Question 1

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

Question 2

Suppose capital and labor are perfect substitutes resulting in a production function of q = K + L.That is,the isoquants are straight lines with a slope of -1.Derive the long-run total cost function TC = C(q)when the wage rate is w and the rental rate on capital is r.

Accepted Answer

The firm will always hire the

Question 3

Suppose the production function is q = 12 L⁰.²⁵ K⁰.⁷⁵.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

Accepted Answer

The firm minimizes costs by se

Question 4

Explain why in the case of economies of scope the production possibility frontier is bowed outward.

Accepted Answer

With economies of scope a firm uses less

Question 5

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 6

You have two career options.You can work for someone else for $50,000 a year,or,you can run your own business,with an annual revenue of $100,000,and explicit costs of $40,000 annually.Explain which career option a profit-maximizer would select and why.

Accepted Answer

In the absence of other implic

Question 7

-The above figure shows the long-run expansion path.With an increase in the wage rate,the long run expansion path will

Accepted Answer

A)  remain unchanged. 
B)  shift up. 
C)  shift down. 
D)  become flatter. 
A)  remain unchanged. 
B)  shift up. 
C)  shift down. 
D)  become flatter.

Question 8

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 9

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 10

Simon is given a free ticket to see Coldplay Saturday night.He already has a ticket to see Sting in concert that night.The Sting ticket cost Simon $50 though he would have paid as much as $80 to go to the show.Simon knows that he can easily sell the Sting ticket on Craigslist for $60.What is his opportunity cost of seeing Coldplay?

Accepted Answer

If Simon did not go to Coldplay,he would

Question 11

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 12

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 average cost is positive,

Suppose capital and labor are perfect substitutes resulting in a production function of q = K + L.That is,the isoquants are straight lines with a slope of -1.Derive the long-run total cost function TC = C(q)when the wage rate is w and the rental rate on capital is r.

Suppose the production function is q = 12 L⁰.²⁵ K⁰.⁷⁵.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

Explain why in the case of economies of scope the production possibility frontier is bowed outward.

A change in relative factor prices will always result in

You have two career options.You can work for someone else for $50,000 a year,or,you can run your own business,with an annual revenue of $100,000,and explicit costs of $40,000 annually.Explain which career option a profit-maximizer would select and why.

-The above figure shows the long-run expansion path.With an increase in the wage rate,the long run expansion path will

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?

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

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

Which of the following statements is NOT true?

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 7: Costs

If average cost is positive,

Suppose capital and labor are perfect substitutes resulting in a production function of q = K + L.That is,the isoquants are straight lines with a slope of -1.Derive the long-run total cost function TC = C(q)when the wage rate is w and the rental rate on capital is r.

Suppose the production function is q = 12 L⁰.²⁵ K⁰.⁷⁵.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

Explain why in the case of economies of scope the production possibility frontier is bowed outward.

A change in relative factor prices will always result in

You have two career options.You can work for someone else for $50,000 a year,or,you can run your own business,with an annual revenue of $100,000,and explicit costs of $40,000 annually.Explain which career option a profit-maximizer would select and why.

-The above figure shows the long-run expansion path.With an increase in the wage rate,the long run expansion path will

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?

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

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

Which of the following statements is NOT true?

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters