Question 1

The high cost of advertising during the Super Bowl will

Accepted Answer

A)  not affect the efficient level of output because advertising is a sunk cost. 
B)  will affect the efficient level of output because profits will fall significantly. 
C)  not affect the efficient level of output because advertising is a fixed cost. 
D)  Not enough information given. 
A)  not affect the efficient level of output because advertising is a sunk cost. 
B)  will affect the efficient level of output because profits will fall significantly. 
C)  not affect the efficient level of output because advertising is a fixed cost. 
D)  Not enough information given.

Question 2

Suppose a firm can only vary the quantity of labor hired in the short run.An increase in the cost of capital will

Accepted Answer

A)  increase the firm's marginal cost. 
B)  decrease the firm's marginal cost. 
C)  have no effect on the firm's marginal cost. 
D)  More information is needed to answer the question. 
A)  increase the firm's marginal cost. 
B)  decrease the firm's marginal cost. 
C)  have no effect on the firm's marginal cost. 
D)  More information is needed to answer the question.

Question 3

A firm's cost curve is determined by

Accepted Answer

A)  congressional laws. 
B)  whether the firm hires engineers or not. 
C)  natural laws. 
D)  the firm's production function. 
A)  congressional laws. 
B)  whether the firm hires engineers or not. 
C)  natural laws. 
D)  the firm's production function.

Question 4

Travel websites such as Travelocity tend to offer reservation services for multiple travel modes.This is because

Accepted Answer

A)  the firms have contractual obligations to offer reservations for airlines and railroads, for example. 
B)  the firms have statutory obligations to offer reservations for airlines and railroads, for example. 
C)  once the firm has the reservation technology for airlines, there are economies of scale in offering the same service for railroads. 
D)  once the firm has the reservation technology for airlines, there are economies of scope in offering the same service for railroads. 
A)  the firms have contractual obligations to offer reservations for airlines and railroads, for example. 
B)  the firms have statutory obligations to offer reservations for airlines and railroads, for example. 
C)  once the firm has the reservation technology for airlines, there are economies of scale in offering the same service for railroads. 
D)  once the firm has the reservation technology for airlines, there are economies of scope in offering the same service for railroads.

Question 5

When the isocost line is tangent to the isoquant,then

Accepted Answer

A)  MPL = MPK. 
B)  the firm is producing that level of output at minimum cost. 
C)  the firm has achieved the right economies of scale. 
D)  All of the above. 
A)  MPL = MPK. 
B)  the firm is producing that level of output at minimum cost. 
C)  the firm has achieved the right economies of scale. 
D)  All of the above.

Question 6

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 7

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 8

The production of cigarettes is highly automated; however,a worker is required to monitor each machine.Machines and workers do not interact with one another.Given this information,there are most likely

Accepted Answer

A)  economies of scale. 
B)  economies of scope. 
C)  constant returns to scale. 
D)  increasing returns to scale. 
A)  economies of scale. 
B)  economies of scope. 
C)  constant returns to scale. 
D)  increasing returns to scale.

Question 9

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 10

In the short run,a firm's output level is 5 units.Its average cost is $40 and its fixed cost is $50.What is this firm's variable cost of producing 5 units?

Accepted Answer

A)  VC = $50 
B)  VC = $100 
C)  VC = $150 
D)  VC = $175 
A)  VC = $50 
B)  VC = $100 
C)  VC = $150 
D)  VC = $175

Question 11

Why do many people choose to not read the manuals included with their new computer?

Accepted Answer

A)  They perceive that learning by doing decreases costs faster than learning by reading. 
B)  They perceive that learning by doing is more enjoyable than learning by reading. 
C)  They perceive that learning by reading is not sophisticated. 
D)  They perceive that learning by doing is better than learning by reading. 
A)  They perceive that learning by doing decreases costs faster than learning by reading. 
B)  They perceive that learning by doing is more enjoyable than learning by reading. 
C)  They perceive that learning by reading is not sophisticated. 
D)  They perceive that learning by doing is better than learning by reading.

Question 12

Economies of scope exist between book publishing and magazine publishing if

Accepted Answer

A)  the cost of publishing a magazine is lower for book publishers than for other firms. 
B)  the cost of publishing a magazine is lower for firms that publish many magazines than for firms that publish only one magazine. 
C)  the cost of publishing a book falls over time as the publisher acquires more experience. 
D)  the cost of a publishing a book is not subject to diminishing marginal returns. 
A)  the cost of publishing a magazine is lower for book publishers than for other firms. 
B)  the cost of publishing a magazine is lower for firms that publish many magazines than for firms that publish only one magazine. 
C)  the cost of publishing a book falls over time as the publisher acquires more experience. 
D)  the cost of a publishing a book is not subject to diminishing marginal returns.

Question 13

Explain why the marginal cost curve intersects a U-shaped average cost curve at its minimum point.

Accepted Answer

At low quantities,the average cost curve

Question 14

A local non-profit group prints a weekly newsletter.Professional typists earn $10 per hour and can type 2 pages per hour.Unpaid volunteers can type only 1 page per hour.Measuring hours of professional typist services on the vertical axis and hours of unpaid volunteer typist services on the horizontal axis,draw the relevant isoquant and isocost curves if the newsletter is 10 pages long.What input mix is chosen by the non-profit group if they wish to minimize the cost of the newsletter? If the group will reimburse volunteers for expenses (lunch,driving),how much must the reimbursement be for your answer to change?

Accepted Answer

@#IMG-DLM& See the above figure.The isoquant is a

Question 15

If the isoquants are straight lines or L-shaped,then a cost-minimizing firm will

Accepted Answer

A)  not be able to minimize costs. 
B)  find the lowest isocost line touching the relevant isoquant. 
C)  find the highest isocost line touching the relevant isoquant. 
D)  choose not to produce any output. 
A)  not be able to minimize costs. 
B)  find the lowest isocost line touching the relevant isoquant. 
C)  find the highest isocost line touching the relevant isoquant. 
D)  choose not to produce any output.

Question 16

Johnny has worked as a CPA for five years and wants to open his own public accounting practice.The cost of his college degree in accounting represents

Accepted Answer

A)  the opportunity cost of this endeavor. 
B)  a sunk cost. 
C)  an expense. 
D)  a variable cost. 
A)  the opportunity cost of this endeavor. 
B)  a sunk cost. 
C)  an expense. 
D)  a variable cost.

Question 17

If average cost is decreasing,

Accepted Answer

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

Question 18

The total cost of producing one unit is $50.The total cost of producing two units is $75.At a production level of two units,the cost function exhibits

Accepted Answer

A)  economies of scale. 
B)  rising average costs. 
C)  increasing marginal costs. 
D)  constant returns to scale. 
A)  economies of scale. 
B)  rising average costs. 
C)  increasing marginal costs. 
D)  constant returns to scale.

Question 19

-The above figure shows the long-run expansion path.The long-run average cost curve will be

Accepted Answer

A)  horizontal. 
B)  downward sloping. 
C)  upward sloping. 
D)  vertical. 
A)  horizontal. 
B)  downward sloping. 
C)  upward sloping. 
D)  vertical.

Question 20

In the short run,a firm 's output level is 10 units.Its total cost is $4000 and its average fixed cost is $100.What is this firm's average variable cost (AVC)of producing 10 units?

Accepted Answer

A)  AVC = $250 
B)  AVC = $275 
C)  AVC = $300 
D)  AVC = $400 
A)  AVC = $250 
B)  AVC = $275 
C)  AVC = $300 
D)  AVC = $400

The high cost of advertising during the Super Bowl will

Suppose a firm can only vary the quantity of labor hired in the short run.An increase in the cost of capital will

A firm's cost curve is determined by

Travel websites such as Travelocity tend to offer reservation services for multiple travel modes.This is because

When the isocost line is tangent to the isoquant,then

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

The slope of the isocost line tells the firm how much

The production of cigarettes is highly automated; however,a worker is required to monitor each machine.Machines and workers do not interact with one another.Given this information,there are most likely

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.

In the short run,a firm's output level is 5 units.Its average cost is $40 and its fixed cost is $50.What is this firm's variable cost of producing 5 units?

Why do many people choose to not read the manuals included with their new computer?

Economies of scope exist between book publishing and magazine publishing if

Explain why the marginal cost curve intersects a U-shaped average cost curve at its minimum point.

If the isoquants are straight lines or L-shaped,then a cost-minimizing firm will

Johnny has worked as a CPA for five years and wants to open his own public accounting practice.The cost of his college degree in accounting represents

If average cost is decreasing,

The total cost of producing one unit is $50.The total cost of producing two units is $75.At a production level of two units,the cost function exhibits

-The above figure shows the long-run expansion path.The long-run average cost curve will be

In the short run,a firm 's output level is 10 units.Its total cost is $4000 and its average fixed cost is $100.What is this firm's average variable cost (AVC)of producing 10 units?

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 high cost of advertising during the Super Bowl will

Suppose a firm can only vary the quantity of labor hired in the short run.An increase in the cost of capital will

A firm's cost curve is determined by

Travel websites such as Travelocity tend to offer reservation services for multiple travel modes.This is because

When the isocost line is tangent to the isoquant,then

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

The slope of the isocost line tells the firm how much

The production of cigarettes is highly automated; however,a worker is required to monitor each machine.Machines and workers do not interact with one another.Given this information,there are most likely

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.

In the short run,a firm's output level is 5 units.Its average cost is $40 and its fixed cost is $50.What is this firm's variable cost of producing 5 units?

Why do many people choose to not read the manuals included with their new computer?

Economies of scope exist between book publishing and magazine publishing if

Explain why the marginal cost curve intersects a U-shaped average cost curve at its minimum point.

If the isoquants are straight lines or L-shaped,then a cost-minimizing firm will

Johnny has worked as a CPA for five years and wants to open his own public accounting practice.The cost of his college degree in accounting represents

If average cost is decreasing,

The total cost of producing one unit is $50.The total cost of producing two units is $75.At a production level of two units,the cost function exhibits

-The above figure shows the long-run expansion path.The long-run average cost curve will be

In the short run,a firm 's output level is 10 units.Its total cost is $4000 and its average fixed cost is $100.What is this firm's average variable cost (AVC)of producing 10 units?

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