Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A firm is currently producing1140 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 3

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 4

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 5

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 6

If there are diseconomies of scale within a given range of output,which of following is(are)TRUE?

Accepted Answer

A)  The short-run average cost curve must be upward sloping within that range of output. 
B)  The long-run average cost curve must be upward sloping within that range of output. 
C)  Long-run average cost must equal short-run average cost. 
D)  All of the above. 
A)  The short-run average cost curve must be upward sloping within that range of output. 
B)  The long-run average cost curve must be upward sloping within that range of output. 
C)  Long-run average cost must equal short-run average cost. 
D)  All of the above.

Question 7

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 8

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 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

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 11

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 12

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 13

A firm pays $5 for each unit of capital.Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter.Draw the isocost curves for total costs of $50 and $100.

Accepted Answer

@#IMG-DLM& See the a

Question 14

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 15

A production possibilities frontier that is a downward-sloping straight line implies

Accepted Answer

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

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

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 s

Question 18

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 19

Joey's Lawncutting Service rents office space from Joey's dad for $300 per month.Joey's dad is thinking of increasing the rent to $400 per month.As a result Joey's marginal cost of cutting grass will

Accepted Answer

A)  increase by $100 divided by the amount of grass cut. 
B)  increase by $100. 
C)  decrease by $100. 
D)  not change. 
A)  increase by $100 divided by the amount of grass cut. 
B)  increase by $100. 
C)  decrease by $100. 
D)  not change.

Question 20

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.

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

A firm is currently producing1140 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

Economies of scale in nuclear power plants exist because of

If the cost of labor increases,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 diseconomies of scope,then which of the following must be true?

If there are diseconomies of scale within a given range of output,which of following is(are)TRUE?

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

Economic costs of an input include

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.

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?

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?

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

A firm pays $5 for each unit of capital.Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter.Draw the isocost curves for total costs of $50 and $100.

When the isocost line is tangent to the isoquant,then

A production possibilities frontier that is a downward-sloping straight line implies

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

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?

Economies of scope exist between book publishing and magazine publishing if

Joey's Lawncutting Service rents office space from Joey's dad for $300 per month.Joey's dad is thinking of increasing the rent to $400 per month.As a result Joey's marginal cost of cutting grass will

A change in relative factor prices will always result in

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

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

A firm is currently producing1140 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

Economies of scale in nuclear power plants exist because of

If the cost of labor increases,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 diseconomies of scope,then which of the following must be true?

If there are diseconomies of scale within a given range of output,which of following is(are)TRUE?

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

Economic costs of an input include

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.

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?

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?

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

A firm pays $5 for each unit of capital.Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter.Draw the isocost curves for total costs of $50 and $100.

When the isocost line is tangent to the isoquant,then

A production possibilities frontier that is a downward-sloping straight line implies

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

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?

Economies of scope exist between book publishing and magazine publishing if

Joey's Lawncutting Service rents office space from Joey's dad for $300 per month.Joey's dad is thinking of increasing the rent to $400 per month.As a result Joey's marginal cost of cutting grass will

A change in relative factor prices will always result in

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 firm is currently producing1140 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

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