Question 1

Is it possible for technological change to be negative? If so,give an example.

Accepted Answer

Technological change could be negative,for instance,when a natural disaster hits,or when a firm hires less-experienced workers.In these cases,the firm would produce a lower level of output with the same inputs.

Question 2

Explain whether each of the following is a fixed cost or a variable cost for Damian Dandridge's tattoo parlor. a.The payment he makes to buy tattoo ink.
B)The wages he pays his employees.
C)The $500-per-month payment he makes to advertise his shop on highway billboards.
D)The lease payment he makes to the landlord who owns the building where his shop is located.
E)The payment he makes on his liability insurance policy.

Accepted Answer

c., d., and e. are fixed costs because they do not change as the quantity of tattoos produced increases. a. and b. are variable costs because they increase as the quantity of tattoos produced increases.  It is important to note that the time period under consideration is important.  In the long run, all of these costs are variable.

Question 3

An isoquant shows

Accepted Answer

A)  the combinations of two goods that yield the same total satisfaction. 
B)  the combinations of two inputs that yield the same total product. 
C)  the combinations of two inputs that cost the same total quantity of money. 
D)  the combination of two goods that cost the same amount of money. 
A)  the combinations of two goods that yield the same total satisfaction. 
B)  the combinations of two inputs that yield the same total product. 
C)  the combinations of two inputs that cost the same total quantity of money. 
D)  the combination of two goods that cost the same amount of money. B

Question 4

The formula for total fixed cost is

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 5

Figure 11-1  
-Refer to Figure 11-1.In a diagram that shows the marginal product of labor on the vertical axis and labor on the horizontal axis,the marginal product curve

Accepted Answer

A)  never intersects the horizontal axis. 
B)  intersects the horizontal axis at a point corresponding to the 5th worker. 
C)  intersects the horizontal axis at a point corresponding to the 6th worker. 
D)  intersects the horizontal axis at a point corresponding to the 8th worker. 
A)  never intersects the horizontal axis. 
B)  intersects the horizontal axis at a point corresponding to the 5th worker. 
C)  intersects the horizontal axis at a point corresponding to the 6th worker. 
D)  intersects the horizontal axis at a point corresponding to the 8th worker.

Question 6

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory.In the following graph,the relationship between costs and output for the smaller factory is represented by the curve ATC1,and the relationship between costs and output for the larger factory is represented by the curve ATC2.   a.If Argyle expects to produce 3,600 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain?
b.If Argyle expects to produce 5,000 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain.
c.If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week,why isn't it also lower when Argyle produces 4,000 sweaters per week?

Accepted Answer

a.Argyle's costs will be lower with a sm

Question 7

In 1955,the chairman of the Sony corporation offered to sell transistor radios through department stores in the United States.Sony based its selling price on its average total cost of production.If a store bought 5,000 radios,Sony would sell them at $29.95 each.For 10,000 there would be a discount,and for more than 10,000 the price would begin to climb.Based on this information,Sony reached minimum efficient scale

Accepted Answer

A)  at a quantity below 5,000 radios. 
B)  at a quantity of 5,000 radios. 
C)  at a quantity of 10,000 radios. 
D)  at a quantity above 10,000 radios. 
A)  at a quantity below 5,000 radios. 
B)  at a quantity of 5,000 radios. 
C)  at a quantity of 10,000 radios. 
D)  at a quantity above 10,000 radios.

Question 8

Figure 11-4  
-Refer to Figure 11-4.The vertical difference between curves F and G measures

Accepted Answer

A)  average fixed costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  sunk costs. 
A)  average fixed costs. 
B)  marginal costs. 
C)  fixed costs. 
D)  sunk costs.

Question 9

Which of the following is an example of positive technological change?

Accepted Answer

A)  A firm offers workers a higher wage to work on weekends and at night. As a result, the firm is able to increase its weekly production of surf boards. 
B)  A firm buys an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards. 
C)  A firm conducts a new advertising campaign. As a result, the demand for the firm's surf boards increases. 
D)  A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day. 
A)  A firm offers workers a higher wage to work on weekends and at night. As a result, the firm is able to increase its weekly production of surf boards. 
B)  A firm buys an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards. 
C)  A firm conducts a new advertising campaign. As a result, the demand for the firm's surf boards increases. 
D)  A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.

