Question 1

Assume Congress decides that Social Security taxes must increase in order to fund the system.This would

Accepted Answer

A)  shift up the marginal cost curve for any firms that hire labor. 
B)  guarantee a decrease in profits. 
C)  shift up the average fixed cost curve for any firms that hire labor. 
D)  guarantee an increase in tax revenues. 
A)  shift up the marginal cost curve for any firms that hire labor. 
B)  guarantee a decrease in profits. 
C)  shift up the average fixed cost curve for any firms that hire labor. 
D)  guarantee an increase in tax revenues.

Question 2

The learning curve is the relationship between

Accepted Answer

A)  returns to scale and cumulative costs. 
B)  marginal costs and current output. 
C)  marginal product of labor and current output. 
D)  average costs and cumulative output. 
A)  returns to scale and cumulative costs. 
B)  marginal costs and current output. 
C)  marginal product of labor and current output. 
D)  average costs and cumulative output.

Question 3

The slope of the isoquant tells the firm how much

Accepted Answer

A)  output increases when labor increases by one unit. 
B)  output increases when capital and labor are doubled. 
C)  capital must decrease to keep output constant when labor increases by one unit. 
D)  a unit of capital costs relative to the cost of labor. 
A)  output increases when labor increases by one unit. 
B)  output increases when capital and labor are doubled. 
C)  capital must decrease to keep output constant when labor increases by one unit. 
D)  a unit of capital costs relative to the cost of labor.

Question 4

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 5

Assume baseball player salaries are fully determined before the season starts.From the point of view of the baseball team owner,player salaries during the course of the season are then

Accepted Answer

A)  variable costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  average costs. 
A)  variable costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  average costs.

Question 6

A windfall profit tax imposed on oil companies would shift the firms'

Accepted Answer

A)  marginal tax rate. 
B)  marginal cost curve. 
C)  average cost curve. 
D)  production function. 
A)  marginal tax rate. 
B)  marginal cost curve. 
C)  average cost curve. 
D)  production function.

Question 7

When a firm produces one unit,the variable cost is $3.When the firm produces two units,the variable cost is $6.What is the marginal cost associated with two units of production?

Accepted Answer

A)  $2 
B)  $0.5 
C)  $6 
D)  $3 
A)  $2 
B)  $0.5 
C)  $6 
D)  $3

Question 8

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 9

Why might a police officer not pull over someone speeding two miles over the speed limit?

Accepted Answer

A)  The explicit costs of stopping the driver over are too high. 
B)  The opportunity costs of stopping the driver are too high. 
C)  The opportunity costs of topping he driver are too low. 
D)  The explicit costs of stopping the driver are too low. 
A)  The explicit costs of stopping the driver over are too high. 
B)  The opportunity costs of stopping the driver are too high. 
C)  The opportunity costs of topping he driver are too low. 
D)  The explicit costs of stopping the driver are too low.

Question 10

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The average cost of the 5th T-shirt is

Accepted Answer

A)  2. 
B)  12. 
C)  52. 
D)  60. 
A)  2. 
B)  12. 
C)  52. 
D)  60.

Question 11

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 12

If the costs of labor and capital increase in the same proportion,the isocost line will

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

A U.S.firm currently produces 200 units of output according to the production function q = L0.5K0.5 and faces input prices equal to wU.S. = rU.S = $11.Should the U.S.firm move their company abroad where they will face input prices equal to wabroad = $6.50 and rabroad = $15.00?

Accepted Answer

A)  Yes, because the total costs will fall from $3,859 to $2,810. 
B)  No, because the total costs will increase from $2,810 to $3,859. 
C)  No, because the firm has decreasing returns to scale. 
D)  Not enough information is given to answer this problem. 
A)  Yes, because the total costs will fall from $3,859 to $2,810. 
B)  No, because the total costs will increase from $2,810 to $3,859. 
C)  No, because the firm has decreasing returns to scale. 
D)  Not enough information is given to answer this problem.

Question 15

At the XYZ Co.,a unit of capital costs 3 times as much as a unit of labor.If the isoquants are convex,and the firm does not change its input mix in the long run,we can conclude that

Accepted Answer

A)  MPK = 3 ∗ MPL. 
B)  the firm will not hire any capital. 
C)  the firm will hire 3 times as much labor as capital. 
D)  the firm will hire 3 times as much capital as labor. 
A)  MPK = 3 ∗ MPL. 
B)  the firm will not hire any capital. 
C)  the firm will hire 3 times as much labor as capital. 
D)  the firm will hire 3 times as much capital as labor.

