Question 1

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced.This would

Accepted Answer

A)  shift the marginal cost curve up. 
B)  shift the marginal cost curve down. 
C)  shift the average fixed cost curve up. 
D)  shift the average fixed cost curve down. 
A)  shift the marginal cost curve up. 
B)  shift the marginal cost curve down. 
C)  shift the average fixed cost curve up. 
D)  shift the average fixed cost curve down.

Question 2

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

Accepted Answer

MC = 100 + 200q
AC = 100 + 100

Question 3

Suppose the short-run production function is q =   .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 4

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 5

If average cost is positive

Accepted Answer

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

Question 6

Marginal cost is

Accepted Answer

A)  positive or zero. 
B)  negative or zero. 
C)  positive or negative but not zero. 
D)  positive, negative, or zero. 
A)  positive or zero. 
B)  negative or zero. 
C)  positive or negative but not zero. 
D)  positive, negative, or zero.

Question 7

If the cost of capital 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 labor 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 labor is employed in production. 
D)  shift inward in parallel fashion.

Question 8

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 9

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 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

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 12

When the isocost line is tangent to the isoquant,then

Accepted Answer

A)  MRTS = -w/r. 
B)  the firm is producing that level of output at minimum cost. 
C)  the last dollar spent on capital yields as much extra output as the last dollar spent on labor. 
D)  All of the above. 
A)  MRTS = -w/r. 
B)  the firm is producing that level of output at minimum cost. 
C)  the last dollar spent on capital yields as much extra output as the last dollar spent on labor. 
D)  All of the above.

Question 13

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.

Question 14

A firm's cost curve is determined by

Accepted Answer

A)  congressional laws. 
B)  whether the firm hires engineers or not. 
C)  natural laws. 
D)  the firm's production function. 
A)  congressional laws. 
B)  whether the firm hires engineers or not. 
C)  natural laws. 
D)  the firm's production function.

Question 15

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 16

Long-run average cost is never greater than short-run average cost because in the long run

Accepted Answer

A)  capital costs equal zero. 
B)  the firm can move to the lowest possible isocost curve. 
C)  wages always increase over time. 
D)  wages always decrease over time. 
A)  capital costs equal zero. 
B)  the firm can move to the lowest possible isocost curve. 
C)  wages always increase over time. 
D)  wages always decrease over time.

Question 17

A change in relative factor prices will always result in

Accepted Answer

A)  a change in the slope of the isoquants. 
B)  a tangency between the new isocost line and a new isoquant. 
C)  a rotation of the isocost lines. 
D)  All of the above. 
A)  a change in the slope of the isoquants. 
B)  a tangency between the new isocost line and a new isoquant. 
C)  a rotation of the isocost lines. 
D)  All of the above.

Question 18

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 19

Which of the following does NOT represent a possible shape of the long-run average cost curve?

Accepted Answer

A)  downward-sloping 
B)  upward-sloping 
C)  U-shaped 
D)  vertical 
A)  downward-sloping 
B)  upward-sloping 
C)  U-shaped 
D)  vertical

Question 20

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.

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced.This would

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

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

If the cost of labor decreases the isocost line will

If average cost is positive

Marginal cost is

If the cost of capital decreases the isocost line will

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?

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

Variable costs

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

When the isocost line is tangent to the isoquant,then

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

A firm's cost curve is determined by

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.

Long-run average cost is never greater than short-run average cost because in the long run

A change in relative factor prices will always result in

If the cost of labor increases the isocost line will

Which of the following does NOT represent a possible shape of the long-run average cost curve?

In the long run,fixed costs are

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

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Exam 6: Costs

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced.This would

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

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

If the cost of labor decreases the isocost line will

If average cost is positive

Marginal cost is

If the cost of capital decreases the isocost line will

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?

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

Variable costs

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

When the isocost line is tangent to the isoquant,then

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

A firm's cost curve is determined by

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.

Long-run average cost is never greater than short-run average cost because in the long run

A change in relative factor prices will always result in

If the cost of labor increases the isocost line will

Which of the following does NOT represent a possible shape of the long-run average cost curve?

In the long run,fixed costs are

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