Question 1

Which of the following is true for the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1?

Accepted Answer

A) Marginal cost equals average total cost 
B) Marginal cost equals average variable cost 
C) Total cost equals total variable cost 
D) Total cost equals total fixed cost 
A) Marginal cost equals average total cost 
B) Marginal cost equals average variable cost 
C) Total cost equals total variable cost 
D) Total cost equals total fixed cost

Question 2

Suppose labor is on the horizontal axis and capital is on the vertical axis.If the wage rate is $15 per worker per hour and the rental rate of capital is $10 per unit per hour,what is the slope of the isocost curve?

Accepted Answer

A) -0.667 
B) -1.5 
C) -10 
D) -15 
A) -0.667 
B) -1.5 
C) -10 
D) -15

Question 3

The possibility of learning by doing ensures:

Accepted Answer

A) equal profits for all firms in an industry. 
B) uniform price for a product. 
C) lower production costs to a pioneering firm. 
D) lower production costs to a market entrant. 
A) equal profits for all firms in an industry. 
B) uniform price for a product. 
C) lower production costs to a pioneering firm. 
D) lower production costs to a market entrant.

Question 4

Which of the following factors can lead to learning by doing?

Accepted Answer

A) Substantial loss suffered in the long run 
B) Decreasing returns to scale 
C) Significant addition to inventory stock 
D) Increased skill of the existing workforce 
A) Substantial loss suffered in the long run 
B) Decreasing returns to scale 
C) Significant addition to inventory stock 
D) Increased skill of the existing workforce

Question 5

An important determinant of market structure is:

Accepted Answer

A) the difference between short-run average cost and long-run average cost for a given rate of output. 
B) the elasticity of market demand where it intersects the industry supply curve. 
C) the slope of the expansion path. 
D) the level of output at which long-run average cost is at a minimum relative to market demand. 
A) the difference between short-run average cost and long-run average cost for a given rate of output. 
B) the elasticity of market demand where it intersects the industry supply curve. 
C) the slope of the expansion path. 
D) the level of output at which long-run average cost is at a minimum relative to market demand.

Question 6

Learning by doing is illustrated by:

Accepted Answer

A) a movement along the average cost curve to a lower cost. 
B) a downward shift of the average cost curve. 
C) a movement along the average cost curve to a higher cost. 
D) an upward shift of the average cost curve. 
A) a movement along the average cost curve to a lower cost. 
B) a downward shift of the average cost curve. 
C) a movement along the average cost curve to a higher cost. 
D) an upward shift of the average cost curve.

Question 7

Which of the following depicts the change in per-unit cost of production resulting from a decrease in the input prices,given the output produced by the firm is constant?

Accepted Answer

A) An upward shift of the marginal cost curve 
B) A rightward shift of the total cost curve 
C) A downward shift of the average cost curve 
D) An upward shift of the isocost curve 
A) An upward shift of the marginal cost curve 
B) A rightward shift of the total cost curve 
C) A downward shift of the average cost curve 
D) An upward shift of the isocost curve

Question 8

Which of the following explains the shape of the long-run average cost curve?

Accepted Answer

A) Returns to scale 
B) Returns to labor 
C) Returns to capital 
D) Rental rate on capital 
A) Returns to scale 
B) Returns to labor 
C) Returns to capital 
D) Rental rate on capital

Question 9

If the marginal cost of pollution abatement differs between two firms,the total cost of pollution abatement can be lowered by:

Accepted Answer

A) increasing abatement where its marginal cost is high and reducing it where marginal cost is lower. 
B) decreasing abatement where its average cost is high and reducing it where average cost is lower. 
C) increasing abatement where its marginal cost is less and reducing it where marginal cost is greater. 
D) decreasing abatement where its marginal cost is less and increasing it where marginal cost is greater. 
A) increasing abatement where its marginal cost is high and reducing it where marginal cost is lower. 
B) decreasing abatement where its average cost is high and reducing it where average cost is lower. 
C) increasing abatement where its marginal cost is less and reducing it where marginal cost is greater. 
D) decreasing abatement where its marginal cost is less and increasing it where marginal cost is greater.

Question 10

A firm incurs a total cost of $500 per day for producing 10 semi-electronic toys.When its production increases to 15 toys,the total cost rises to $700.The firm observes that at each level of output between 10 toys and 15 toys,the marginal cost of production is below the average cost of production.Which of the following can be definitely concluded about the firm's cost curves when its output is anywhere between 10 toys and 15 toys?

Accepted Answer

A) The marginal cost curve is positively sloped for this range of output 
B) The total fixed cost curve is negatively sloped for this range of output. 
C) The average cost curve is negatively sloped for this range of output. 
D) The average variable cost curve is positively sloped for this range of output. 
A) The marginal cost curve is positively sloped for this range of output 
B) The total fixed cost curve is negatively sloped for this range of output. 
C) The average cost curve is negatively sloped for this range of output. 
D) The average variable cost curve is positively sloped for this range of output.

Question 11

Suppose labor is on the horizontal axis and capital on the vertical axis.If the total cost is defined by the equation TC = $400 + $15L + $10K,the slope of the isocost curve is:

Accepted Answer

A) -0.667 
B) -1.5 
C) -8 
D) -40 
A) -0.667 
B) -1.5 
C) -8 
D) -40

Question 12

Economic analysis suggests that if the marginal cost of pollution abatement differs for two firms,the least cost pollution abatement strategy would require:

Accepted Answer

A) that both firms are limited to the same total pollution. 
B) that the firms engage in different levels of pollution abatement but incur the same marginal cost of abatement. 
C) that the firms engage in different levels of pollution abatement as long as they incur different marginal costs. 
D) that the firms engage in different levels of pollution abatement but incur the same opportunity cost. 
A) that both firms are limited to the same total pollution. 
B) that the firms engage in different levels of pollution abatement but incur the same marginal cost of abatement. 
C) that the firms engage in different levels of pollution abatement as long as they incur different marginal costs. 
D) that the firms engage in different levels of pollution abatement but incur the same opportunity cost.

Question 13

Learning by doing:

Accepted Answer

A) is synonymous with economies of scale. 
B) causes the average cost curve to shift down. 
C) causes the firm's marginal cost curve to shift up and to the left. 
D) occurs when output increases in greater proportion to the increase in inputs. 
A) is synonymous with economies of scale. 
B) causes the average cost curve to shift down. 
C) causes the firm's marginal cost curve to shift up and to the left. 
D) occurs when output increases in greater proportion to the increase in inputs.

Question 14

The law of diminishing marginal returns:

Accepted Answer

A) is relevant in both the short and the long-run. 
B) says that increasing fixed inputs eventually results in smaller and smaller increases in total output. 
C) says that increasing variable inputs eventually results in smaller and smaller increases in total output. 
D) says that increasing variable inputs eventually results in smaller and smaller increases in total cost. 
A) is relevant in both the short and the long-run. 
B) says that increasing fixed inputs eventually results in smaller and smaller increases in total output. 
C) says that increasing variable inputs eventually results in smaller and smaller increases in total output. 
D) says that increasing variable inputs eventually results in smaller and smaller increases in total cost.

Question 15

A firm uses labor as an input in production.In the short-run,its average cost will reach a minimum where:

Accepted Answer

A) average product of labor reaches a maximum. 
B) marginal product of labor reaches a maximum. 
C) marginal cost begins to increase. 
D) marginal cost equals average cost. 
A) average product of labor reaches a maximum. 
B) marginal product of labor reaches a maximum. 
C) marginal cost begins to increase. 
D) marginal cost equals average cost.

Question 16

If total fixed costs are $1,000,variable costs are constant at $5.00 per unit over the relevant range of output and average total cost is $6,what is total variable cost?

Accepted Answer

A) $100 
B) $1,000 
C) $5,000 
D) $6,000 
A) $100 
B) $1,000 
C) $5,000 
D) $6,000

Question 17

Suppose the government restricts the amount of capital equipment firms can purchase in an attempt to increase employment.If a firm expands output then its long-run average costs will be:

Accepted Answer

A) less than they would be without the restriction. 
B) more than they would be without the restriction. 
C) the same as they would be without the restriction. 
D) uncertain.Need more information 
A) less than they would be without the restriction. 
B) more than they would be without the restriction. 
C) the same as they would be without the restriction. 
D) uncertain.Need more information

Question 18

Assume that Donnell Corp.is currently producing 500 units of output per period,using 25 units of labor and 20 units of capital.Values for the marginal product of each input and the prices of the inputs are as follows: MPK = 100,MPL = 200,w = 2,and r = 3.Given the information above,which of the following is true?

Accepted Answer

A) The firm is currently using the optimal levels of capital and labor. 
B) The firm should increase capital and reduce labor usage. 
C) The firm should increase labor and reduce capital usage. 
D) The firm is not using the optimal levels of capital and labor,and it is impossible to determine the optimal levels from the given information. 
A) The firm is currently using the optimal levels of capital and labor. 
B) The firm should increase capital and reduce labor usage. 
C) The firm should increase labor and reduce capital usage. 
D) The firm is not using the optimal levels of capital and labor,and it is impossible to determine the optimal levels from the given information.

Question 19

A firm employs 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital costs $21 per unit.For the quantities of inputs employed,MPL = 3 and MPK = 3.In this situation,the firm:

Accepted Answer

A) is producing the maximum amount possible at the lowest possible cost. 
B) could lower its production costs by using more capital and less labor. 
C) could increase its output at no extra cost by using more labor and less capital. 
D) should keep its input usage unchanged. 
A) is producing the maximum amount possible at the lowest possible cost. 
B) could lower its production costs by using more capital and less labor. 
C) could increase its output at no extra cost by using more labor and less capital. 
D) should keep its input usage unchanged.

Question 20

Which of the following statements about the relationship between marginal cost and average cost is correct?

Accepted Answer

A) When MC is falling,AC is rising. 
B) AC equals MC at MC's lowest point. 
C) When MC exceeds AC,AC must be rising. 
D) When AC exceeds MC,MC must be rising. 
A) When MC is falling,AC is rising. 
B) AC equals MC at MC's lowest point. 
C) When MC exceeds AC,AC must be rising. 
D) When AC exceeds MC,MC must be rising.

Which of the following is true for the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1?

Suppose labor is on the horizontal axis and capital is on the vertical axis.If the wage rate is $15 per worker per hour and the rental rate of capital is $10 per unit per hour,what is the slope of the isocost curve?

The possibility of learning by doing ensures:

Which of the following factors can lead to learning by doing?

An important determinant of market structure is:

Learning by doing is illustrated by:

Which of the following depicts the change in per-unit cost of production resulting from a decrease in the input prices,given the output produced by the firm is constant?

Which of the following explains the shape of the long-run average cost curve?

If the marginal cost of pollution abatement differs between two firms,the total cost of pollution abatement can be lowered by:

Suppose labor is on the horizontal axis and capital on the vertical axis.If the total cost is defined by the equation TC = $400 + $15L + $10K,the slope of the isocost curve is:

Economic analysis suggests that if the marginal cost of pollution abatement differs for two firms,the least cost pollution abatement strategy would require:

Learning by doing:

The law of diminishing marginal returns:

A firm uses labor as an input in production.In the short-run,its average cost will reach a minimum where:

If total fixed costs are $1,000,variable costs are constant at $5.00 per unit over the relevant range of output and average total cost is $6,what is total variable cost?

Suppose the government restricts the amount of capital equipment firms can purchase in an attempt to increase employment.If a firm expands output then its long-run average costs will be:

A firm employs 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital costs $21 per unit.For the quantities of inputs employed,MP_L = 3 and MP_K = 3.In this situation,the firm:

Which of the following statements about the relationship between marginal cost and average cost is correct?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 8: The Cost of Production

Which of the following is true for the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1?

Suppose labor is on the horizontal axis and capital is on the vertical axis.If the wage rate is $15 per worker per hour and the rental rate of capital is $10 per unit per hour,what is the slope of the isocost curve?

The possibility of learning by doing ensures:

Which of the following factors can lead to learning by doing?

An important determinant of market structure is:

Learning by doing is illustrated by:

Which of the following depicts the change in per-unit cost of production resulting from a decrease in the input prices,given the output produced by the firm is constant?

Which of the following explains the shape of the long-run average cost curve?

If the marginal cost of pollution abatement differs between two firms,the total cost of pollution abatement can be lowered by:

Suppose labor is on the horizontal axis and capital on the vertical axis.If the total cost is defined by the equation TC = $400 + $15L + $10K,the slope of the isocost curve is:

Economic analysis suggests that if the marginal cost of pollution abatement differs for two firms,the least cost pollution abatement strategy would require:

Learning by doing:

The law of diminishing marginal returns:

A firm uses labor as an input in production.In the short-run,its average cost will reach a minimum where:

If total fixed costs are $1,000,variable costs are constant at $5.00 per unit over the relevant range of output and average total cost is $6,what is total variable cost?

Suppose the government restricts the amount of capital equipment firms can purchase in an attempt to increase employment.If a firm expands output then its long-run average costs will be:

A firm employs 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital costs $21 per unit.For the quantities of inputs employed,MPL = 3 and MPK = 3.In this situation,the firm:

Which of the following statements about the relationship between marginal cost and average cost is correct?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Which of the following is true for the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1?

A firm employs 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital costs $21 per unit.For the quantities of inputs employed,MP_L = 3 and MP_K = 3.In this situation,the firm: