Question 1

When labor is the only variable input used in production,marginal cost [MC]:

Accepted Answer

A) is inversely related to the marginal product of labor [MPL]. 
B) is inversely related to the wage rate [w]. 
C) is positively related to MPL. 
D) is negatively related to labor supply [SL]. 
A) is inversely related to the marginal product of labor [MPL]. 
B) is inversely related to the wage rate [w]. 
C) is positively related to MPL. 
D) is negatively related to labor supply [SL].

Question 2

A tangency between an isocost line and an isoquant shows all the following,except:

Accepted Answer

A) the maximum output attainable by a firm at a given cost. 
B) the minimum cost necessary to produce a given output. 
C) an input combination where the ratio of marginal products equals the ratio of the input prices. 
D) an input combination where the returns to labor and capital inputs are equal. 
A) the maximum output attainable by a firm at a given cost. 
B) the minimum cost necessary to produce a given output. 
C) an input combination where the ratio of marginal products equals the ratio of the input prices. 
D) an input combination where the returns to labor and capital inputs are equal.

Question 3

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is marginal cost when 1 unit of output is produced?

Accepted Answer

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

Question 4

Once diminishing returns have set in,each additional unit of the variable input:

Accepted Answer

A) decreases total output. 
B) adds less to total output. 
C) adds more to total output. 
D) does not affect total output. 
A) decreases total output. 
B) adds less to total output. 
C) adds more to total output. 
D) does not affect total output.

Question 5

Which of the following is true of the expansion path?

Accepted Answer

A) It always slopes upward. 
B) It slopes upward as long as input prices are constant. 
C) It slopes upward as long as the firm uses more of both inputs as output increases. 
D) It is always linear,but not necessarily upward-sloping. 
A) It always slopes upward. 
B) It slopes upward as long as input prices are constant. 
C) It slopes upward as long as the firm uses more of both inputs as output increases. 
D) It is always linear,but not necessarily upward-sloping.

Question 6

Although isocost lines and budget lines are similar,they differ in that:

Accepted Answer

A) budget lines are linear while isocost lines can be curved. 
B) the consumer is constrained to the budget line while the firm can have more than one isocost line. 
C) the slope of a budget line equals the price ratio while the slope of an isocost line is not related to prices. 
D) budget lines do not have a constant expenditure. 
A) budget lines are linear while isocost lines can be curved. 
B) the consumer is constrained to the budget line while the firm can have more than one isocost line. 
C) the slope of a budget line equals the price ratio while the slope of an isocost line is not related to prices. 
D) budget lines do not have a constant expenditure.

Question 7

Which of the following assumptions is made by economists while constructing a firm's marginal cost [MC] and average cost [AC] curves?

Accepted Answer

A) Input prices are constant. 
B) Output is constant. 
C) Output price is constant. 
D) Technology will vary. 
A) Input prices are constant. 
B) Output is constant. 
C) Output price is constant. 
D) Technology will vary.

Question 8

If constant returns to scale apply to the entire range of production,then the long-run total cost curve would most likely:

Accepted Answer

A) be a straight line from the origin. 
B) to increase at a decreasing rate initially,and then increase at an increasing rate. 
C) to increase at an increasing rate initially,and then increase at a decreasing rate. 
D) be U-shaped. 
A) be a straight line from the origin. 
B) to increase at a decreasing rate initially,and then increase at an increasing rate. 
C) to increase at an increasing rate initially,and then increase at a decreasing rate. 
D) be U-shaped.

Question 9

Which of the following can be identified from an isocost line?

Accepted Answer

A) The least costly combination of inputs needed to produce a given level of output 
B) The relative prices of inputs 
C) The technological relationships among inputs 
D) The rate at which one input can be substituted for another in the production process 
A) The least costly combination of inputs needed to produce a given level of output 
B) The relative prices of inputs 
C) The technological relationships among inputs 
D) The rate at which one input can be substituted for another in the production process

Question 10

On the following per-unit cost graph,show two ways to identify total fixed cost.Explain your answer.