Question 10

In the short run,if marginal product is below average product,then average variable cost is increasing.

Accepted Answer

A) True 
 B)False

Question 11

Consider a manufacturing operation that uses specialized machinery and labor to produce its output.In this case,the input that is not fixed in the short run is labor.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Accepted Answer

A) True 
 B)False

Question 14

What is an isoquant? What is the slope of an isoquant?

Accepted Answer

An isoquant is curve that shows all the

Question 15

Which of the following is a fixed cost?

Accepted Answer

A)  payment to hire a security worker to guard the gate to the factory around the clock 
B)  wages to hire assembly line workers 
C)  payments to an electric utility 
D)  costs of raw materials 
A)  payment to hire a security worker to guard the gate to the factory around the clock 
B)  wages to hire assembly line workers 
C)  payments to an electric utility 
D)  costs of raw materials

Question 16

If production displays diseconomies of scale,the long run average cost curve is

Accepted Answer

A)  above the short run average total cost curve. 
B)  above the long run marginal cost curve. 
C)  upward sloping. 
D)  downward sloping. 
A)  above the short run average total cost curve. 
B)  above the long run marginal cost curve. 
C)  upward sloping. 
D)  downward sloping.

Question 17

Assume that 1366 Technologies initially does not sell enough solar wafers to realize economies of scale.To reach economies of scale,1366 Technologies must

Accepted Answer

A)  produce and sell more wafers at a lower average total cost 
B)  produce and sell fewer wafers at a lower average total cost 
C)  produce and sell more wafers at a higher average total cost. 
D)  produce and sell fewer wafers at a lower average total cost. 
A)  produce and sell more wafers at a lower average total cost 
B)  produce and sell fewer wafers at a lower average total cost 
C)  produce and sell more wafers at a higher average total cost. 
D)  produce and sell fewer wafers at a lower average total cost.

Question 18

Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist,12 for the second artist,and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?

Accepted Answer

The average product of labor i

Question 19

Figure 11-7  
-Refer to Figure 11-7.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,then along the isocost AF,the total cost

Accepted Answer

A)  is $500. 
B)  is $750. 
C)  is $1,250. 
D)  cannot be determined without the price of capital. 
A)  is $500. 
B)  is $750. 
C)  is $1,250. 
D)  cannot be determined without the price of capital.

Question 20

Figure 11-7  
-Refer to Figure 11-7.The lines shown in the diagram are isocost lines.Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

Accepted Answer

A)  the movement from AF to BF 
B)  the movement from BF to AF 
C)  the movement from BF to BD 
D)  the movement from BF to CE 
A)  the movement from AF to BF 
B)  the movement from BF to AF 
C)  the movement from BF to BD 
D)  the movement from BF to CE

Exam 11: Technology, production, and Costs

Is it possible for technological change to be negative? If so,give an example.

An isoquant shows

The formula for total fixed cost is

Figure 11-1 -Refer to Figure 11-1.In a diagram that shows the marginal product of labor on the vertical axis and labor on the horizontal axis,the marginal product curve

Figure 11-4 -Refer to Figure 11-4.The vertical difference between curves F and G measures

Which of the following is an example of positive technological change?

In the short run,if marginal product is below average product,then average variable cost is increasing.

Consider a manufacturing operation that uses specialized machinery and labor to produce its output.In this case,the input that is not fixed in the short run is labor.

The process a firm uses to turn inputs into outputs of goods and services is called technology.

What is an isoquant? What is the slope of an isoquant?

Which of the following is a fixed cost?

If production displays diseconomies of scale,the long run average cost curve is

Assume that 1366 Technologies initially does not sell enough solar wafers to realize economies of scale.To reach economies of scale,1366 Technologies must

Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist,12 for the second artist,and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?

Figure 11-7 -Refer to Figure 11-7.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,then along the isocost AF,the total cost

Figure 11-7 -Refer to Figure 11-7.The lines shown in the diagram are isocost lines.Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters