Question 1

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

Accepted Answer

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

Question 2

The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. Assume that the firm's capital is fixed at 250 units, the rental rate of capital is $5 per unit, and the wage rate is $10 per hour. The amount of labor needed to produce q units of output is

Accepted Answer

A) 0.0124q. 
B) 13.832q0.6. 
C) 0.0124q1.67. 
D) 13.832q1.67. 
A) 0.0124q. 
B) 13.832q0.6. 
C) 0.0124q1.67. 
D) 13.832q1.67. C

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 C

Question 4

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 5

Suppose the short-run production function is q = L0.5. If the marginal cost of producing the tenth unit is $5, what is the wage per unit of labor?

Accepted Answer

A) $1 
B) $0.5 
C) $0.25 
D) It cannot be determined without more information. 
A) $1 
B) $0.5 
C) $0.25 
D) It cannot be determined without more information.

Question 6

If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as

Accepted Answer

A) the monthly mortgage payment the firm must pay. 
B) the price the firm paid divided by twelve. 
C) zero. 
D) the rent the firm could earn if it rented the building to another firm. 
A) the monthly mortgage payment the firm must pay. 
B) the price the firm paid divided by twelve. 
C) zero. 
D) the rent the firm could earn if it rented the building to another firm.

Question 7

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 8

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 9

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 10

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 11

Which of the following is NOT true?

Accepted Answer

A) Rental costs for a building are sunk in the short run and fixed in the long run. 
B) Rental costs for a building are avoidable in the long run. 
C) Variable costs, such as ingredients for a pizza, are avoidable in the long run and the short run. 
D) Rental costs for a building are fixed in the short run and sunk in the long run. 
A) Rental costs for a building are sunk in the short run and fixed in the long run. 
B) Rental costs for a building are avoidable in the long run. 
C) Variable costs, such as ingredients for a pizza, are avoidable in the long run and the short run. 
D) Rental costs for a building are fixed in the short run and sunk in the long run.

Question 12

If a firm buys a specialized metal stamping machine that will last 4 years for $125,000 and cannot resell it, the opportunity cost is

Accepted Answer

A) $0. 
B) $31,250. 
C) $125,000. 
D) $93,750. 
A) $0. 
B) $31,250. 
C) $125,000. 
D) $93,750.

Question 13

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. What are Manisha's economic 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 14

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 15

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 16

If producing more output increases 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 17

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 18

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 19

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

Accepted Answer

A) $10,500. 
B) $7,500. 
C) $18,000. 
D) $0. 
A) $10,500. 
B) $7,500. 
C) $18,000. 
D) $0.

Question 20

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

Accepted Answer

A) True 
 B)False

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

The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. Assume that the firm's capital is fixed at 250 units, the rental rate of capital is $5 per unit, and the wage rate is $10 per hour. The amount of labor needed to produce q units of output is

Which of the following is a form of outsourcing?

In the long run, fixed costs are

Suppose the short-run production function is q = L0.5. If the marginal cost of producing the tenth unit is $5, what is the wage per unit of labor?

If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as

The slope of the isocost line tells the firm how much

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

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 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?

Which of the following is NOT true?

If a firm buys a specialized metal stamping machine that will last 4 years for $125,000 and cannot resell it, the opportunity cost is

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

Economic costs of an input include

If producing more output increases average cost then

If the cost of capital increases the isocost line will

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

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

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

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

The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. Assume that the firm's capital is fixed at 250 units, the rental rate of capital is $5 per unit, and the wage rate is $10 per hour. The amount of labor needed to produce q units of output is

Which of the following is a form of outsourcing?

In the long run, fixed costs are

Suppose the short-run production function is q = L0.5. If the marginal cost of producing the tenth unit is $5, what is the wage per unit of labor?

If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as

The slope of the isocost line tells the firm how much

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

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 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?

Which of the following is NOT true?

If a firm buys a specialized metal stamping machine that will last 4 years for $125,000 and cannot resell it, the opportunity cost is

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

Economic costs of an input include

If producing more output increases average cost then

If the cost of capital increases the isocost line will

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

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

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

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