Accepted Answer

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Question 11

Decreasing returns to scale imply:

Accepted Answer

A) decreasing long run average cost and increasing short-run average cost. 
B) increasing long run average cost. 
C) constant long run average cost. 
D) increasing long run average cost and decreasing short run average cost. 
A) decreasing long run average cost and increasing short-run average cost. 
B) increasing long run average cost. 
C) constant long run average cost. 
D) increasing long run average cost and decreasing short run average cost.

Question 12

Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:

Accepted Answer

A) increasing marginal product of labor. 
B) constant returns scale. 
C) economies of scale. 
D) diminishing marginal product of labor. 
A) increasing marginal product of labor. 
B) constant returns scale. 
C) economies of scale. 
D) diminishing marginal product of labor.

Question 13

Which of the following statements is not true?

Accepted Answer

A) Average variable cost falls,reaches a minimum and begins to rise. 
B) Average total cost falls,reaches a minimum and begins to rise. 
C) Average fixed cost falls,reaches a minimum,and begins to rise. 
D) Marginal cost falls,reaches a minimum and begins to rise. 
A) Average variable cost falls,reaches a minimum and begins to rise. 
B) Average total cost falls,reaches a minimum and begins to rise. 
C) Average fixed cost falls,reaches a minimum,and begins to rise. 
D) Marginal cost falls,reaches a minimum and begins to rise.

Question 14

The expansion path identifies:

Accepted Answer

A) the least costly combination of inputs required to produce various levels of output. 
B) the firm's demand curves for the inputs. 
C) the various combinations of inputs that can be used to produce a given level of output. 
D) the least-cost combination of outputs. 
A) the least costly combination of inputs required to produce various levels of output. 
B) the firm's demand curves for the inputs. 
C) the various combinations of inputs that can be used to produce a given level of output. 
D) the least-cost combination of outputs.

Question 15

Assume that labor is plotted on the horizontal axis and capital is plotted on the vertical axis.A firm plans to spend $1,000 per week on inputs and confronts a wage rate of $10 per hour and a capital rental rate of $20 per hour.Given this information,what will be the slope of the isocost curve?

Accepted Answer

A) -2 
B) -1/2 
C) -100 
D) -50 
A) -2 
B) -1/2 
C) -100 
D) -50

Question 16

The technological relationships reflected in the firms' long run cost curves are an important factor in determining the market structure of an industry because:

Accepted Answer

A) they determine the size of the market. 
B) they influence the price elasticity of demand for the product. 
C) they influence the demand for the product in the short run. 
D) they determine the number of firms that can exist in an industry in the long run. 
A) they determine the size of the market. 
B) they influence the price elasticity of demand for the product. 
C) they influence the demand for the product in the short run. 
D) they determine the number of firms that can exist in an industry in the long run.

Question 17

Once diminishing returns have set in,each additional unit of output:

Accepted Answer

A) requires less of the variable input than the previous unit. 
B) requires less cost outlay than the previous unit. 
C) requires more of the fixed input than the previous unit. 
D) requires more cost outlay than the previous unit. 
A) requires less of the variable input than the previous unit. 
B) requires less cost outlay than the previous unit. 
C) requires more of the fixed input than the previous unit. 
D) requires more cost outlay than the previous unit.

Question 18

Suppose a firm has two plants producing the same good.Each plant is producing 200 units of the good.In plant A,the short run average cost of production is $20 and in plant B it is $30.If the firm wants to produce a total of 400 units at the lowest cost in the long run,it should:

Accepted Answer

A) switch production from plant B to plant A until the average cost of production at each plant is the same. 
B) produce only at plant A and shut down plant B. 
C) switch production from plant B to plant A until the average cost is the same at the two plants. 
D) continue to use the same input ratio. 
A) switch production from plant B to plant A until the average cost of production at each plant is the same. 
B) produce only at plant A and shut down plant B. 
C) switch production from plant B to plant A until the average cost is the same at the two plants. 
D) continue to use the same input ratio.

Question 19

Economies of scope exist if:

Accepted Answer

A) it is cheaper to have only one firm in an industry. 
B) it is cheaper for one firm to produce two products jointly than for separate firms to produce them separately. 
C) it is more expensive to have one firm in an industry. 
D) it is cheaper for two firms to work together to make two products than for one firm to make both by itself. 
A) it is cheaper to have only one firm in an industry. 
B) it is cheaper for one firm to produce two products jointly than for separate firms to produce them separately. 
C) it is more expensive to have one firm in an industry. 
D) it is cheaper for two firms to work together to make two products than for one firm to make both by itself.

Question 20

Suppose the wage rate is $15 per hour and the rental rate of capital is $10 per hour.If the marginal product of labor is 60 and the marginal product of capital 10,the profit maximizing firm should:

Accepted Answer

A) hire more labor and less capital. 
B) utilize more capital and less labor. 
C) maintain its current input mix of capital and labor. 
D) employ more of both capital and labor. 
A) hire more labor and less capital. 
B) utilize more capital and less labor. 
C) maintain its current input mix of capital and labor. 
D) employ more of both capital and labor.

When labor is the only variable input used in production,marginal cost [MC]:

A tangency between an isocost line and an isoquant shows all the following,except:

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is marginal cost when 1 unit of output is produced?

Once diminishing returns have set in,each additional unit of the variable input:

Which of the following is true of the expansion path?

Although isocost lines and budget lines are similar,they differ in that:

Which of the following assumptions is made by economists while constructing a firm's marginal cost [MC] and average cost [AC] curves?

If constant returns to scale apply to the entire range of production,then the long-run total cost curve would most likely:

Which of the following can be identified from an isocost line?

On the following per-unit cost graph,show two ways to identify total fixed cost.Explain your answer.

Decreasing returns to scale imply:

Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:

Which of the following statements is not true?

The expansion path identifies:

Assume that labor is plotted on the horizontal axis and capital is plotted on the vertical axis.A firm plans to spend $1,000 per week on inputs and confronts a wage rate of $10 per hour and a capital rental rate of $20 per hour.Given this information,what will be the slope of the isocost curve?

The technological relationships reflected in the firms' long run cost curves are an important factor in determining the market structure of an industry because:

Once diminishing returns have set in,each additional unit of output:

Suppose a firm has two plants producing the same good.Each plant is producing 200 units of the good.In plant A,the short run average cost of production is $20 and in plant B it is $30.If the firm wants to produce a total of 400 units at the lowest cost in the long run,it should:

Economies of scope exist if:

Suppose the wage rate is $15 per hour and the rental rate of capital is $10 per hour.If the marginal product of labor is 60 and the marginal product of capital 10,the profit maximizing firm should:

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

When labor is the only variable input used in production,marginal cost [MC]:

A tangency between an isocost line and an isoquant shows all the following,except:

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is marginal cost when 1 unit of output is produced?

Once diminishing returns have set in,each additional unit of the variable input:

Which of the following is true of the expansion path?

Although isocost lines and budget lines are similar,they differ in that:

Which of the following assumptions is made by economists while constructing a firm's marginal cost [MC] and average cost [AC] curves?

If constant returns to scale apply to the entire range of production,then the long-run total cost curve would most likely:

Which of the following can be identified from an isocost line?

On the following per-unit cost graph,show two ways to identify total fixed cost.Explain your answer.

Decreasing returns to scale imply:

Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:

Which of the following statements is not true?

The expansion path identifies:

Assume that labor is plotted on the horizontal axis and capital is plotted on the vertical axis.A firm plans to spend $1,000 per week on inputs and confronts a wage rate of $10 per hour and a capital rental rate of $20 per hour.Given this information,what will be the slope of the isocost curve?

The technological relationships reflected in the firms' long run cost curves are an important factor in determining the market structure of an industry because:

Once diminishing returns have set in,each additional unit of output:

Suppose a firm has two plants producing the same good.Each plant is producing 200 units of the good.In plant A,the short run average cost of production is $20 and in plant B it is $30.If the firm wants to produce a total of 400 units at the lowest cost in the long run,it should:

Economies of scope exist if:

Suppose the wage rate is $15 per hour and the rental rate of capital is $10 per hour.If the marginal product of labor is 60 and the marginal product of capital 10,the profit maximizing firm should:

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