Question 1

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. D

Question 2

Explain why the long-run total cost curve,not the short-run total cost curve,shows the lowest cost of producing any level of output.Is there an exception?

Accepted Answer

In the long run,all costs are variable so the firm can select the least-cost mix of all inputs to produce any given quantity.The exception would be at minimum long-run cost where min.LR and min.SR costs are equal.

Question 3

Short-run costs are never equal or lower than long-run cost.

Accepted Answer

A) True 
 B)False  False

Question 4

A firm can minimize cost by

Accepted Answer

A)  picking the bundle of inputs where the lowest isocost line touches the isoquant. 
B)  picking the bundle of inputs where the isoquant is tangent to the isocost line. 
C)  picking the bundle of inputs where the last dollar spent on one input gives as much extra output as the last dollar spent on any other input. 
D)  All of the above. 
A)  picking the bundle of inputs where the lowest isocost line touches the isoquant. 
B)  picking the bundle of inputs where the isoquant is tangent to the isocost line. 
C)  picking the bundle of inputs where the last dollar spent on one input gives as much extra output as the last dollar spent on any other input. 
D)  All of the above.

Question 5

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 6

In the short run,marginal cost is increasing when

Accepted Answer

A)  MPL is decreasing. 
B)  MPL is increasing. 
C)  APL is increasing. 
D)  APL is decreasing. 
A)  MPL is decreasing. 
B)  MPL is increasing. 
C)  APL is increasing. 
D)  APL is decreasing.

Question 7

What are the functions for MC and AC if TC = 40 + 10q + 5q2?

Accepted Answer

A)  MC = 10q; AC = 10 + 5q 
B)  MC = 10 + 10q; AC = 40/q + 10 + 10q 
C)  MC = 10 + 10q; AC = 40/q + 10q2 
D)  MC = 20 + 10q; AC = 40/q + 10q 
A)  MC = 10q; AC = 10 + 5q 
B)  MC = 10 + 10q; AC = 40/q + 10 + 10q 
C)  MC = 10 + 10q; AC = 40/q + 10q2 
D)  MC = 20 + 10q; AC = 40/q + 10q

Question 8

Learning by doing will result in

Accepted Answer

A)  an upward sloping long-run average cost curve. 
B)  a larger long-run marginal cost than long-run average cost. 
C)  a rotation in the isocost curves. 
D)  lower long-run costs than short-run costs. 
A)  an upward sloping long-run average cost curve. 
B)  a larger long-run marginal cost than long-run average cost. 
C)  a rotation in the isocost curves. 
D)  lower long-run costs than short-run costs.

Question 9

-A firm's production function for pretzels is shown in the above figure.If the firm's fixed cost equals $100 per time period and the wage rate equals $1 per unit of labor per time period,calculate the firm's MC,AVC,and AC schedules.Do these cost functions follow the general rules concerning the relationships between MC,AVC and AC?

Accepted Answer

@#IMG-DLM& MC > AVC,

Question 10

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 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

Suppose each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the short run,an increase in the price of shovels will result in

Accepted Answer

A)  fewer shovels being purchased. 
B)  more workers being hired. 
C)  a decrease in the firm's output. 
D)  no change in the firm's output. 
A)  fewer shovels being purchased. 
B)  more workers being hired. 
C)  a decrease in the firm's output. 
D)  no change in the firm's output.

Question 13

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 14

-At Albert's Pretzel Company,MPL = 1/L,and MPK = 1/K.The isoquant for 100 pounds of pretzels daily is shown in the above figure.Albert minimizes the cost of producing 100 pounds of pretzels daily by hiring 5 units of labor and 10 units of capital when w = 50 and r = 25.When r rises to 100,what is the minimum cost of producing 100 pounds of pretzels daily in the short run? in the long run?

Accepted Answer

In the short run,the input mix cannot ch

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

At what output level,q,is average cost minimized if the short-run costs for a company are C = 40 + 4q + q2?

Accepted Answer

A)  q = 2   
B)  q = 0 
C)  q = 40 
D)  q = 2 
A)  q = 2   
B)  q = 0 
C)  q = 40 
D)  q = 2

Question 17

A production possibilities frontier that is bowed-inward implies

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scope. 
C)  economies of scope. 
D)  no economies of scope. 
A)  economies of scale. 
B)  diseconomies of scope. 
C)  economies of scope. 
D)  no economies of scope.

Question 18

Assuming that w and r are both positive,if the long-run expansion path is horizontal,then

Accepted Answer

A)  MPK = 0. 
B)  MRTS is a function of capital only. 
C)  w = r. 
D)  All of the above. 
A)  MPK = 0. 
B)  MRTS is a function of capital only. 
C)  w = r. 
D)  All of the above.

Question 19

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 20

In the short run,average variable costs are minimized when

Accepted Answer

A)  MPL equals APL. 
B)  APL is maximized. 
C)  MPL is maximized and APL is increasing. 
D)  Both A and B. 
A)  MPL equals APL. 
B)  APL is maximized. 
C)  MPL is maximized and APL is increasing. 
D)  Both A and B.

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

Explain why the long-run total cost curve,not the short-run total cost curve,shows the lowest cost of producing any level of output.Is there an exception?

Short-run costs are never equal or lower than long-run cost.

A firm can minimize cost by

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

In the short run,marginal cost is increasing when

What are the functions for MC and AC if TC = 40 + 10q + 5q²?

Learning by doing will result in

Suppose the short-run production function is q = L^0.5.If the marginal cost of producing the tenth unit is $5,what is the wage per unit of labor?

"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.

Suppose each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the short run,an increase in the price of shovels will result in

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

Economic costs of an input include

At what output level,q,is average cost minimized if the short-run costs for a company are C = 40 + 4q + q²?

A production possibilities frontier that is bowed-inward implies

Assuming that w and r are both positive,if the long-run expansion path is horizontal,then

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?

In the short run,average variable costs are minimized when

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 7: Costs

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

Explain why the long-run total cost curve,not the short-run total cost curve,shows the lowest cost of producing any level of output.Is there an exception?

Short-run costs are never equal or lower than long-run cost.

A firm can minimize cost by

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

In the short run,marginal cost is increasing when

What are the functions for MC and AC if TC = 40 + 10q + 5q2?

Learning by doing will result in

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 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.

Suppose each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the short run,an increase in the price of shovels will result in

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

Economic costs of an input include

At what output level,q,is average cost minimized if the short-run costs for a company are C = 40 + 4q + q2?

A production possibilities frontier that is bowed-inward implies

Assuming that w and r are both positive,if the long-run expansion path is horizontal,then

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?

In the short run,average variable costs are minimized when

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

What are the functions for MC and AC if TC = 40 + 10q + 5q²?

Suppose the short-run production function is q = L^0.5.If the marginal cost of producing the tenth unit is $5,what is the wage per unit of labor?

At what output level,q,is average cost minimized if the short-run costs for a company are C = 40 + 4q + q²?