Question 1

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 2

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 3

Which of the following will cause the marginal cost curve of making cigarettes to shift?

Accepted Answer

A)  a $5 million penalty charged to each cigarette maker 
B)  a $1 per pack tax on cigarettes 
C)  a $1 million advertising campaign by the American Cancer Society 
D)  All of the above. 
A)  a $5 million penalty charged to each cigarette maker 
B)  a $1 per pack tax on cigarettes 
C)  a $1 million advertising campaign by the American Cancer Society 
D)  All of the above.

Question 4

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 5

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 6

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 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 a unit of labor. 
D)  the isocost curve will shift outward if the firm wishes to produce more.

Question 7

If producing more output has no effect on 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 8

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 9

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 10

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 11

"If the wage rate paid to one form of labor is twice the cost of another form of labor,the first type of labor must be twice as productive." Comment.

Accepted Answer

This is True
Firms minimize cost by sett

Question 12

A cost function has economies of scale if

Accepted Answer

A)  average fixed costs fall as production increases. 
B)  total costs fall as production increases. 
C)  the average total cost falls as production increases. 
D)  it is less expensive to produce goods jointly rather than separately. 
A)  average fixed costs fall as production increases. 
B)  total costs fall as production increases. 
C)  the average total cost falls as production increases. 
D)  it is less expensive to produce goods jointly rather than separately.

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.According to her accountant,what are Manisha's 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

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 15

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.

Question 16

Explain how a firm can have constant returns to scale in production and economies of scale in cost.

Accepted Answer

A firm can have constant returns to scal

Question 17

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

If the cost of capital increases the isocost line will

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

Which of the following will cause the marginal cost curve of making cigarettes to shift?

Which of the following is NOT true?

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

The slope of the isocost line tells the firm how much

If producing more output has no effect on average cost then

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

Economic costs of an input include

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 wage rate paid to one form of labor is twice the cost of another form of labor,the first type of labor must be twice as productive." Comment.

A cost function has economies of scale if

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?

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

Explain how a firm can have constant returns to scale in production and economies of scale in cost.

Which of the following statements is NOT true?

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 the cost of capital increases the isocost line will

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

Which of the following will cause the marginal cost curve of making cigarettes to shift?

Which of the following is NOT true?

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

The slope of the isocost line tells the firm how much

If producing more output has no effect on average cost then

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

Economic costs of an input include

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 wage rate paid to one form of labor is twice the cost of another form of labor,the first type of labor must be twice as productive." Comment.

A cost function has economies of scale if

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?

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

Explain how a firm can have constant returns to scale in production and economies of scale in cost.

Which of the following statements is NOT true?

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