Question 1

Suppose that each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the long run,the firm will experience

Accepted Answer

A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  The returns to scale cannot be determined from the information provided. 
A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  The returns to scale cannot be determined from the information provided.

Question 2

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 3

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 4

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 5

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.

Question 6

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 7

-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 8

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 9

If increasing returns to scale are present,the long-run average cost increases as more output is produced.

Accepted Answer

A) True 
 B)False

Question 10

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 11

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last.An economist may amortize the expense of a durable and never fully account for the total expense.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

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 15

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

Question 16

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

Accepted Answer

A)  fewer shovels being purchased to produce the same number of trenches. 
B)  more workers being hired to produce the same number of trenches. 
C)  the firm wishing to produce more trenches. 
D)  no change in the firm's input mix. 
A)  fewer shovels being purchased to produce the same number of trenches. 
B)  more workers being hired to produce the same number of trenches. 
C)  the firm wishing to produce more trenches. 
D)  no change in the firm's input mix.

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

Economic efficiency entails

Accepted Answer

A)  producing a given amount of output with the most expensive mix of inputs. 
B)  producing a given amount of output with the least number of inputs. 
C)  producing a given amount of output with the most inputs. 
D)  producing a given amount of output with the cheapest mix of inputs. 
A)  producing a given amount of output with the most expensive mix of inputs. 
B)  producing a given amount of output with the least number of inputs. 
C)  producing a given amount of output with the most inputs. 
D)  producing a given amount of output with the cheapest mix of inputs.

Question 19

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

Accepted Answer

A)  MC = AVC 
B)  MC = AC 
C)  MC > AFC 
D)  All of the above. 
A)  MC = AVC 
B)  MC = AC 
C)  MC > AFC 
D)  All of the above.

Question 20

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.

Suppose that each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the long run,the firm will experience

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

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

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

In the short run,average variable costs are minimized when

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

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

If increasing returns to scale are present,the long-run average cost increases as more output is produced.

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

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last.An economist may amortize the expense of a durable and never fully account for the total expense.

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

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?

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

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

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.

Economic efficiency entails

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

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

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 that each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the long run,the firm will experience

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

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

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

In the short run,average variable costs are minimized when

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

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

If increasing returns to scale are present,the long-run average cost increases as more output is produced.

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

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last.An economist may amortize the expense of a durable and never fully account for the total expense.

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

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?

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

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

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.

Economic efficiency entails

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

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

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 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?