Question 1

Which of the following is true?

Accepted Answer

A) When average cost is decreasing,total cost must also be decreasing. 
B) When average cost is decreasing,average product of labor must be decreasing. 
C) When average cost is decreasing,marginal cost must be less than average cost. 
D) When average cost is decreasing,output must be decreasing. 
A) When average cost is decreasing,total cost must also be decreasing. 
B) When average cost is decreasing,average product of labor must be decreasing. 
C) When average cost is decreasing,marginal cost must be less than average cost. 
D) When average cost is decreasing,output must be decreasing.

Question 2

Which of the following is true at every point on the expansion path?

Accepted Answer

A) It shows the combinations of inputs having the maximum productivity. 
B) It shows the various levels of output that can be produced using a given level of inputs. 
C) It shows the various combinations of inputs that can be used to produce a given level of output. 
D) It shows the maximum output attainable at a given cost. 
A) It shows the combinations of inputs having the maximum productivity. 
B) It shows the various levels of output that can be produced using a given level of inputs. 
C) It shows the various combinations of inputs that can be used to produce a given level of output. 
D) It shows the maximum output attainable at a given cost.

Question 3

Each point on an expansion path:

Accepted Answer

A) has a constant input price ratio. 
B) has the same marginal rate of technical substitution [MRTS]. 
C) has the same total cost. 
D) is cost-minimizing. 
A) has a constant input price ratio. 
B) has the same marginal rate of technical substitution [MRTS]. 
C) has the same total cost. 
D) is cost-minimizing.

Question 4

Which of the following is true of cost minimization?

Accepted Answer

A) It is equivalent to profit maximization. 
B) It is sufficient for profit maximization. 
C) It is necessary for profit maximization. 
D) It is unrelated to profit maximization. 
A) It is equivalent to profit maximization. 
B) It is sufficient for profit maximization. 
C) It is necessary for profit maximization. 
D) It is unrelated to profit maximization.

Question 5

Which of the following is guaranteed by increasing returns to scale in production experienced in the long run?

Accepted Answer

A) Negative marginal costs 
B) Zero average costs 
C) Declining average costs 
D) Rising marginal costs 
A) Negative marginal costs 
B) Zero average costs 
C) Declining average costs 
D) Rising marginal costs

Question 6

If $\Delta$TC represents the change in total cost,$\Delta$w the change in the wage rate,$\Delta$TFC the change in total fixed cost,$\Delta$q the change in output,and $\Delta$AC the change in average cost,the marginal cost of the firm can be defined as:

Accepted Answer

A) $\Delta$TC/$\Delta$w. 
B) $\Delta$TFC/$\Delta$q. 
C) $\Delta$AC/$\Delta$q. 
D) $\Delta$TC/$\Delta$q. 
A) $\Delta$TC/$\Delta$w. 
B) $\Delta$TFC/$\Delta$q. 
C) $\Delta$AC/$\Delta$q. 
D) $\Delta$TC/$\Delta$q.

Question 7

If the marginal product of the variable input rises and then falls,the MC curve will:

Accepted Answer

A) rise and then fall. 
B) fall and then rise. 
C) downward sloping throughout. 
D) not depend upon the path of the marginal product of the variable input. 
A) rise and then fall. 
B) fall and then rise. 
C) downward sloping throughout. 
D) not depend upon the path of the marginal product of the variable input.

Question 8

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is the marginal cost of the second unit?

Accepted Answer

A) $0 
B) $0.50 
C) $1 
D) $2 
A) $0 
B) $0.50 
C) $1 
D) $2

Question 9

When average costs fall as output increases,it is due to _____;when they fall at a given level of output it is due to _____.

Accepted Answer

A) economies of scale;learning by doing 
B) economies of scale;diseconomies of scale 
C) learning by doing;economies of scale 
D) learning by doing;diseconomies of scale 
A) economies of scale;learning by doing 
B) economies of scale;diseconomies of scale 
C) learning by doing;economies of scale 
D) learning by doing;diseconomies of scale

Question 10

Which of the following determines the shape of the marginal cost curve in the short run?

Accepted Answer

A) The marginal product of labor is first increasing and then decreasing 
B) The wage rate first decreases and then increases throughout the range of output 
C) The price of output produced by labor is first decreasing and then increasing 
D) The presence of economies of scale in the product market 
A) The marginal product of labor is first increasing and then decreasing 
B) The wage rate first decreases and then increases throughout the range of output 
C) The price of output produced by labor is first decreasing and then increasing 
D) The presence of economies of scale in the product market

Question 11

Long-run costs of production are generally lower than the short run costs because:

Accepted Answer

A) all inputs are fixed in the long run. 
B) firms cannot change their scale of production in the long run. 
C) there is greater flexibility in input usage in the long run. 
D) there is no scope for learning by doing in the long run. 
A) all inputs are fixed in the long run. 
B) firms cannot change their scale of production in the long run. 
C) there is greater flexibility in input usage in the long run. 
D) there is no scope for learning by doing in the long run.

Question 12

For the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1,the firm's average variable cost is minimized at an output of:

Accepted Answer

A) ten. 
B) five. 
C) two. 
D) one. 
A) ten. 
B) five. 
C) two. 
D) one.

Question 13

Suppose a firm that uses labor and capital as the only inputs in production is currently on the long-run expansion path.The marginal product of labor and capital at this least cost combination are 60 units and 80 units respectively and the wage rate of labor is $6.Calculate the rental cost of capital borne by the firm.

Accepted Answer

A) $10 
B) $8 
C) $5 
D) $12 
A) $10 
B) $8 
C) $5 
D) $12

Question 14

Which of the following does not decline as output increases?

Accepted Answer

A) Marginal cost 
B) Average fixed cost 
C) Average cost 
D) Total fixed cost 
A) Marginal cost 
B) Average fixed cost 
C) Average cost 
D) Total fixed cost

Question 15

If total cost rises as the level of output produced increases,then:

Accepted Answer

A) marginal cost must be rising. 
B) marginal cost must be constant. 
C) marginal cost must be falling. 
D) marginal cost must be positive. 
A) marginal cost must be rising. 
B) marginal cost must be constant. 
C) marginal cost must be falling. 
D) marginal cost must be positive.

Question 16

Learning by doing:

Accepted Answer

A) results in higher costs in the long run than in the short run. 
B) is a result of technological progress. 
C) increases productivity of the inputs. 
D) results from the increased use of inputs in production. 
A) results in higher costs in the long run than in the short run. 
B) is a result of technological progress. 
C) increases productivity of the inputs. 
D) results from the increased use of inputs in production.

Question 17

Which of the following is true of the total variable cost curve in the short run?

Accepted Answer

A) It depicts the law of decreasing returns to scale. 
B) It is a straight line parallel to the horizontal axis. 
C) It is independent of the production function. 
D) It lies below the short-run total cost curve. 
A) It depicts the law of decreasing returns to scale. 
B) It is a straight line parallel to the horizontal axis. 
C) It is independent of the production function. 
D) It lies below the short-run total cost curve.

Question 18

Dine-in restaurants provide two distinct products,food and a place to sit and eat.This is an example of:

Accepted Answer

A) economics of scale. 
B) economies of scope. 
C) a poor pricing strategy. 
D) a loss leader. 
A) economics of scale. 
B) economies of scope. 
C) a poor pricing strategy. 
D) a loss leader.

Question 19

Increasing returns to scale imply that:

Accepted Answer

A) average costs are constant. 
B) average costs are falling. 
C) average costs are increasing. 
D) average costs are negative. 
A) average costs are constant. 
B) average costs are falling. 
C) average costs are increasing. 
D) average costs are negative.

Question 20

Which of the following statements regarding the relationship between average cost and marginal cost is not true?

Accepted Answer

A) When marginal cost is below average total cost,average total cost falls. 
B) When marginal cost is above average variable cost,average variable cost rises. 
C) When marginal cost is equal to average total cost,average total cost is minimized. 
D) When marginal cost is above average fixed cost,average fixed cost rises. 
A) When marginal cost is below average total cost,average total cost falls. 
B) When marginal cost is above average variable cost,average variable cost rises. 
C) When marginal cost is equal to average total cost,average total cost is minimized. 
D) When marginal cost is above average fixed cost,average fixed cost rises.

Which of the following is true?

Which of the following is true at every point on the expansion path?

Each point on an expansion path:

Which of the following is true of cost minimization?

Which of the following is guaranteed by increasing returns to scale in production experienced in the long run?

If $\Delta$ TC represents the change in total cost, $\Delta$ w the change in the wage rate, $\Delta$ TFC the change in total fixed cost, $\Delta$ q the change in output,and $\Delta$ AC the change in average cost,the marginal cost of the firm can be defined as:

If the marginal product of the variable input rises and then falls,the MC curve will:

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is the marginal cost of the second unit?

When average costs fall as output increases,it is due to _;when they fall at a given level of output it is due to _.

Which of the following determines the shape of the marginal cost curve in the short run?

Long-run costs of production are generally lower than the short run costs because:

For the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1,the firm's average variable cost is minimized at an output of:

Which of the following does not decline as output increases?

If total cost rises as the level of output produced increases,then:

Learning by doing:

Which of the following is true of the total variable cost curve in the short run?

Dine-in restaurants provide two distinct products,food and a place to sit and eat.This is an example of:

Increasing returns to scale imply that:

Which of the following statements regarding the relationship between average cost and marginal cost is not true?

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?

Which of the following is true at every point on the expansion path?

Each point on an expansion path:

Which of the following is true of cost minimization?

Which of the following is guaranteed by increasing returns to scale in production experienced in the long run?

If Δ\DeltaΔ TC represents the change in total cost, Δ\DeltaΔ w the change in the wage rate, Δ\DeltaΔ TFC the change in total fixed cost, Δ\DeltaΔ q the change in output,and Δ\DeltaΔ AC the change in average cost,the marginal cost of the firm can be defined as:

If the marginal product of the variable input rises and then falls,the MC curve will:

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is the marginal cost of the second unit?

When average costs fall as output increases,it is due to _____;when they fall at a given level of output it is due to _____.

Which of the following determines the shape of the marginal cost curve in the short run?

Long-run costs of production are generally lower than the short run costs because:

For the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1,the firm's average variable cost is minimized at an output of:

Which of the following does not decline as output increases?

If total cost rises as the level of output produced increases,then:

Learning by doing:

Which of the following is true of the total variable cost curve in the short run?

Dine-in restaurants provide two distinct products,food and a place to sit and eat.This is an example of:

Increasing returns to scale imply that:

Which of the following statements regarding the relationship between average cost and marginal cost is not true?

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

If $\Delta$ TC represents the change in total cost, $\Delta$ w the change in the wage rate, $\Delta$ TFC the change in total fixed cost, $\Delta$ q the change in output,and $\Delta$ AC the change in average cost,the marginal cost of the firm can be defined as:

When average costs fall as output increases,it is due to _;when they fall at a given level of output it is due to _.

For the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1,the firm's average variable cost is minimized at an output of: