Question 1

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 2

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 3

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 4

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 5

For the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1,the marginal cost at an output of one unit equals:

Accepted Answer

A) $0. 
B) $5. 
C) $8. 
D) $10. 
A) $0. 
B) $5. 
C) $8. 
D) $10.

Question 6

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 7

Consider a graph with a total variable cost curve.Cost is on the vertical axis and output on the horizontal axis.The marginal cost can be represented by:

Accepted Answer

A) a ray from the origin to a point tangent to the total variable cost curve. 
B) a ray from the origin to a point on the total variable cost curve. 
C) the slope at a particular point on the total variable cost curve. 
D) the distance from the origin to a point on the total variable cost curve. 
A) a ray from the origin to a point tangent to the total variable cost curve. 
B) a ray from the origin to a point on the total variable cost curve. 
C) the slope at a particular point on the total variable cost curve. 
D) the distance from the origin to a point on the total variable cost curve.

Question 8

Average fixed cost [AFC] is the:

Accepted Answer

A) horizontal distance between average total cost [ATC] and average variable cost [AVC]. 
B) vertical distance between ATC and AVC. 
C) horizontal distance between ATC and the Y-axis. 
D) vertical distance between ATC and the X-axis. 
A) horizontal distance between average total cost [ATC] and average variable cost [AVC]. 
B) vertical distance between ATC and AVC. 
C) horizontal distance between ATC and the Y-axis. 
D) vertical distance between ATC and the X-axis.

Question 9

A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital $5 per unit.For the quantities of inputs employed,MPL = 2 and MPK = 5.In this situation,the firm:

Accepted Answer

A) is producing the maximum output possible given the prices and relative productivities of the inputs. 
B) could lower its production costs by using more labor and less capital. 
C) could increase its output at no extra cost by using more capital and less labor. 
D) should use more of both inputs in equal proportions. 
A) is producing the maximum output possible given the prices and relative productivities of the inputs. 
B) could lower its production costs by using more labor and less capital. 
C) could increase its output at no extra cost by using more capital and less labor. 
D) should use more of both inputs in equal proportions.

Question 10

A firm's production cost equaling the opportunity cost of its resources reflects the fact that:

Accepted Answer

A) resources are best-suited to producing one particular good. 
B) firms typically make one primary product. 
C) resources can be used to make many different products. 
D) firms often make more than one product. 
A) resources are best-suited to producing one particular good. 
B) firms typically make one primary product. 
C) resources can be used to make many different products. 
D) firms often make more than one product.

Question 11

Talco Inc. ,a manufacturer of steel pipes,uses 500 workers and 100 machines to produce 10,000 pipes,each 28mm thick,every day.Its operations research team reports that the marginal productivity of labor is 40 steel pipes while that of capital is 240 steel pipes.If workers are paid $8 per day and the rental cost of capital is $40 per day,examine whether the company is following the golden rule of cost minimization.

Accepted Answer

The golden rule of cost minimization say

Question 12

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 13

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 14

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 15

For the total variable cost (TVc.curve below,draw a total cost curve and a positive total fixed cost (TFc.curve.Then derive the associated marginal cost (Mc. ,average total cost (ATc. ,average variable (AVc. ,and average fixed cost (AFc.curves.Explain the appropriate relationships among the curves.

Accepted Answer

@#IMG-DLM&_TB1826_00 
Total fixed cost is simply a

Question 16

Which of the following is true of learning by doing?

Accepted Answer

A) It results from economies of scale. 
B) It results from an increase in the price of inputs. 
C) It results from the substitution of one input by a costlier input. 
D) It results from a firm's cumulative output experience. 
A) It results from economies of scale. 
B) It results from an increase in the price of inputs. 
C) It results from the substitution of one input by a costlier input. 
D) It results from a firm's cumulative output experience.

Question 17

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 18

If the marginal product of labor is four times the marginal product of capital and the price of labor is twice the price of capital,then:

Accepted Answer

A) labor will be substituted for capital by a profit maximizing firm. 
B) capital will be substituted for labor by a profit maximizing firm. 
C) output cannot be expanded any further by using the same input levels. 
D) input usage should be left unchanged. 
A) labor will be substituted for capital by a profit maximizing firm. 
B) capital will be substituted for labor by a profit maximizing firm. 
C) output cannot be expanded any further by using the same input levels. 
D) input usage should be left unchanged.

Question 19

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 20

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

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

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

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:

For the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1,the marginal cost at an output of one unit equals:

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

Consider a graph with a total variable cost curve.Cost is on the vertical axis and output on the horizontal axis.The marginal cost can be represented by:

Average fixed cost [AFC] is the:

A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital $5 per unit.For the quantities of inputs employed,MP_L = 2 and MP_K = 5.In this situation,the firm:

A firm's production cost equaling the opportunity cost of its resources reflects the fact that:

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

Decreasing returns to scale imply:

An important determinant of market structure is:

For the total variable cost (TVc.curve below,draw a total cost curve and a positive total fixed cost (TFc.curve.Then derive the associated marginal cost (Mc. ,average total cost (ATc. ,average variable (AVc. ,and average fixed cost (AFc.curves.Explain the appropriate relationships among the curves.

Which of the following is true of learning by doing?

Which of the following is true of cost minimization?

If the marginal product of labor is four times the marginal product of capital and the price of labor is twice the price of capital,then:

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

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?

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

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

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

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:

For the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1,the marginal cost at an output of one unit equals:

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

Consider a graph with a total variable cost curve.Cost is on the vertical axis and output on the horizontal axis.The marginal cost can be represented by:

Average fixed cost [AFC] is the:

A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital $5 per unit.For the quantities of inputs employed,MPL = 2 and MPK = 5.In this situation,the firm:

A firm's production cost equaling the opportunity cost of its resources reflects the fact that:

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

Decreasing returns to scale imply:

An important determinant of market structure is:

For the total variable cost (TVc.curve below,draw a total cost curve and a positive total fixed cost (TFc.curve.Then derive the associated marginal cost (Mc. ,average total cost (ATc. ,average variable (AVc. ,and average fixed cost (AFc.curves.Explain the appropriate relationships among the curves.

Which of the following is true of learning by doing?

Which of the following is true of cost minimization?

If the marginal product of labor is four times the marginal product of capital and the price of labor is twice the price of capital,then:

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

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?

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

For the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1,the marginal cost at an output of one unit equals:

A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital $5 per unit.For the quantities of inputs employed,MP_L = 2 and MP_K = 5.In this situation,the firm: