Question 1

The slope of an isocost line ________ and equals the negative of ________.

Accepted Answer

A)  increases as we move down the line; the ratio of input prices 
B)  decreases as we move down the line; the ratio of the marginal products 
C)  is constant; the ratio of input prices 
D)  is constant; the ratio of the marginal products 
A)  increases as we move down the line; the ratio of input prices 
B)  decreases as we move down the line; the ratio of the marginal products 
C)  is constant; the ratio of input prices 
D)  is constant; the ratio of the marginal products C

Question 2

Which of the following costs will not change as output changes?

Accepted Answer

A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  average fixed cost 
E)  total fixed cost 
A)  marginal cost 
B)  total variable cost 
C)  average variable cost 
D)  average fixed cost 
E)  total fixed cost E

Question 3

Figure 11-18  
-Refer to Figure 11-18.Starting from point e,a movement along the isocost to point f

Accepted Answer

A)  decreases the total cost of production but not output. 
B)  increases the total cost of production and decreases output. 
C)  decreases both the total cost of production and output. 
D)  decreases output but not the total cost of production. 
A)  decreases the total cost of production but not output. 
B)  increases the total cost of production and decreases output. 
C)  decreases both the total cost of production and output. 
D)  decreases output but not the total cost of production. D

Question 4

Improvements in inventory control represent a positive technological change because they allow firms to produce the same output with fewer inputs.In recent years,many firms have adopted an inventory system in which firms accept shipments from suppliers as close as possible to the time they will be needed.Wal-Mart has been a pioneer in using inventory control systems to this in its stores.This type of inventory system is called a ________ inventory system.

Accepted Answer

A)  first-in-first-out 
B)  cash-and-carry 
C)  just-in-time 
D)  buy-now-pay-later 
A)  first-in-first-out 
B)  cash-and-carry 
C)  just-in-time 
D)  buy-now-pay-later

Question 5

An isocost line shows

Accepted Answer

A)  all the possible combinations of two inputs that a firm can use to produce its output. 
B)  all the possible combinations of two inputs a firm can use that have the same total cost. 
C)  all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D)  all the possible combinations of two inputs with constant returns to scale. 
A)  all the possible combinations of two inputs that a firm can use to produce its output. 
B)  all the possible combinations of two inputs a firm can use that have the same total cost. 
C)  all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D)  all the possible combinations of two inputs with constant returns to scale.

Question 6

Figure 11-4  
-Refer to Figure 11-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Accepted Answer

A)  It remains constant. 
B)  It rises. 
C)  It falls. 
D)  It could rise or fall depending on what happens to total cost. 
A)  It remains constant. 
B)  It rises. 
C)  It falls. 
D)  It could rise or fall depending on what happens to total cost.

Question 7

Figure 11-13  
-Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,what is the price of capital along the isocost CE?

Accepted Answer

A)  $400 per unit 
B)  $100 per unit 
C)  $25 per unit 
D)  insufficient information to answer question 
A)  $400 per unit 
B)  $100 per unit 
C)  $25 per unit 
D)  insufficient information to answer question

Question 8

If fixed costs do not change,then marginal cost

Accepted Answer

A)  also remains constant. 
B)  equals the change in variable cost divided by the change in output. 
C)  equals the change in average variable cost divided by the change in output. 
D)  equals the change in average fixed cost divided by the change in output. 
A)  also remains constant. 
B)  equals the change in variable cost divided by the change in output. 
C)  equals the change in average variable cost divided by the change in output. 
D)  equals the change in average fixed cost divided by the change in output.

Question 9

The slope of a typical isoquant is negative because to produce a given output,a producer

Accepted Answer

A)  will use more of one input only if it uses more of another. 
B)  can use less of one input only if the productivity of that input increases 
C)  can use less of one input only if it uses more of another. 
D)  will use more of one input only if the price of that input falls. 
A)  will use more of one input only if it uses more of another. 
B)  can use less of one input only if the productivity of that input increases 
C)  can use less of one input only if it uses more of another. 
D)  will use more of one input only if the price of that input falls.

Question 10

The marginal rate of technical substitution is measured by

Accepted Answer

A)  the slope of the isoquant. 
B)  the relative input prices. 
C)  the slope of the isocost line. 
D)  the ratio of the product's price to the product's cost of production. 
A)  the slope of the isoquant. 
B)  the relative input prices. 
C)  the slope of the isocost line. 
D)  the ratio of the product's price to the product's cost of production.

