Question 1

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 2

Are the costs of utilities always fixed, always variable, or can they be both? Briefly explain.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

For many firms, the cost of utilities ca

Question 3

Figure 7.14  
-Refer to Figure 7.14.Suppose Hilda hires labour at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

Accepted Answer

A) $3600 
B) $1120 
C) $592 
D) $560 
A) $3600 
B) $1120 
C) $592 
D) $560

Question 4

What is the difference between 'diminishing marginal returns' and 'diseconomies of scale'?

Accepted Answer

A) Both concepts explain why marginal cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B) Both concepts explain why average total cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D) Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. 
A) Both concepts explain why marginal cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B) Both concepts explain why average total cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D) Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.

Question 5

Figure 7.3   Fancy Footwear manufactures shoes.Figure 7.3 shows Fancy Footwear's marginal product of labour and average product of labour curves in the short run.
-Refer to Figure 7.3.Which of the following statements correctly describes the curves in the figure?

Accepted Answer

A) The marginal product of labour curve is represented by curve A and the average product of labour curve is represented by curve B. 
B) The marginal product of labour curve is represented by curve B and the average product of labour curve is represented by curve A. 
C) Curve A could represent either the average product curve or the marginal product curve.Curve B represents the total product curve. 
D) Curve B could represent either the average product curve or the marginal product curve.Curve A represents the total product curve. 
A) The marginal product of labour curve is represented by curve A and the average product of labour curve is represented by curve B. 
B) The marginal product of labour curve is represented by curve B and the average product of labour curve is represented by curve A. 
C) Curve A could represent either the average product curve or the marginal product curve.Curve B represents the total product curve. 
D) Curve B could represent either the average product curve or the marginal product curve.Curve A represents the total product curve.

Question 6

A firm's expansion path

Accepted Answer

A) is the same thing as its long-run average cost curve. 
B) is a curve that shows a firm's cost-minimising combination of inputs for every level of output, holding input prices constant. 
C) shows the targeted growth rate in sales over the long run. 
D) is a curve that shows expected profits at various price levels. 
A) is the same thing as its long-run average cost curve. 
B) is a curve that shows a firm's cost-minimising combination of inputs for every level of output, holding input prices constant. 
C) shows the targeted growth rate in sales over the long run. 
D) is a curve that shows expected profits at various price levels.

Question 7

Academic book publishers hire editors, designers, and production and marketing managers who help prepare books for publication.Because these employees work on several books simultaneously, the number of people the company hires will not go up and down with the quantity of books the company publishes during any particular year.The salaries and benefits of people in these job categories will be included in

Accepted Answer

A) fixed cost and marginal cost but not variable cost. 
B) fixed cost but not variable cost and total cost. 
C) marginal cost and total cost but not fixed cost. 
D) fixed cost and total cost but not variable cost. 
A) fixed cost and marginal cost but not variable cost. 
B) fixed cost but not variable cost and total cost. 
C) marginal cost and total cost but not fixed cost. 
D) fixed cost and total cost but not variable cost.

Question 8

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore

Accepted Answer

A) the marginal product of the 5th worker is negative. 
B) the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C) the average product of the 5th worker is negative. 
D) the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers. 
A) the marginal product of the 5th worker is negative. 
B) the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C) the average product of the 5th worker is negative. 
D) the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers.

Question 9

What happens when a firm experiences a positive technological change?

Accepted Answer

A) The price of a share of the firm's stock rises. 
B) The firm is able to produce more output using the same inputs, or the same output using fewer inputs. 
C) The value of the firm's assets rises. 
D) The firm will hire additional workers in order to increase production. 
A) The price of a share of the firm's stock rises. 
B) The firm is able to produce more output using the same inputs, or the same output using fewer inputs. 
C) The value of the firm's assets rises. 
D) The firm will hire additional workers in order to increase production.

Question 10

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, what would the expansion provide to the airlines?

Accepted Answer

A) Economies of scale 
B) Diseconomies of scale 
C) Higher average costs but lower total costs 
D) Higher marginal costs but lower total costs 
A) Economies of scale 
B) Diseconomies of scale 
C) Higher average costs but lower total costs 
D) Higher marginal costs but lower total costs

Question 11

What is the formula for total fixed cost?

Accepted Answer

A) TFC = TC + TVC. 
B) TFC = TVC - TC. 
C) TFC = TC/TVC. 
D) TFC = TC - TVC. 
A) TFC = TC + TVC. 
B) TFC = TVC - TC. 
C) TFC = TC/TVC. 
D) TFC = TC - TVC.

Question 12

An isocost line shows

Accepted Answer

A) all the possible combinations of two inputs that a firm can use to produce its output. 
B) all the possible combinations of two inputs a firm can use that have the same total cost. 
C) all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D) all the possible combinations of two inputs with constant returns to scale. 
A) all the possible combinations of two inputs that a firm can use to produce its output. 
B) all the possible combinations of two inputs a firm can use that have the same total cost. 
C) all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D) all the possible combinations of two inputs with constant returns to scale.

Question 13

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

Accepted Answer

A) True 
 B)False

Question 14

What does the slope of an isoquant measure?

Accepted Answer

A) The price ratio of the two inputs. 
B) The average product of labour. 
C) The ratio of the marginal utility of the two inputs. 
D) The rate at which inputs can be substituted for each other keeping total output constant. 
A) The price ratio of the two inputs. 
B) The average product of labour. 
C) The ratio of the marginal utility of the two inputs. 
D) The rate at which inputs can be substituted for each other keeping total output constant.

Question 15

If average total cost is $50 and average fixed cost is $15 when output is 20 units, what is the firm's total variable cost at that level of output?

Accepted Answer

A) $1000. 
B) $700. 
C) $300. 
D) impossible to determine without additional information. 
A) $1000. 
B) $700. 
C) $300. 
D) impossible to determine without additional information.

Question 16

The average total cost of production

Accepted Answer

A) is the extra cost required to produce one more unit. 
B) equals the explicit cost of production. 
C) equals total cost of production divided by the level of output. 
D) equals total cost of production multiplied times the level of output. 
A) is the extra cost required to produce one more unit. 
B) equals the explicit cost of production. 
C) equals total cost of production divided by the level of output. 
D) equals total cost of production multiplied times the level of output.

Question 17

What is the relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs?

Accepted Answer

A) Production function. 
B) Supply curve, or supply schedule. 
C) Marginal product of labour. 
D) Average product of labour. 
A) Production function. 
B) Supply curve, or supply schedule. 
C) Marginal product of labour. 
D) Average product of labour.

Question 18

Suppose a firm uses labour and capital to produce output.The last unit of labour hired has a marginal product of 12 units of output, and the last unit of capital employed has a marginal product of 20 units.Use the optimal combination of inputs rule to calculate the price of capital if the price of labour is $6 per unit.The price of capital is

Accepted Answer

A) $2. 
B) $10. 
C) $20. 
D) impossible to determine with the information given. 
A) $2. 
B) $10. 
C) $20. 
D) impossible to determine with the information given.

Question 19

The long run refers to a time period

Accepted Answer

A) during which a firm is able to purchase all of its inputs, including its plant and equipment. 
B) long enough for a firm to vary all of its inputs, to adopt new technology and change the size of its physical plant. 
C) long enough for a firm to pay all of its creditors in full. 
D) long enough for a firm to change the use of its variable inputs. 
A) during which a firm is able to purchase all of its inputs, including its plant and equipment. 
B) long enough for a firm to vary all of its inputs, to adopt new technology and change the size of its physical plant. 
C) long enough for a firm to pay all of its creditors in full. 
D) long enough for a firm to change the use of its variable inputs.

Question 20

When does a 'stockout' occur?

Accepted Answer

A) When brokers run out of shares of stock to sell of a particular company. 
B) When a disruption due to a power outage, etc., causes a temporary production shutdown. 
C) When a company holds too many goods in inventories. 
D) When a firm loses sales because goods consumers want are not available. 
A) When brokers run out of shares of stock to sell of a particular company. 
B) When a disruption due to a power outage, etc., causes a temporary production shutdown. 
C) When a company holds too many goods in inventories. 
D) When a firm loses sales because goods consumers want are not available.

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Are the costs of utilities always fixed, always variable, or can they be both? Briefly explain. __________________________________________________________________________________________________________________________________________________________________________________________

Figure 7.14 -Refer to Figure 7.14.Suppose Hilda hires labour at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

What is the difference between 'diminishing marginal returns' and 'diseconomies of scale'?

Figure 7.3 Fancy Footwear manufactures shoes.Figure 7.3 shows Fancy Footwear's marginal product of labour and average product of labour curves in the short run. -Refer to Figure 7.3.Which of the following statements correctly describes the curves in the figure?

A firm's expansion path

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore

What happens when a firm experiences a positive technological change?

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, what would the expansion provide to the airlines?

What is the formula for total fixed cost?

An isocost line shows

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

What does the slope of an isoquant measure?

If average total cost is $50 and average fixed cost is $15 when output is 20 units, what is the firm's total variable cost at that level of output?

The average total cost of production

What is the relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs?

The long run refers to a time period

When does a 'stockout' occur?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 7: Technology Production and Costs

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Are the costs of utilities always fixed, always variable, or can they be both? Briefly explain. __________________________________________________________________________________________________________________________________________________________________________________________

Figure 7.14 -Refer to Figure 7.14.Suppose Hilda hires labour at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?

What is the difference between 'diminishing marginal returns' and 'diseconomies of scale'?

Figure 7.3 Fancy Footwear manufactures shoes.Figure 7.3 shows Fancy Footwear's marginal product of labour and average product of labour curves in the short run. -Refer to Figure 7.3.Which of the following statements correctly describes the curves in the figure?

A firm's expansion path

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore

What happens when a firm experiences a positive technological change?

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, what would the expansion provide to the airlines?

What is the formula for total fixed cost?

An isocost line shows

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

What does the slope of an isoquant measure?

If average total cost is $50 and average fixed cost is $15 when output is 20 units, what is the firm's total variable cost at that level of output?

The average total cost of production

What is the relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs?

The long run refers to a time period

When does a 'stockout' occur?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters