Question 1

As output increases, the distance between average total cost and average variable cost increases.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Table 11-8
   
Elegant Settings manufactures stainless steel cutlery.Table 11-8 shows the company's cost data.
-Refer to Table 11-8.Elegant Settings experiences

Accepted Answer

A) economies of scale up to an output level of 400. 
B) diminishing returns up to an output level of 400. 
C) increasing returns beyond an output level of 400. 
D) economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400. 
A) economies of scale up to an output level of 400. 
B) diminishing returns up to an output level of 400. 
C) increasing returns beyond an output level of 400. 
D) economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Question 4

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

Accepted Answer

A) 2 chairs. 
B) 3 chairs. 
C) 4 chairs. 
D) 38 chairs. 
A) 2 chairs. 
B) 3 chairs. 
C) 4 chairs. 
D) 38 chairs.

Question 5

Which of the following would be categorized as an opportunity cost?
A.not being able to spend your $10,000 savings if you sink the money in your business
B.the cost of purchasing supplies for your house-cleaning business
C.the cost of purchasing auto insurance for your dry-cleaning delivery business

Accepted Answer

A) a only 
B) a and c only 
C) b and c only 
D) all of the above 
A) a only 
B) a and c only 
C) b and c only 
D) all of the above

Question 6

If marginal product is greater than average product, then

Accepted Answer

A) average product must be decreasing. 
B) marginal product must be decreasing. 
C) marginal product must be increasing. 
D) marginal product could either be increasing or decreasing. 
A) average product must be decreasing. 
B) marginal product must be decreasing. 
C) marginal product must be increasing. 
D) marginal product could either be increasing or decreasing.

Question 7

Figure 11-11
   
Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 11-11.In the short run, if the firm sells fewer than 5,000 picture frames per month

Accepted Answer

A) it should produce with the scale of operation associated with ATCₐ. 
B) it should produce with the scale of operation associated with ATCb. 
C) it should produce with the scale of operation associated with ATCc. 
D) it will experience constant returns to scale. 
A) it should produce with the scale of operation associated with ATCₐ. 
B) it should produce with the scale of operation associated with ATCb. 
C) it should produce with the scale of operation associated with ATCc. 
D) it will experience constant returns to scale.

Question 8

Minimum efficient scale is defined as the level of output at which

Accepted Answer

A) all economies of scale are exhausted. 
B) diminishing returns affect average total cost. 
C) the firm's long-run average total cost starts falling. 
D) the maximum output is produced. 
A) all economies of scale are exhausted. 
B) diminishing returns affect average total cost. 
C) the firm's long-run average total cost starts falling. 
D) the maximum output is produced.

Question 9

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 10

As a firm moves to higher isocost lines

Accepted Answer

A) its profits increase. 
B) its revenue increases. 
C) its input price ratio increases. 
D) its total cost increases. 
A) its profits increase. 
B) its revenue increases. 
C) its input price ratio increases. 
D) its total cost increases.

Question 11

The formula for total fixed cost is

Accepted Answer

A) TFC = TC + TVC. 
B) TFC = TVC - TC. 
C) TFC = TC/TVC. 
D) TFC = TC - TVC. 
A) TFC = TC + TVC. 
B) TFC = TVC - TC. 
C) TFC = TC/TVC. 
D) TFC = TC - TVC.

Question 12

Figure 11-10
  
-Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Qc units.What will happen to its average cost of production?

Accepted Answer

A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37. 
A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question 13

Figure 11-16
  
-Refer to Figure 11-16.The figure above illustrates a series of isoquants.Which of the following statements is true?

Accepted Answer

A) Points x, z, and y all represent the same output. 
B) Points z and y represent the same output; this output is produced with more capital at z than at y. 
C) Point x and y represent the same output but the cost of production at y is greater than the cost of production at x. 
D) Point z represents a greater output than point x or point y. 
A) Points x, z, and y all represent the same output. 
B) Points z and y represent the same output; this output is produced with more capital at z than at y. 
C) Point x and y represent the same output but the cost of production at y is greater than the cost of production at x. 
D) Point z represents a greater output than point x or point y.

