Question 1

Suppose the price of capital and labor remain constant.As a firm's expenditures for capital and labor increase,its isocost line

Accepted Answer

A) shifts out parallel to the original isocost line. 
B) shifts in parallel to the original isocost line. 
C) rotates outward on the Y-intercept. 
D) rotates outward on the X-intercept. 
A) shifts out parallel to the original isocost line. 
B) shifts in parallel to the original isocost line. 
C) rotates outward on the Y-intercept. 
D) rotates outward on the X-intercept.

Question 2

Long-run cost curves are U-shaped because

Accepted Answer

A) of the law of demand. 
B) of the law of diminishing returns. 
C) of economies and diseconomies of scale. 
D) of the law of supply. 
A) of the law of demand. 
B) of the law of diminishing returns. 
C) of economies and diseconomies of scale. 
D) of the law of supply.

Question 3

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Accepted Answer

A) the firm can afford more sophisticated technology in production. 
B) labor and management can specialize even further in their tasks. 
C) as a larger input buyer,the firm can purchase inputs at a lower per unit cost. 
D) as a firm expands its production,its profit margin per-unit of output increases. 
A) the firm can afford more sophisticated technology in production. 
B) labor and management can specialize even further in their tasks. 
C) as a larger input buyer,the firm can purchase inputs at a lower per unit cost. 
D) as a firm expands its production,its profit margin per-unit of output increases.

Question 4

The typical shape of an isoquant is

Accepted Answer

A) convex towards the origin. 
B) concave towards the origin. 
C) linear and downward sloping. 
D) linear and upward sloping. 
A) convex towards the origin. 
B) concave towards the origin. 
C) linear and downward sloping. 
D) linear and upward sloping.

Question 5

In the short run,if marginal product is at its maximum,then

Accepted Answer

A) average cost is at its minimum. 
B) average variable cost is at its minimum. 
C) marginal cost is at its minimum. 
D) total cost is at its maximum. 
A) average cost is at its minimum. 
B) average variable cost is at its minimum. 
C) marginal cost is at its minimum. 
D) total cost is at its maximum.

Question 6

Figure 11-5  
-Refer to Figure 11-5.Curve G approaches curve F because

Accepted Answer

A) marginal cost is above average variable costs. 
B) average fixed cost falls as output rises. 
C) fixed cost falls as capacity rises. 
D) total cost falls as more and more is produced. 
A) marginal cost is above average variable costs. 
B) average fixed cost falls as output rises. 
C) fixed cost falls as capacity rises. 
D) total cost falls as more and more is produced.

Question 7

Vipsana's Gyros House sells gyros.The cost of ingredients (pita,meat,spices,etc. )to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Accepted Answer

A) $2.00 
B) $2.40 
C) $4.40 
D) $6.80 
A) $2.00 
B) $2.40 
C) $4.40 
D) $6.80

Question 8

Which of the following is an implicit cost of production?

Accepted Answer

A) the loss in the value of capital equipment due to wear and tear 
B) the salary you pay yourself for running your business 
C) the utility bill paid to water,electricity,and natural gas companies 
D) the interest you pay your mother for the money she loaned you to start your business 
A) the loss in the value of capital equipment due to wear and tear 
B) the salary you pay yourself for running your business 
C) the utility bill paid to water,electricity,and natural gas companies 
D) the interest you pay your mother for the money she loaned you to start your business

Question 9

Average fixed costs of production

Accepted Answer

A) remain constant. 
B) will rise at a fixed rate as more is produced. 
C) graph as a U-shaped curve. 
D) fall as long as output is increased. 
A) remain constant. 
B) will rise at a fixed rate as more is produced. 
C) graph as a U-shaped curve. 
D) fall as long as output is increased.

Question 10

Costs that change as output changes are called incremental costs.

Accepted Answer

A) True 
 B)False

Question 11

In the short run,marginal product of labor increases at first and then falls because

Accepted Answer

A) as more labor is hired,they are not as skilled as the first ones hired. 
B) there are fewer opportunities for division of labor and specialization when fewer workers are hired. 
C) managerial inefficiency sets in when a firm gets too large. 
D) the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive. 
A) as more labor is hired,they are not as skilled as the first ones hired. 
B) there are fewer opportunities for division of labor and specialization when fewer workers are hired. 
C) managerial inefficiency sets in when a firm gets too large. 
D) the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive.

Question 12

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Accepted Answer

A) True 
 B)False

Question 13

One reason why,in the short run,the marginal product of labor might increase initially as more workers are hired is that

Accepted Answer

A) the first workers hired get to use the best equipment. 
B) specialization allows a worker to focus on one task,thereby increasing her proficiency at that task. 
C) the best workers are hired first and later hires are not as skillful. 
D) beyond some point,a firm has hired too many workers. 
A) the first workers hired get to use the best equipment. 
B) specialization allows a worker to focus on one task,thereby increasing her proficiency at that task. 
C) the best workers are hired first and later hires are not as skillful. 
D) beyond some point,a firm has hired too many workers.

Question 14

The president of Toyota's Georgetown plant was quoted as saying,"Demand for high volumes saps your energy.Over a period of time,it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." Based on this quote,what must be true of the plant's average cost of production curve?

Accepted Answer

A) It is upward-sloping. 
B) It is downward-sloping. 
C) It is a ray from the origin. 
D) It is U-shaped. 
A) It is upward-sloping. 
B) It is downward-sloping. 
C) It is a ray from the origin. 
D) It is U-shaped.

Question 15

Figure 11-2  
-Refer to Figure 11-2.Short run output is maximized at

Accepted Answer

A) L1. 
B) L2. 
C) L3. 
D) insufficient information to determine 
A) L1. 
B) L2. 
C) L3. 
D) insufficient information to determine

Question 16

A downward sloping marginal product of labor curve demonstrates the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 17

Sally quit her job as an auto mechanic earning $50,000 per year to start her own business.To save money she operates her business out of a small building she owns which,until she started her own business,she had rented out for $10,000 per year.She also invested her $20,000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.
Total revenue $120,000
Cost of labor 40,000
Cost of materials 15,000
Equipment rental 5,000
a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because "right now I don't pay any rent and it will cost me $10,000 a year to rent near town." Do you agree with her reasoning?

Accepted Answer

a.$121,000 = 40,000 (labor)+ 15,000 (mat

Question 18

The division of labor and specialization explain

Accepted Answer

A) why,when the marginal product of labor increases,so does the average product of labor. 
B) why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C) why the marginal product of labor rises as a firm hires its first units of labor. 
D) why firms may find it profitable to use more workers when the marginal product of labor is negative. 
A) why,when the marginal product of labor increases,so does the average product of labor. 
B) why the average product of labor falls when firms use more capital or change the layout of their businesses. 
C) why the marginal product of labor rises as a firm hires its first units of labor. 
D) why firms may find it profitable to use more workers when the marginal product of labor is negative.

Question 19

Which of the following statements correctly describes the distinction between technology and technological change?

Accepted Answer

A) Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain. 
C) Technology is product-centered;its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D) Technology involves research and development while technological change involves the use of more efficient machinery. 
A) Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain. 
C) Technology is product-centered;its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D) Technology involves research and development while technological change involves the use of more efficient machinery.

Question 20

The absolute value of the slope of an isocost line equals the ratio of

Accepted Answer

A) the marginal productivities of the two inputs. 
B) the prices of the two inputs. 
C) the marginal utilities of the two inputs. 
D) the quantities of the two inputs. 
A) the marginal productivities of the two inputs. 
B) the prices of the two inputs. 
C) the marginal utilities of the two inputs. 
D) the quantities of the two inputs.

Exam 11: Technology,production,and Costs

Suppose the price of capital and labor remain constant.As a firm's expenditures for capital and labor increase,its isocost line

Long-run cost curves are U-shaped because

Economies of scale exist as a firm increases its size in the long run because of all of the following except

The typical shape of an isoquant is

In the short run,if marginal product is at its maximum,then

Figure 11-5 -Refer to Figure 11-5.Curve G approaches curve F because

Vipsana's Gyros House sells gyros.The cost of ingredients (pita,meat,spices,etc. )to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Which of the following is an implicit cost of production?

Average fixed costs of production

Costs that change as output changes are called incremental costs.

In the short run,marginal product of labor increases at first and then falls because

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

One reason why,in the short run,the marginal product of labor might increase initially as more workers are hired is that

Figure 11-2 -Refer to Figure 11-2.Short run output is maximized at

A downward sloping marginal product of labor curve demonstrates the law of diminishing marginal returns.

The division of labor and specialization explain

Which of the following statements correctly describes the distinction between technology and technological change?

The absolute value of the slope of an isocost line equals the ratio of

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