Question 1

If a firm buys a specialized metal stamping machine that will last 4 years for $125,000 and cannot resell it, the sunk 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 2

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 3

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 4

Which of the following is NOT an explicit cost?

Accepted Answer

A) $200 to hire 2 gardeners for landscaping work 
B) $1500 to buy bricks for the driveway of your house 
C) $25 for lunch to serve to your workers 
D) The $100 in interest you lost by using your CD funds to pay for new pizza oven 
A) $200 to hire 2 gardeners for landscaping work 
B) $1500 to buy bricks for the driveway of your house 
C) $25 for lunch to serve to your workers 
D) The $100 in interest you lost by using your CD funds to pay for new pizza oven

Question 5

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 6

A firm's marginal cost can always be thought of as the change in total cost if

Accepted Answer

A) the firm produces one more unit of output. 
B) the firm buys one more unit of capital. 
C) the firm's average cost increases by $1. 
D) the firm moves to the next highest isoquant. 
A) the firm produces one more unit of output. 
B) the firm buys one more unit of capital. 
C) the firm's average cost increases by $1. 
D) the firm moves to the next highest isoquant.

Question 7

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 8

Which of the following is NOT a form of outsourcing?

Accepted Answer

A) hiring an accountant to do your taxes 
B) replacing the windshield wipers on your car 
C) paying your son to mow the lawn 
D) taking a taxi to the airport 
A) hiring an accountant to do your taxes 
B) replacing the windshield wipers on your car 
C) paying your son to mow the lawn 
D) taking a taxi to the airport

Question 9

Suppose the cost of producing two goods, x and y, can be represented as C = ax + by + cxy. If there are diseconomies of scope, then which of the following must be TRUE?

Accepted Answer

A) a = b B) a + b = -c C) c > 0 D) c < 0 A) a = b B) a + b = -c C) c > 0 D) c < 0

Question 10

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 11

Which of the following statements is NOT true?

Accepted Answer

A) AC = AFC + AVC 
B) C = F + VC 
C) AVC = wage/MPL 
D) AFC = AC - AVC 
A) AC = AFC + AVC 
B) C = F + VC 
C) AVC = wage/MPL 
D) AFC = AC - AVC

Question 12

Learning by doing, which leads to lower costs in the long run, is often

Accepted Answer

A) increased when new machinery is brought into the production process. 
B) a function of cumulative output, that is producing more of the good or service. 
C) improved through better use of computers in the production process. 
D) not very important to most firms. 
A) increased when new machinery is brought into the production process. 
B) a function of cumulative output, that is producing more of the good or service. 
C) improved through better use of computers in the production process. 
D) not very important to most firms.

Question 13

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last. An economist may amortize the expense of a durable and never fully account for the total expense.

Accepted Answer

A) True 
 B)False

Question 14

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 15

If the cost of labor decreases the isocost line will

Accepted Answer

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

Question 16

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 17

You purchase a pizza oven that is expected to last 10 years for $15,000. How do you account for the economic cost of the oven?

Accepted Answer

A) Expense the oven, taking a write-off for the entire price in the first year. 
B) Amortize the cost over the 10 year life of the oven, resulting in a cost of $1,500 per year. 
C) Calculate the value of renting the oven to someone else and use that as your cost. 
D) The cost is the price of the oven minus any revenue made selling pizzas made in the oven. 
A) Expense the oven, taking a write-off for the entire price in the first year. 
B) Amortize the cost over the 10 year life of the oven, resulting in a cost of $1,500 per year. 
C) Calculate the value of renting the oven to someone else and use that as your cost. 
D) The cost is the price of the oven minus any revenue made selling pizzas made in the oven.

Question 18

The production of cigarettes is highly automated; however, a worker is required to monitor each machine. Machines and workers do not interact with one another. Given this information, there are most likely

Accepted Answer

A) economies of scale. 
B) economies of scope. 
C) constant returns to scale. 
D) increasing returns to scale. 
A) economies of scale. 
B) economies of scope. 
C) constant returns to scale. 
D) increasing returns to scale.

Question 19

Why do many people choose NOT to read the manuals included with their new computer?

Accepted Answer

A) They perceive that learning by doing decreases costs faster than learning by reading. 
B) They perceive that learning by doing is more enjoyable than learning by reading. 
C) They perceive that learning by reading is not sophisticated. 
D) They believe that the manuals are not accurate. 
A) They perceive that learning by doing decreases costs faster than learning by reading. 
B) They perceive that learning by doing is more enjoyable than learning by reading. 
C) They perceive that learning by reading is not sophisticated. 
D) They believe that the manuals are not accurate.

Question 20

If a particular production process is subject to diminishing marginal returns to labor at every level of output, then at every level of output

Accepted Answer

A) AC is upward sloping. 
B) MC exceeds AVC. 
C) AFC is constant. 
D) None of the above. 
A) AC is upward sloping. 
B) MC exceeds AVC. 
C) AFC is constant. 
D) None of the above.

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

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

Which of the following is NOT an explicit cost?

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

A firm's marginal cost can always be thought of as the change in total cost if

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

Which of the following is NOT a form of outsourcing?

Suppose the cost of producing two goods, x and y, can be represented as C = ax + by + cxy. If there are diseconomies of scope, then which of the following must be TRUE?

Variable costs

Which of the following statements is NOT true?

Learning by doing, which leads to lower costs in the long run, is often

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last. An economist may amortize the expense of a durable and never fully account for the total expense.

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.

If the cost of labor decreases the isocost line will

Isocost lines

You purchase a pizza oven that is expected to last 10 years for $15,000. How do you account for the economic cost of the oven?

The production of cigarettes is highly automated; however, a worker is required to monitor each machine. Machines and workers do not interact with one another. Given this information, there are most likely

Why do many people choose NOT to read the manuals included with their new computer?

If a particular production process is subject to diminishing marginal returns to labor at every level of output, then at every level of output

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

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

Which of the following is NOT an explicit cost?

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

A firm's marginal cost can always be thought of as the change in total cost if

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

Which of the following is NOT a form of outsourcing?

Suppose the cost of producing two goods, x and y, can be represented as C = ax + by + cxy. If there are diseconomies of scope, then which of the following must be TRUE?

Variable costs

Which of the following statements is NOT true?

Learning by doing, which leads to lower costs in the long run, is often

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last. An economist may amortize the expense of a durable and never fully account for the total expense.

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.

If the cost of labor decreases the isocost line will

Isocost lines

You purchase a pizza oven that is expected to last 10 years for $15,000. How do you account for the economic cost of the oven?

The production of cigarettes is highly automated; however, a worker is required to monitor each machine. Machines and workers do not interact with one another. Given this information, there are most likely

Why do many people choose NOT to read the manuals included with their new computer?

If a particular production process is subject to diminishing marginal returns to labor at every level of output, then at every level of output

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