Question 1

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 2

In the short run,changes in output can only be brought about by a change in the quantity of variable inputs.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

Suppose two countries use different combinations of inputs,such as labor and capital,to produce the same product.This implies all of the following except that

Accepted Answer

A) the two countries use different technologies to produce the product. 
B) the inputs are not equally productive in the two countries. 
C) the prices of the inputs are not the same in the countries. 
D) one country is more efficient in the production of the good than the other. 
A) the two countries use different technologies to produce the product. 
B) the inputs are not equally productive in the two countries. 
C) the prices of the inputs are not the same in the countries. 
D) one country is more efficient in the production of the good than the other.

Question 6

$$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Lanterns }
\end{array} & \begin{array} { c } 
\text { Fixed Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Average Total } \
\text { Cost (dollars) }
\end{array} \
\hline 75 & 200 & 170 & 370 & 4.93 \
\hline 80 & 200 & 230 & 430 & 5.36 \
\hline 90 & 200 & & & 7.67 \
\hline 100 & 200 & 810 & & \
\hline 115 & 200 & & & 11.8 \
\hline 117 & 200 & 1264 & 1464 & 12.5 \
\hline 120 & 200 & 1480 & & \
\hline
\end{array}$$ Table 11-7 shows cost data for Lotus Lanterns,a producer of whimsical night lights.
-Refer to Table 11-7.What is the average variable cost per unit of production when the firm produces 90 lanterns?

Accepted Answer

A) $490 
B) $33.67 
C) $7.67 
D) $5.44 
A) $490 
B) $33.67 
C) $7.67 
D) $5.44

Question 7

Who was the economist who first analyzed the advantages of specialization and the division of labor?

Accepted Answer

A) David Ricardo 
B) Arthur C.Pigou 
C) Ronald Coase 
D) Adam Smith 
A) David Ricardo 
B) Arthur C.Pigou 
C) Ronald Coase 
D) Adam Smith

Question 8

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,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 9

If the average variable cost curve is above the marginal cost curve,then

Accepted Answer

A) marginal costs must be decreasing. 
B) average variable costs must be increasing. 
C) marginal costs must be increasing. 
D) marginal costs can be either increasing or decreasing. 
A) marginal costs must be decreasing. 
B) average variable costs must be increasing. 
C) marginal costs must be increasing. 
D) marginal costs can be either increasing or decreasing.

Question 10

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 11

Which of the following equations is incorrect?

Accepted Answer

A) ATC - AFC = AVC 
B) AVC + AFC = ATC 
C) AFC = ATC - AVC 
D) ATC = AVC - AFC 
A) ATC - AFC = AVC 
B) AVC + AFC = ATC 
C) AFC = ATC - AVC 
D) ATC = AVC - AFC

Question 12

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1,000 routers each month,but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.Therefore

Accepted Answer

A) ABC is experiencing diseconomies of scale. 
B) ABC is experiencing diminishing returns. 
C) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month. 
D) ABC will soon go out of business. 
A) ABC is experiencing diseconomies of scale. 
B) ABC is experiencing diminishing returns. 
C) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month. 
D) ABC will soon go out of business.

Question 13

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,then the expansion would provide ________ to the airlines.

Accepted Answer

A) economies of scale 
B) diseconomies of scale 
C) higher average costs but lower total costs 
D) higher marginal costs but lower total costs 
A) economies of scale 
B) diseconomies of scale 
C) higher average costs but lower total costs 
D) higher marginal costs but lower total costs

Question 14

What is the difference between between total costs,variable costs,and fixed costs?

Accepted Answer

Total costs are the costs of all inputs

Question 15

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Accepted Answer

A) price of capital increases. 
B) price of labor decreases. 
C) price of labor increases. 
D) marginal product of labor increases. 
A) price of capital increases. 
B) price of labor decreases. 
C) price of labor increases. 
D) marginal product of labor increases.

Question 16

Fill in the missing values in the following table.Draw one graph showing how total output increases with the quantity of workers hired,and another graph showing the marginal product of labor and the average product of labor.
 $$\begin{array} { | l | c | l | l | } 
\hline \begin{array} { l } 
\text { Quantity of } \
\text { Workers }
\end{array} & \text { Total Output } & \begin{array} { l } 
\text { Marginal } \
\text { Product of } \
\text { Labor }
\end{array} & \begin{array} { l } 
\text { Average } \
\text { Product of } \
\text { Labor }
\end{array} \
\hline 0 & 0 & & \
\hline 1 & 200 & & \
\hline 2 & 500 & & \
\hline 3 & 900 & & \
\hline 4 & 1,150 & & \
\hline 5 & 1,300 & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | c | c | c | } 
\

Question 17

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

Accepted Answer

A) Diminishing returns are the result of changes in explicit costs.Diseconomies of scale are the result of changes in explicit costs and implicit costs. 
B) Diminishing returns refer to production while diseconomies of scale refer to costs. 
C) Diminishing returns cause a firm's marginal cost curve to rise;diseconomies of scale cause a firm's marginal cost curve to fall. 
D) Diminishing returns apply only to the short run;diseconomies of scale apply only in the long run. 
A) Diminishing returns are the result of changes in explicit costs.Diseconomies of scale are the result of changes in explicit costs and implicit costs. 
B) Diminishing returns refer to production while diseconomies of scale refer to costs. 
C) Diminishing returns cause a firm's marginal cost curve to rise;diseconomies of scale cause a firm's marginal cost curve to fall. 
D) Diminishing returns apply only to the short run;diseconomies of scale apply only in the long run.

Question 18

All of the following cost curves are U-shaped except one.Which curve is not U-shaped?

Accepted Answer

A) the marginal cost curve 
B) the average fixed cost curve 
C) the average total cost curve 
D) the average variable cost curve 
A) the marginal cost curve 
B) the average fixed cost curve 
C) the average total cost curve 
D) the average variable cost curve

Question 19

Red Stone Creamery currently hires 5 workers.When it added a 6th worker,its output actually fell.Which of the following statements is true?

Accepted Answer

A) The marginal product of the sixth worker must be negative. 
B) The average product of the sixth worker is negative. 
C) The sixth worker is not as skilled as the fifth worker. 
D) The total product becomes negative. 
A) The marginal product of the sixth worker must be negative. 
B) The average product of the sixth worker is negative. 
C) The sixth worker is not as skilled as the fifth worker. 
D) The total product becomes negative.

Question 20

In the short run,why does a production function eventually display diminishing returns to labor?

Accepted Answer

A) As the number of workers increases it becomes difficult to monitor them. 
B) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. 
C) As the number of workers increases eventually the gains from the division of labor and specialization are used up. 
D) The opportunity cost of hiring additional workers must eventually rise. 
A) As the number of workers increases it becomes difficult to monitor them. 
B) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. 
C) As the number of workers increases eventually the gains from the division of labor and specialization are used up. 
D) The opportunity cost of hiring additional workers must eventually rise.

Exam 11: Technology,production,and Costs

An isocost line shows

In the short run,changes in output can only be brought about by a change in the quantity of variable inputs.

The marginal rate of technical substitution is measured by

Suppose two countries use different combinations of inputs,such as labor and capital,to produce the same product.This implies all of the following except that

Who was the economist who first analyzed the advantages of specialization and the division of labor?

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,then along the isocost AF,the total cost

If the average variable cost curve is above the marginal cost curve,then

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

Which of the following equations is incorrect?

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1,000 routers each month,but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.Therefore

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,then the expansion would provide ________ to the airlines.

What is the difference between between total costs,variable costs,and fixed costs?

You own a business that answers telephone calls for physicians after their offices close.You have an incentive to substitute capital for labor if the

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

All of the following cost curves are U-shaped except one.Which curve is not U-shaped?

Red Stone Creamery currently hires 5 workers.When it added a 6th worker,its output actually fell.Which of the following statements is true?

In the short run,why does a production function eventually display diminishing returns to labor?

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

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