Question 14

The Santa Fe Spark Plug Company supplies spark plugs to automotive parts dealers.An increase in the demand for its product led Santa Fe to hire 150 new workers.Santa Fe also plans to expand the capacity of its plant but this project will take 2 years to complete.Which of the following statements is true?

Accepted Answer

A) The wages and benefits paid to the new workers are implicit costs. 
B) The long run for Santa Fe is longer than 1 year. 
C) The short run for Santa Fe is 1 year. 
D) In the short run Santa Fe's variable costs increase but its fixed costs decrease. 
A) The wages and benefits paid to the new workers are implicit costs. 
B) The long run for Santa Fe is longer than 1 year. 
C) The short run for Santa Fe is 1 year. 
D) In the short run Santa Fe's variable costs increase but its fixed costs decrease.

Question 15

Suppose a firm uses labor and capital to produce output.The last unit of labor hired has a marginal product of 12 units of output, and the last unit of capital employed has a marginal product of 20 units.Use the optimal combination of inputs rule to calculate the price of capital if the price of labor is $6 per unit.The price of capital is

Accepted Answer

A) $2. 
B) $10. 
C) $20. 
D) impossible to determine with the information given. 
A) $2. 
B) $10. 
C) $20. 
D) impossible to determine with the information given.

Question 16

What is the difference between between total costs, variable costs, and fixed costs?

Accepted Answer

Total costs are the costs of all inputs

Question 17

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.Therefore,

Accepted Answer

A) ABC is experiencing diseconomies of scale. 
B) ABC is experiencing diminishing returns. 
C) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month. 
D) ABC will soon go out of business. 
A) ABC is experiencing diseconomies of scale. 
B) ABC is experiencing diminishing returns. 
C) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month. 
D) ABC will soon go out of business.

Question 18

State the law of diminishing marginal returns.

Accepted Answer

As more units of a variable in

Question 19

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

A) True 
 B)False

Question 20

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.

As output increases, the distance between average total cost and average variable cost increases.

An isoquant shows

Table 11-8 Elegant Settings manufactures stainless steel cutlery.Table 11-8 shows the company's cost data. -Refer to Table 11-8.Elegant Settings experiences

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

Which of the following would be categorized as an opportunity cost? A.not being able to spend your $10,000 savings if you sink the money in your business B.the cost of purchasing supplies for your house-cleaning business C.the cost of purchasing auto insurance for your dry-cleaning delivery business

If marginal product is greater than average product, then

Minimum efficient scale is defined as the level of output at which

As a firm moves to higher isocost lines

The formula for total fixed cost is

Figure 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Qc units.What will happen to its average cost of production?

Figure 11-16 -Refer to Figure 11-16.The figure above illustrates a series of isoquants.Which of the following statements is true?

What is the difference between between total costs, variable costs, and fixed costs?

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.Therefore,

State the law of diminishing marginal returns.

Average total cost is equal to average variable cost minus average fixed cost.

The typical shape of an isoquant is

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 11: Technology, Production, and Costs

As output increases, the distance between average total cost and average variable cost increases.

An isoquant shows

Table 11-8 Elegant Settings manufactures stainless steel cutlery.Table 11-8 shows the company's cost data. -Refer to Table 11-8.Elegant Settings experiences

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

If marginal product is greater than average product, then

Minimum efficient scale is defined as the level of output at which

As a firm moves to higher isocost lines

The formula for total fixed cost is

Figure 11-10 -Refer to Figure 11-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now, following a permanent change in demand, it plans to cut production to Qc units.What will happen to its average cost of production?

Figure 11-16 -Refer to Figure 11-16.The figure above illustrates a series of isoquants.Which of the following statements is true?

What is the difference between between total costs, variable costs, and fixed costs?

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.Therefore,

State the law of diminishing marginal returns.

Average total cost is equal to average variable cost minus average fixed cost.

The typical shape of an isoquant is

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters