initial River Rouge plant in Michigan resulted in high production costs. 
C) to locate its production centers closer to its customers. 
D) because it was not able to attract skilled workers to its first plant in River Rouge, Michigan. 
A) to save on transport costs. 
B) because diseconomies of scale at its initial River Rouge plant in Michigan resulted in high production costs. 
C) to locate its production centers closer to its customers. 
D) because it was not able to attract skilled workers to its first plant in River Rouge, Michigan.

Question 2

Describe how Magna International has used positive technological change to manage its inventory.

Accepted Answer

Magna International uses a "just-in-time

Question 3

If the marginal product of labour is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least cost combination and what should be done if they are not?

Accepted Answer

The marginal product per dollar spent on

Question 4

An isoquant shows

Accepted Answer

A) the combinations of two goods that yield the same total satisfaction. 
B) the combinations of two inputs that yield the same total product. 
C) the combinations of two inputs that cost the same total quantity of money. 
D) the combination of two goods that cost the same amount of money. 
A) the combinations of two goods that yield the same total satisfaction. 
B) the combinations of two inputs that yield the same total product. 
C) the combinations of two inputs that cost the same total quantity of money. 
D) the combination of two goods that cost the same amount of money.

Question 5

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory.In the following graph, the relationship between costs and output for the smaller factory is represented by the curve ATC₁, and the relationship between costs and output for the larger factory is represented by the curve ATC₂.
   
a.If Argyle expects to produce 3,600 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain?
b.If Argyle expects to produce 5,000 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain.
c.If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week, why isn't it also lower when Argyle produces 4,000 sweaters per week?

Accepted Answer

a.Argyle's costs will be lower with a sm

Question 6

Explain how the listed events (a-d)would affect the following at Hilton Hotels.
i.Marginal cost
ii.Average variable cost
iii.Average fixed cost
iv.Average total cost
a.Hilton decides on an across-the-board 5 percent increase in executive salaries.
b.Hilton decides to eliminate all print advertising.
c.Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers.
d.The federal government starts to levy a $5 room tax on all hotel rooms.

Accepted Answer

a.Average fixed cost and average total c

Question 7

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor who has a store of the same size as yours is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price, you expect to make a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for both of you?

Accepted Answer

A) The competing store probably has a lower marginal cost of production. 
B) The competing store probably has a lower average variable cost of production. 
C) The competing store's goal is to maximize revenue and not profit. 
D) The competing store probably has a lower average cost because average fixed cost falls as output increases. 
A) The competing store probably has a lower marginal cost of production. 
B) The competing store probably has a lower average variable cost of production. 
C) The competing store's goal is to maximize revenue and not profit. 
D) The competing store probably has a lower average cost because average fixed cost falls as output increases.

Question 8

If average product is decreasing, then marginal product must be negative.

Accepted Answer

A) True 
 B)False

Question 9

Average fixed costs of production

Accepted Answer

A) remain constant. 
B) will rise at a fixed rate as more is produced. 
C) graph as a U-shaped curve. 
D) fall as long as output is increased. 
A) remain constant. 
B) will rise at a fixed rate as more is produced. 
C) graph as a U-shaped curve. 
D) fall as long as output is increased.

Question 10

The slope of an isocost line determines the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 11

A positive technological change which decreases the price of inputs Telus uses to provide mobile phone service will cause

Accepted Answer

A) Telus' average total cost curve and marginal cost curve to shift downward. 
B) Telus' average total cost curve but not its marginal cost curve to shift downward. 
C) Telus' marginal cost curve but not its average total cost curve to shift downward. 
D) a movement downward along Telus' current average total cost curve. 
A) Telus' average total cost curve and marginal cost curve to shift downward. 
B) Telus' average total cost curve but not its marginal cost curve to shift downward. 
C) Telus' marginal cost curve but not its average total cost curve to shift downward. 
D) a movement downward along Telus' current average total cost curve.

Question 12

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

Accepted Answer

A) $1,000. 
B) $700. 
C) $300. 
D) impossible to determine without additional information. 
A) $1,000. 
B) $700. 
C) $300. 
D) impossible to determine without additional information.

Question 13

Figure 9.2
  
-Refer to Figure 9.2.The average product of labour declines after L₂ because

Accepted Answer

A) the marginal product of labour is below the average product of labour. 
B) the marginal product of labour is falling. 
C) the marginal product of labour is negative. 
D) the marginal product of labour is positive. 
A) the marginal product of labour is below the average product of labour. 
B) the marginal product of labour is falling. 
C) the marginal product of labour is negative. 
D) the marginal product of labour is positive.

Question 14

State the law of diminishing marginal returns.

Accepted Answer

As more units of a variable in

Question 15

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

Accepted Answer

A) $41.43. 
B)  $134.29. 
C) $135. 
D) $145. 
A) $41.43. 
B)  $134.29. 
C) $135. 
D) $145.

Question 16

The long-run average cost curve shows

Accepted Answer

A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build. 
A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build.

Question 17

Golda Rush quit her job as a manager for Rona to start her own hair dressing salon, Goldilocks.She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest)and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year.In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material.Based on this information, what is the amount of her explicit costs?

Accepted Answer

A) $45,000 
B) $45,500 
C) $47,000 
D) $87,000 
A) $45,000 
B) $45,500 
C) $47,000 
D) $87,000

Question 18

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Accepted Answer

A) $2.00 
B) $2.40 
C) $4.40 
D) $6.80 
A) $2.00 
B) $2.40 
C) $4.40 
D) $6.80

Question 19

What is an isoquant? What is the slope of an isoquant?

Accepted Answer

An isoquant is curve that shows all the

Question 20

Figure 9.7
  
-Refer to Figure 9.7.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit, what is the price of capital along the isocost CE?

Accepted Answer

A) $400 per unit 
B) $100 per unit 
C) $25 per unit 
D) insufficient information to answer question 
A) $400 per unit 
B) $100 per unit 
C) $25 per unit 
D) insufficient information to answer question

Ford Motor Company started producing the Model A at plants scattered around the United States

Describe how Magna International has used positive technological change to manage its inventory.

If the marginal product of labour is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least cost combination and what should be done if they are not?

An isoquant shows

If average product is decreasing, then marginal product must be negative.

Average fixed costs of production

The slope of an isocost line determines the marginal rate of substitution.

A positive technological change which decreases the price of inputs Telus uses to provide mobile phone service will cause

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

Figure 9.2 -Refer to Figure 9.2.The average product of labour declines after L₂ because

State the law of diminishing marginal returns.

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

The long-run average cost curve shows

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

What is an isoquant? What is the slope of an isoquant?

Figure 9.7 -Refer to Figure 9.7.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit, what is the price of capital along the isocost CE?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

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Exam 9: Technology, Production, and Costs

Ford Motor Company started producing the Model A at plants scattered around the United States

Describe how Magna International has used positive technological change to manage its inventory.

If the marginal product of labour is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least cost combination and what should be done if they are not?

An isoquant shows

If average product is decreasing, then marginal product must be negative.

Average fixed costs of production

The slope of an isocost line determines the marginal rate of substitution.

A positive technological change which decreases the price of inputs Telus uses to provide mobile phone service will cause

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

Figure 9.2 -Refer to Figure 9.2.The average product of labour declines after L₂ because

State the law of diminishing marginal returns.

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

The long-run average cost curve shows

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

What is an isoquant? What is the slope of an isoquant?

Figure 9.7 -Refer to Figure 9.7.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit, what is the price of capital along the isocost CE?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters