Question 1

The marginal cost curve intersects the average fixed cost curve at its minimum.

Accepted Answer

A) True 
 B)False

Question 2

Suppose MPL = 0.5 ∗ (q/L)and MPK = 0.5 ∗ (q/K).In the long run,the firm will hire equal amounts of capital and labor

Accepted Answer

A)  all of the time. 
B)  only when w = r. 
C)  only when w = 0.5 ∗ r. 
D)  at no point in time. 
A)  all of the time. 
B)  only when w = r. 
C)  only when w = 0.5 ∗ r. 
D)  at no point in time.

Question 3

The tangency points between the long-run average cost curve (LRAC)and the short-run average cost curves (SRAC)are

Accepted Answer

A)  always at the minimum of the SRACs. 
B)  never at the downward portion of the SRACs. 
C)  always at the maximum of the SRACs. 
D)  not necessarily at the minimum of the SRACs. 
A)  always at the minimum of the SRACs. 
B)  never at the downward portion of the SRACs. 
C)  always at the maximum of the SRACs. 
D)  not necessarily at the minimum of the SRACs.

Question 4

Joey's Lawncutting Service rents office space from Joey's dad for $300 per month.A similar office space in the same building rents for $545 per month.What is the economic profit earned by Joey's dad?

Accepted Answer

A)  Profit of $245 
B)  Profit of $100 
C)  Loss of $100 
D)  Loss of $245 
A)  Profit of $245 
B)  Profit of $100 
C)  Loss of $100 
D)  Loss of $245

Question 5

If Option A costs $40 and yields 20 units of output,and Option B costs $50 and yields 20 units of output,

Accepted Answer

A)  Option B and Option A are equally economically efficient. 
B)  Option B is economically efficient relative to Option A. 
C)  Option A is economically efficient relative to Option B. 
D)  It is not possible to determine which option is more economically efficient. 
A)  Option B and Option A are equally economically efficient. 
B)  Option B is economically efficient relative to Option A. 
C)  Option A is economically efficient relative to Option B. 
D)  It is not possible to determine which option is more economically efficient.

Question 6

A firm is currently producing 1140 units of output according to the production function q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80.In the short run,capital is fixed at 5 units.In the long run,the firm's costs are

Accepted Answer

A)  lower because the firm substitutes towards more labor and away from capital. 
B)  lower because the firm substitutes towards more capital and away from labor. 
C)  higher because the firm substitutes towards more labor and away from capital. 
D)  higher because the firm substitutes towards more capital and away from labor. 
A)  lower because the firm substitutes towards more labor and away from capital. 
B)  lower because the firm substitutes towards more capital and away from labor. 
C)  higher because the firm substitutes towards more labor and away from capital. 
D)  higher because the firm substitutes towards more capital and away from labor.

Question 7

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

Accepted Answer

A)  2. 
B)  10. 
C)  12. 
D)  60. 
A)  2. 
B)  10. 
C)  12. 
D)  60.

Question 8

A firm produces output according to the production function,q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80.What is the minimum cost of producing 1140 units of output?

Accepted Answer

A)  Cost = $780 
B)  Cost = $694 
C)  Cost = $2,071 
D)  Not enough information is given to answer this problem. 
A)  Cost = $780 
B)  Cost = $694 
C)  Cost = $2,071 
D)  Not enough information is given to answer this problem.

Question 9

The cost of waiting two months for health care to address a debilitating problem in Canada is most accurately described as

Accepted Answer

A)  an explicit cost. 
B)  an accounting cost. 
C)  no real cost. 
D)  an opportunity cost. 
A)  an explicit cost. 
B)  an accounting cost. 
C)  no real cost. 
D)  an opportunity cost.

Question 10

The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."

Accepted Answer

A) True 
 B)False

Question 11

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 12

In the short run,the expansion path is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  diagonal. 
D)  indeterminate. 
A)  horizontal. 
B)  vertical. 
C)  diagonal. 
D)  indeterminate.

Question 13

If Option A costs $40 and yields 20 units of output,and Option B costs $50 and yields 30 units of output,

Accepted Answer

A)  Option B and Option A are equally economically efficient. 
B)  Option B is economically efficient relative to Option A. 
C)  Option A is economically efficient relative to Option B. 
D)  It is not possible to determine which option is more economically efficient. 
A)  Option B and Option A are equally economically efficient. 
B)  Option B is economically efficient relative to Option A. 
C)  Option A is economically efficient relative to Option B. 
D)  It is not possible to determine which option is more economically efficient.

Question 14

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 15

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

Question 16

If a firm buys a building so as to have office space for its workers,the monthly opportunity cost of the building is best measured as

Accepted Answer

A)  the monthly mortgage payment the firm must pay. 
B)  the price the firm paid divided by twelve. 
C)  zero. 
D)  the rent the firm could earn if it rented the building to another firm. 
A)  the monthly mortgage payment the firm must pay. 
B)  the price the firm paid divided by twelve. 
C)  zero. 
D)  the rent the firm could earn if it rented the building to another firm.

Question 17

To dig a trench,each worker needs a shovel.Workers can use only one shovel at a time.Workers without shovels do nothing,and shovels cannot operate on their own.Graphically determine the number of shovels and workers used by a firm to dig 2 trenches when:
(a)w = 10 and r = 10
(b)w = 10 and r = 5

Accepted Answer

@#IMG-DLM& See the above figure.Because

Question 18

Which of the following will cause the average fixed 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 $3 per hour wage increase 
D)  an increase in the demand for cigarettes 
A)  a $5 million penalty charged to each cigarette maker 
B)  a $1 per pack tax on cigarettes 
C)  a $3 per hour wage increase 
D)  an increase in the demand for cigarettes

Question 19

Which of the following statements best explains why long-run average cost is never greater than short-run average cost?

Accepted Answer

A)  In the long run, tangency of the isocost and isoquant is attainable. This is not necessarily true in the short run. 
B)  In the long run, diseconomies of scale might not occur, but in the short run diminishing marginal returns do. 
C)  In the long run, the cost of capital declines because the firm is able to pay down some of its debts. 
D)  In the long run, the average cost curve need not be U-shaped, but in the short run it is. 
A)  In the long run, tangency of the isocost and isoquant is attainable. This is not necessarily true in the short run. 
B)  In the long run, diseconomies of scale might not occur, but in the short run diminishing marginal returns do. 
C)  In the long run, the cost of capital declines because the firm is able to pay down some of its debts. 
D)  In the long run, the average cost curve need not be U-shaped, but in the short run it is.

Question 20

If a production function is represented as q = LaKb,the long-run average cost curve will be horizontal as long as

Accepted Answer

A)  a + b = 0. 
B)  a + b = 1. 
C)  q > 0. 
D)  L = K. 
A)  a + b = 0. 
B)  a + b = 1. 
C)  q > 0. 
D)  L = K.

The marginal cost curve intersects the average fixed cost curve at its minimum.

Suppose MP_L = 0.5 ∗ (q/L)and MP_K = 0.5 ∗ (q/K).In the long run,the firm will hire equal amounts of capital and labor

The tangency points between the long-run average cost curve (LRAC)and the short-run average cost curves (SRAC)are

Joey's Lawncutting Service rents office space from Joey's dad for $300 per month.A similar office space in the same building rents for $545 per month.What is the economic profit earned by Joey's dad?

If Option A costs $40 and yields 20 units of output,and Option B costs $50 and yields 20 units of output,

A firm is currently producing 1140 units of output according to the production function q = L^4/3K^1/2 and faces input prices equal to w = $20 and r = $80.In the short run,capital is fixed at 5 units.In the long run,the firm's costs are

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

A firm produces output according to the production function,q = L^4/3K^1/2 and faces input prices equal to w = $20 and r = $80.What is the minimum cost of producing 1140 units of output?

The cost of waiting two months for health care to address a debilitating problem in Canada is most accurately described as

The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."

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?

In the short run,the expansion path is

If Option A costs $40 and yields 20 units of output,and Option B costs $50 and yields 30 units of output,

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

Which of the following statements is NOT true?

If a firm buys a building so as to have office space for its workers,the monthly opportunity cost of the building is best measured as

To dig a trench,each worker needs a shovel.Workers can use only one shovel at a time.Workers without shovels do nothing,and shovels cannot operate on their own.Graphically determine the number of shovels and workers used by a firm to dig 2 trenches when: (a)w = 10 and r = 10 (b)w = 10 and r = 5

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

Which of the following statements best explains why long-run average cost is never greater than short-run average cost?

If a production function is represented as q = L^aK^b,the long-run average cost curve will be horizontal as long as

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

The marginal cost curve intersects the average fixed cost curve at its minimum.

Suppose MPL = 0.5 ∗ (q/L)and MPK = 0.5 ∗ (q/K).In the long run,the firm will hire equal amounts of capital and labor

The tangency points between the long-run average cost curve (LRAC)and the short-run average cost curves (SRAC)are

Joey's Lawncutting Service rents office space from Joey's dad for $300 per month.A similar office space in the same building rents for $545 per month.What is the economic profit earned by Joey's dad?

If Option A costs $40 and yields 20 units of output,and Option B costs $50 and yields 20 units of output,

A firm is currently producing 1140 units of output according to the production function q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80.In the short run,capital is fixed at 5 units.In the long run,the firm's costs are

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

A firm produces output according to the production function,q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80.What is the minimum cost of producing 1140 units of output?

The cost of waiting two months for health care to address a debilitating problem in Canada is most accurately described as

The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."

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?

In the short run,the expansion path is

If Option A costs $40 and yields 20 units of output,and Option B costs $50 and yields 30 units of output,

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

Which of the following statements is NOT true?

If a firm buys a building so as to have office space for its workers,the monthly opportunity cost of the building is best measured as

To dig a trench,each worker needs a shovel.Workers can use only one shovel at a time.Workers without shovels do nothing,and shovels cannot operate on their own.Graphically determine the number of shovels and workers used by a firm to dig 2 trenches when: (a)w = 10 and r = 10 (b)w = 10 and r = 5

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

Which of the following statements best explains why long-run average cost is never greater than short-run average cost?

If a production function is represented as q = LaKb,the long-run average cost curve will be horizontal as long as

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

Suppose MP_L = 0.5 ∗ (q/L)and MP_K = 0.5 ∗ (q/K).In the long run,the firm will hire equal amounts of capital and labor

A firm is currently producing 1140 units of output according to the production function q = L^4/3K^1/2 and faces input prices equal to w = $20 and r = $80.In the short run,capital is fixed at 5 units.In the long run,the firm's costs are

A firm produces output according to the production function,q = L^4/3K^1/2 and faces input prices equal to w = $20 and r = $80.What is the minimum cost of producing 1140 units of output?

If a production function is represented as q = L^aK^b,the long-run average cost curve will be horizontal as long as