Question 1

At the point of tangency between an isoquant and an isocost line,

Accepted Answer

A)  the firm is minimizing the cost of producing a given amount of output 
B)  the firm is maximizing the cost of producing a given amount of output 
C)  the household is maximizing its total utility given its income 
D)  the society is maximizing the social value of output, given its resources and technology 
E)  none of the above 
A)  the firm is minimizing the cost of producing a given amount of output 
B)  the firm is maximizing the cost of producing a given amount of output 
C)  the household is maximizing its total utility given its income 
D)  the society is maximizing the social value of output, given its resources and technology 
E)  none of the above

Question 2

Which of the following is not a characteristic of isoquants?

Accepted Answer

A)  They slope downward. 
B)  They do not intersect. 
C)  Their slope represents the ratio of the input prices. 
D)  They represent efficient combinations of two resources. 
E)  Isoquants further from the origin represent higher output levels. 
A)  They slope downward. 
B)  They do not intersect. 
C)  Their slope represents the ratio of the input prices. 
D)  They represent efficient combinations of two resources. 
E)  Isoquants further from the origin represent higher output levels.

Question 3

-From the firm's perspective, point e in Exhibit 7-17 is preferable to which other point?

Accepted Answer

A)  Point a because e represents the same output at lower cost. 
B)  Point a because e represents higher output at the same cost. 
C)  Point b because e represents the same output at lower cost. 
D)  Point b because e represents higher output at the same cost. 
E)  Point b because e represents higher output at lower cost. 
A)  Point a because e represents the same output at lower cost. 
B)  Point a because e represents higher output at the same cost. 
C)  Point b because e represents the same output at lower cost. 
D)  Point b because e represents higher output at the same cost. 
E)  Point b because e represents higher output at lower cost.

Question 4

Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of Manny Motors' isocost line is 3 million, and the vertical (robot) intercept of the isocost line is 5 million. Manny Motors' operating budget must be

Accepted Answer

A)  $4.5 million 
B)  $8 million 
C)  $60 million 
D)  $80 million 
E)  $120 million 
A)  $4.5 million 
B)  $8 million 
C)  $60 million 
D)  $80 million 
E)  $120 million

Question 5

Which of the following is not true of isoquants?

Accepted Answer

A)  isoquants farther from the origin represent greater output 
B)  isoquants slope downward to the right 
C)  isoquants never intersect one another 
D)  isoquants shift leftward when input prices increase 
E)  isoquants tend to be convex to the origin (bowed toward the origin) 
A)  isoquants farther from the origin represent greater output 
B)  isoquants slope downward to the right 
C)  isoquants never intersect one another 
D)  isoquants shift leftward when input prices increase 
E)  isoquants tend to be convex to the origin (bowed toward the origin)

Question 6

A firm that produces where the isocost line is tangent to an isoquant line must be

Accepted Answer

A)  maximizing profit 
B)  maximizing revenues 
C)  minimizing the total cost of producing that output level 
D)  minimizing output for a given total cost 
E)  paying the same prices for capital and labor 
A)  maximizing profit 
B)  maximizing revenues 
C)  minimizing the total cost of producing that output level 
D)  minimizing output for a given total cost 
E)  paying the same prices for capital and labor

Question 7

A firm can increase output by moving along a given isoquant.

Accepted Answer

A) True 
 B)False

Question 8

If a firm is currently minimizing per-unit costs of producing 1,000 units of output, a movement along the current isocost line will

Accepted Answer

A)  increase total cost 
B)  reduce total cost 
C)  increase output 
D)  reduce output 
E)  keep output constant 
A)  increase total cost 
B)  reduce total cost 
C)  increase output 
D)  reduce output 
E)  keep output constant

Question 9

An isoquant is negatively sloped because

Accepted Answer

A)  labor is productive and capital is not 
B)  both labor and capital are costly 
C)  labor and capital can replace each other in production 
D)  labor and capital can replace each other in expenditure 
E)  the ratio of marginal productivities rises, then falls 
A)  labor is productive and capital is not 
B)  both labor and capital are costly 
C)  labor and capital can replace each other in production 
D)  labor and capital can replace each other in expenditure 
E)  the ratio of marginal productivities rises, then falls

Question 10

When a firm has the option of using two different inputs and it elects to use only one (e.g., labor), it will be at the vertical or horizontal intercept of its isocost line.

Accepted Answer

A) True 
 B)False

Question 11

Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million, and the vertical (robot) intercept is 5 million. The slope of the isocost line is

Accepted Answer

A)  -6.67 
B)  -2.4 
C)  -1.67 
D)  -60 
E)  -5.3 
A)  -6.67 
B)  -2.4 
C)  -1.67 
D)  -60 
E)  -5.3

Question 12

Which of the following is not true of isoquants?

Accepted Answer

A)  They slope down and to the right. 
B)  They are convex to the origin. 
C)  Their slope equals the marginal rate of technical substitution. 
D)  Output rises as you move along a specific isoquant. 
E)  Isoquants closer to the origin represent lower output levels. 
A)  They slope down and to the right. 
B)  They are convex to the origin. 
C)  Their slope equals the marginal rate of technical substitution. 
D)  Output rises as you move along a specific isoquant. 
E)  Isoquants closer to the origin represent lower output levels.

Question 13

The expansion path

Accepted Answer

A)  is always a straight line that slopes upward 
B)  shows the least-cost input combinations for producing each level of output, if input prices are constant 
C)  shows the utility-maximizing combinations of products that society can produce, given resources and technology 
D)  shows the economic growth made possible when technology improves 
E)  shows the firm's profit-maximizing quantity of output at various product prices 
A)  is always a straight line that slopes upward 
B)  shows the least-cost input combinations for producing each level of output, if input prices are constant 
C)  shows the utility-maximizing combinations of products that society can produce, given resources and technology 
D)  shows the economic growth made possible when technology improves 
E)  shows the firm's profit-maximizing quantity of output at various product prices

Question 14

Isoquants do not intersect except when a firm doubles the amounts of resources employed.

Accepted Answer

A) True 
 B)False

Question 15

Upon opening a printing and copy shop, a firm budgets $30,000 for copy machines and labor. If the price of labor is $30 per hour, what is the vertical intercept of the isocost line when labor is measured on the horizontal axis?

Accepted Answer

A)  75 hours 
B)  1,000 hours 
C)  90,000 hours 
D)  300,000 hours 
E)  It is impossible to tell from the information given. 
A)  75 hours 
B)  1,000 hours 
C)  90,000 hours 
D)  300,000 hours 
E)  It is impossible to tell from the information given.

Question 16

Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $15 per hour, how many hours of labor can the firm hire if it spends nothing on machines?

Accepted Answer

A)  3/4 hour 
B)  75 hours 
C)  2,667 hours 
D)  20,000 hours 
E)  300,000 hours 
A)  3/4 hour 
B)  75 hours 
C)  2,667 hours 
D)  20,000 hours 
E)  300,000 hours

Question 17

The horizontal (labor) intercept of Manny Motors' isocost line is 3 million, and the vertical (robot) intercept is 5 million. Which of the following best describes what would happen to the isocost line if Manny Motors' operating budget decreased?

Accepted Answer

A)  It would shift rightward to a parallel position. 
B)  It would shift rightward to a nonparallel position. 
C)  It would shift leftward to a parallel position. 
D)  It would shift leftward to a nonparallel position. 
E)  Nothing. 
A)  It would shift rightward to a parallel position. 
B)  It would shift rightward to a nonparallel position. 
C)  It would shift leftward to a parallel position. 
D)  It would shift leftward to a nonparallel position. 
E)  Nothing.

Question 18

-In Exhibit 7-17, the firm would prefer producing at point b to

Accepted Answer

A)  points a and c only because b represents the same output at lower cost 
B)  points a and c only because b represents higher output at the same cost 
C)  points a and c only because b represents higher output at lower cost 
D)  point e only because b represents lower cost 
E)  all other points on the graph 
A)  points a and c only because b represents the same output at lower cost 
B)  points a and c only because b represents higher output at the same cost 
C)  points a and c only because b represents higher output at lower cost 
D)  point e only because b represents lower cost 
E)  all other points on the graph

Question 19

All combinations of inputs along an isoquant line represent the same total output.

Accepted Answer

A) True 
 B)False

Question 20

-At point b in Exhibit 7-17, output is

Accepted Answer

A)  higher than at points a and c, but cost is the same 
B)  the same as at points a and c, but cost is lower 
C)  the same as at points a and c, but cost is higher 
D)  lower than at points a and c and so is cost 
E)  higher than at point a 
A)  higher than at points a and c, but cost is the same 
B)  the same as at points a and c, but cost is lower 
C)  the same as at points a and c, but cost is higher 
D)  lower than at points a and c and so is cost 
E)  higher than at point a

Exam 7: Appendix: a Closer Look at Production and Cost

At the point of tangency between an isoquant and an isocost line,

Which of the following is not a characteristic of isoquants?

-From the firm's perspective, point e in Exhibit 7-17 is preferable to which other point?

Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of Manny Motors' isocost line is 3 million, and the vertical (robot) intercept of the isocost line is 5 million. Manny Motors' operating budget must be

Which of the following is not true of isoquants?

A firm that produces where the isocost line is tangent to an isoquant line must be

A firm can increase output by moving along a given isoquant.

If a firm is currently minimizing per-unit costs of producing 1,000 units of output, a movement along the current isocost line will

An isoquant is negatively sloped because

When a firm has the option of using two different inputs and it elects to use only one (e.g., labor), it will be at the vertical or horizontal intercept of its isocost line.

Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million, and the vertical (robot) intercept is 5 million. The slope of the isocost line is

Which of the following is not true of isoquants?

The expansion path

Isoquants do not intersect except when a firm doubles the amounts of resources employed.

Upon opening a printing and copy shop, a firm budgets $30,000 for copy machines and labor. If the price of labor is $30 per hour, what is the vertical intercept of the isocost line when labor is measured on the horizontal axis?

Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $15 per hour, how many hours of labor can the firm hire if it spends nothing on machines?

The horizontal (labor) intercept of Manny Motors' isocost line is 3 million, and the vertical (robot) intercept is 5 million. Which of the following best describes what would happen to the isocost line if Manny Motors' operating budget decreased?

-In Exhibit 7-17, the firm would prefer producing at point b to

All combinations of inputs along an isoquant line represent the same total output.

-At point b in Exhibit 7-17, output is

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix: price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix: Indifference Curves and Utility Maximization

Production and Cost in the Firm

A: perfect Competition

B: perfect Competition

A: monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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