Question 16

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 17

Four years after graduating from college you must decide if you want to go on as an accountant (your college major)or if you want to make a career change and become a singer.The cost of your education will matter for your decision.

Accepted Answer

A) True 
 B)False

Question 18

Economies of scale in nuclear power plants exist because of

Accepted Answer

A)  more efficient plant management. 
B)  a better understanding of the plant's idiosyncrasies, or learning-by-doing. 
C)  nuclear power technology changes. 
D)  both A and B. 
A)  more efficient plant management. 
B)  a better understanding of the plant's idiosyncrasies, or learning-by-doing. 
C)  nuclear power technology changes. 
D)  both A and B.

Question 19

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 20

Your company makes copper pipes.Over the years,you have collected a large inventory of raw copper.The production process involves melting the copper and shaping it into pipes.You also have a large stockpile of pennies.Suppose the price of copper rises so much that the copper in the penny becomes worth more than one cent.Should you melt down your pennies?

Accepted Answer

This problem appeared as a puzzle in the

Assume Congress decides that Social Security taxes must increase in order to fund the system.This would

The learning curve is the relationship between

The slope of the isoquant tells the firm how much

A change in relative factor prices will always result in

Assume baseball player salaries are fully determined before the season starts.From the point of view of the baseball team owner,player salaries during the course of the season are then

A windfall profit tax imposed on oil companies would shift the firms'

When a firm produces one unit,the variable cost is $3.When the firm produces two units,the variable cost is $6.What is the marginal cost associated with two units of production?

When the isocost line is tangent to the isoquant,then

Why might a police officer not pull over someone speeding two miles over the speed limit?

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The average cost of the 5th T-shirt is

If the cost of labor increases,the isocost line will

If the costs of labor and capital increase in the same proportion,the isocost line will

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

A U.S.firm currently produces 200 units of output according to the production function q = L^0.5K^0.5 and faces input prices equal to w^U.S. = r^U.S = $11.Should the U.S.firm move their company abroad where they will face input prices equal to w^abroad = $6.50 and r^abroad = $15.00?

At the XYZ Co.,a unit of capital costs 3 times as much as a unit of labor.If the isoquants are convex,and the firm does not change its input mix in the long run,we can conclude that

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

Four years after graduating from college you must decide if you want to go on as an accountant (your college major)or if you want to make a career change and become a singer.The cost of your education will matter for your decision.

Economies of scale in nuclear power plants exist because of

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

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

Assume Congress decides that Social Security taxes must increase in order to fund the system.This would

The learning curve is the relationship between

The slope of the isoquant tells the firm how much

A change in relative factor prices will always result in

Assume baseball player salaries are fully determined before the season starts.From the point of view of the baseball team owner,player salaries during the course of the season are then

A windfall profit tax imposed on oil companies would shift the firms'

When a firm produces one unit,the variable cost is $3.When the firm produces two units,the variable cost is $6.What is the marginal cost associated with two units of production?

When the isocost line is tangent to the isoquant,then

Why might a police officer not pull over someone speeding two miles over the speed limit?

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The average cost of the 5th T-shirt is

If the cost of labor increases,the isocost line will

If the costs of labor and capital increase in the same proportion,the isocost line will

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

A U.S.firm currently produces 200 units of output according to the production function q = L0.5K0.5 and faces input prices equal to wU.S. = rU.S = $11.Should the U.S.firm move their company abroad where they will face input prices equal to wabroad = $6.50 and rabroad = $15.00?

At the XYZ Co.,a unit of capital costs 3 times as much as a unit of labor.If the isoquants are convex,and the firm does not change its input mix in the long run,we can conclude that

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

Four years after graduating from college you must decide if you want to go on as an accountant (your college major)or if you want to make a career change and become a singer.The cost of your education will matter for your decision.

Economies of scale in nuclear power plants exist because of

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

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

A U.S.firm currently produces 200 units of output according to the production function q = L^0.5K^0.5 and faces input prices equal to w^U.S. = r^U.S = $11.Should the U.S.firm move their company abroad where they will face input prices equal to w^abroad = $6.50 and r^abroad = $15.00?

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