Question 11

Marginal cost is calculated for a particular increase in output by

Accepted Answer

A)  multiplying the total cost by the change in output. 
B)  multiplying the change in total cost by the change in output. 
C)  dividing the total cost by the change in output. 
D)  dividing the change in total cost by the change in output. 
A)  multiplying the total cost by the change in output. 
B)  multiplying the change in total cost by the change in output. 
C)  dividing the total cost by the change in output. 
D)  dividing the change in total cost by the change in output.

Question 12

Figure 11-14   Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14.Which of the following could explain why the United States and China use different input combinations to produce a given quantity of cotton and yet,each country produces that quantity at the lowest possible cost?

Accepted Answer

A)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C)  because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D)  because the marginal product per dollar spent on capital yields a higher return in the United States than in China 
A)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B)  because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C)  because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D)  because the marginal product per dollar spent on capital yields a higher return in the United States than in China

Question 13

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

Accepted Answer

Consider a variable input such as labor.

Question 14

If a firm experiences positive technological change,it is able to produce more output using the same inputs.

Accepted Answer

A) True 
 B)False

Question 15

A U-shaped long run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true?

Accepted Answer

A)  The average product of labor is at its maximum when the average product of labor equals the marginal product of labor. 
B)  The average product of labor is at its minimum when the average product of labor equals the marginal product of labor. 
C)  The average product of labor tells us how much output changes as the quantity of workers hired changes. 
D)  Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing. 
A)  The average product of labor is at its maximum when the average product of labor equals the marginal product of labor. 
B)  The average product of labor is at its minimum when the average product of labor equals the marginal product of labor. 
C)  The average product of labor tells us how much output changes as the quantity of workers hired changes. 
D)  Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing.

Question 17

Which of the following is true at the output level where average total cost is at its minimum?

Accepted Answer

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

Question 18

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 19

Figure 11-11   Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 11-11.In the short run,if the firm sells fewer than 5,000 picture frames per month

Accepted Answer

A)  it should produce with the scale of operation associated with ATCa. 
B)  it should produce with the scale of operation associated with ATCb. 
C)  it should produce with the scale of operation associated with ATCc. 
D)  it will experience constant returns to scale. 
A)  it should produce with the scale of operation associated with ATCa. 
B)  it should produce with the scale of operation associated with ATCb. 
C)  it should produce with the scale of operation associated with ATCc. 
D)  it will experience constant returns to scale.

Question 20

Use the following graph to answer the following questions.   a.If the wage rate and the rental price of machines are both $50 and total cost is $800,is the cost-minimizing point A,B,or C?
b.If the wage rate is $40,the rental price of equipment is $120,and total cost is $1,200,is the cost-minimizing point A,B,or C?
c.If the wage rate is $60,the rental price of equipment is $90,and total cost is $1,800,is the cost-minimizing point A,B,or C?

Accepted Answer

a. If total cost is $800 and the wage ra

The slope of an isocost line and equals the negative of .

Which of the following costs will not change as output changes?

Figure 11-18 -Refer to Figure 11-18.Starting from point e,a movement along the isocost to point f

An isocost line shows

Figure 11-4 -Refer to Figure 11-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,what is the price of capital along the isocost CE?

If fixed costs do not change,then marginal cost

The slope of a typical isoquant is negative because to produce a given output,a producer

The marginal rate of technical substitution is measured by

Marginal cost is calculated for a particular increase in output by

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

If a firm experiences positive technological change,it is able to produce more output using the same inputs.

A U-shaped long run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Which of the following statements is true?

Which of the following is true at the output level where average total cost is at its minimum?

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

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

Filters

Exam 11: Technology, production, and Costs

The slope of an isocost line ________ and equals the negative of ________.

Which of the following costs will not change as output changes?

Figure 11-18 -Refer to Figure 11-18.Starting from point e,a movement along the isocost to point f

An isocost line shows

Figure 11-4 -Refer to Figure 11-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Figure 11-13 -Refer to Figure 11-13.The lines shown in the diagram are isocost lines.If the price of labor is $50 per unit,what is the price of capital along the isocost CE?

If fixed costs do not change,then marginal cost

The slope of a typical isoquant is negative because to produce a given output,a producer

The marginal rate of technical substitution is measured by

Marginal cost is calculated for a particular increase in output by

Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

If a firm experiences positive technological change,it is able to produce more output using the same inputs.

A U-shaped long run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Which of the following statements is true?

Which of the following is true at the output level where average total cost is at its minimum?

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

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

Filters

The slope of an isocost line and equals the negative of .