Question 1

-Which of the following is true of point c in Exhibit 7-17?

Accepted Answer

A)  The MRTS of labor for capital is equal to the ratio of the wage rate to the price of capital. 
B)  The MRTS of labor for capital is less than the ratio of the wage rate to the price of capital. 
C)  The firm would be producing its output at the lowest possible cost. 
D)  The MRTS of labor for capital is greater than the ratio of the wage rate to the price of capital. 
E)  The ratio of the marginal product of labor to the price of capital is equal to the ratio of the wage rate to the price of capital. 
A)  The MRTS of labor for capital is equal to the ratio of the wage rate to the price of capital. 
B)  The MRTS of labor for capital is less than the ratio of the wage rate to the price of capital. 
C)  The firm would be producing its output at the lowest possible cost. 
D)  The MRTS of labor for capital is greater than the ratio of the wage rate to the price of capital. 
E)  The ratio of the marginal product of labor to the price of capital is equal to the ratio of the wage rate to the price of capital.

Question 2

Isoquants map combinations of inputs and outputs that yield equal profit.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 7-23 Production Isoquants ans Isocosts  
-In terms of output produced, which of the following expresses the relationships illustrated in Exhibit 7-23?

Accepted Answer

A)  A > B > C 
B)  A = B > C 
C)  B > C > A 
D)  A = B = C 
E)  C > B > A 
A)  A > B > C 
B)  A = B > C 
C)  B > C > A 
D)  A = B = C 
E)  C > B > A

Question 4

Exhibit 7-21  
-For the three isocost lines shown in Exhibit 7-21 which of the following is true:

Accepted Answer

A)  the expenditure on inputs does not change as the isocost lines get farther from the origin 
B)  the amount of output produced gets smaller the farther the isocost lines get from the origin 
C)  the amount of output produced gets larger the farther the isocost lines get from the origin 
D)  the expenditure on inputs required by the firm gets smaller the farther the isocost lines get from the origin 
E)  the expenditure on inputs required by the firm gets larger the farther the isocost lines get from the origin 
A)  the expenditure on inputs does not change as the isocost lines get farther from the origin 
B)  the amount of output produced gets smaller the farther the isocost lines get from the origin 
C)  the amount of output produced gets larger the farther the isocost lines get from the origin 
D)  the expenditure on inputs required by the firm gets smaller the farther the isocost lines get from the origin 
E)  the expenditure on inputs required by the firm gets larger the farther the isocost lines get from the origin

Question 5

Exhibit 7-21  
-If the isocost line in Exhibit 7-21 is AB, the optimal quantity of labor is shown at point

Accepted Answer

A)  n 
B)  p 
C)  q 
D)  r 
E)  s 
A)  n 
B)  p 
C)  q 
D)  r 
E)  s

Question 6

The marginal rate of technical substitution is the rate at which

Accepted Answer

A)  one product can be substituted for another without affecting total production cost 
B)  one product can be substituted for another without affecting total expenditure by the buyer 
C)  one product can be substituted for another without affecting total utility 
D)  one input can be substituted for another without affecting total production cost 
E)  one input can be substituted for another without affecting total output 
A)  one product can be substituted for another without affecting total production cost 
B)  one product can be substituted for another without affecting total expenditure by the buyer 
C)  one product can be substituted for another without affecting total utility 
D)  one input can be substituted for another without affecting total production cost 
E)  one input can be substituted for another without affecting total output

Question 7

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 the wage increased?

Accepted Answer

A)  It would shift to the right. 
B)  It would rotate outward along the horizontal axis. 
C)  It would rotate inward along the horizontal axis. 
D)  It would rotate outward along the vertical axis. 
E)  It would rotate inward along the vertical axis. 
A)  It would shift to the right. 
B)  It would rotate outward along the horizontal axis. 
C)  It would rotate inward along the horizontal axis. 
D)  It would rotate outward along the vertical axis. 
E)  It would rotate inward along the vertical axis.

Question 8

If labor is measured along the horizontal axis, capital is measured along the vertical axis, W equals the wage rate, and R equals the cost of capital, the slope of an isocost line is

Accepted Answer

A)  W + R 
B)  W - R 
C)  -W/R 
D)  -R/W 
E)  R - W 
A)  W + R 
B)  W - R 
C)  -W/R 
D)  -R/W 
E)  R - W

Question 9

The marginal rate of technical substitution between labor (L) and capital (C) equals

Accepted Answer

A)  MUL/MUC 
B)  AVC 
C)  MPL/MPC 
D)  the capital-labor ratio 
E)  the labor-capital ratio 
A)  MUL/MUC 
B)  AVC 
C)  MPL/MPC 
D)  the capital-labor ratio 
E)  the labor-capital ratio

Question 10

Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $5 per hour and the firm can afford to operate its copy machine for 5,000 hours if it hires no labor, the slope of an isocost line when labor is measured on the horizontal axis is

Accepted Answer

A)  -5/8 
B)  -8/5 
C)  -1/5 
D)  -5 
E)  -1/4 
A)  -5/8 
B)  -8/5 
C)  -1/5 
D)  -5 
E)  -1/4

Question 11

Exhibit 7-20  
-In Exhibit 7-20, the movement from CD to AB might reflect a(n)

Accepted Answer

A)  increase in the prices of both labor and land 
B)  decrease in the amount the producer can spend 
C)  increase in the price of labor and a decrease in the price of land 
D)  decrease in the price of labor and an increase in the price of land 
E)  increase in the amount the producer can spend 
A)  increase in the prices of both labor and land 
B)  decrease in the amount the producer can spend 
C)  increase in the price of labor and a decrease in the price of land 
D)  decrease in the price of labor and an increase in the price of land 
E)  increase in the amount the producer can spend

Question 12

Just as the marginal product of labor first rises and then declines so does the

Accepted Answer

A)  average variable cost 
B)  marginal cost 
C)  marginal capital of product 
D)  production function 
E)  marginal product of capital 
A)  average variable cost 
B)  marginal cost 
C)  marginal capital of product 
D)  production function 
E)  marginal product of capital

Question 13

A production function

Accepted Answer

A)  shows the functions of production such as income, consumption, and employment 
B)  shows the relationship between quantities of inputs used and quantity of output produced 
C)  quantifies the amounts of variable inputs needed to produce fixed inputs 
D)  is the quota a firm manager expects the workers to meet 
E)  is a theoretical concept having no relevance to real-world production 
A)  shows the functions of production such as income, consumption, and employment 
B)  shows the relationship between quantities of inputs used and quantity of output produced 
C)  quantifies the amounts of variable inputs needed to produce fixed inputs 
D)  is the quota a firm manager expects the workers to meet 
E)  is a theoretical concept having no relevance to real-world production

Question 14

The point of tangency between the isocost line and an isoquant illustrates the maximum cost of producing a specific level of output.

Accepted Answer

A) True 
 B)False

Question 15

The slope of the isocost line is constant.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 7-16  
-In terms of output produced, which of the following expresses the relationships illustrated in Exhibit 7-16?

Accepted Answer

A)  a > b > c 
B)  a = b > c 
C)  b > c > a 
D)  c > b = a 
E)  c > b > a 
A)  a > b > c 
B)  a = b > c 
C)  b > c > a 
D)  c > b = a 
E)  c > b > a

Question 17

The statement that firms minimize cost means all of the following except that

Accepted Answer

A)  they produce the most output they can with each given level of resources 
B)  the output they produce could not be produced using fewer resources 
C)  firms maximize revenues 
D)  firms are technologically efficient 
E)  each level of output is produced in the least expensive manner 
A)  they produce the most output they can with each given level of resources 
B)  the output they produce could not be produced using fewer resources 
C)  firms maximize revenues 
D)  firms are technologically efficient 
E)  each level of output is produced in the least expensive manner

Question 18

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 auto workers' wages decreased?

Accepted Answer

A)  It would shift to the left. 
B)  It would rotate outward along the horizontal axis. 
C)  It would rotate inward along the horizontal axis. 
D)  It would rotate outward along the vertical axis. 
E)  It would rotate inward along the vertical axis. 
A)  It would shift to the left. 
B)  It would rotate outward along the horizontal axis. 
C)  It would rotate inward along the horizontal axis. 
D)  It would rotate outward along the vertical axis. 
E)  It would rotate inward along the vertical axis.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 7-16  
-Which combination of capital and labor illustrated in Exhibit 7-16 will maximize the producers revenue?

Accepted Answer

A)  a 
B)  b 
C)  c 
D)  e 
E)  cannot tell from information given 
A)  a 
B)  b 
C)  c 
D)  e 
E)  cannot tell from information given

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

-Which of the following is true of point c in Exhibit 7-17?

Isoquants map combinations of inputs and outputs that yield equal profit.

Exhibit 7-23 Production Isoquants ans Isocosts -In terms of output produced, which of the following expresses the relationships illustrated in Exhibit 7-23?

Exhibit 7-21 -For the three isocost lines shown in Exhibit 7-21 which of the following is true:

Exhibit 7-21 -If the isocost line in Exhibit 7-21 is AB, the optimal quantity of labor is shown at point

The marginal rate of technical substitution is the rate at which

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 the wage increased?

If labor is measured along the horizontal axis, capital is measured along the vertical axis, W equals the wage rate, and R equals the cost of capital, the slope of an isocost line is

The marginal rate of technical substitution between labor (L) and capital (C) equals

Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $5 per hour and the firm can afford to operate its copy machine for 5,000 hours if it hires no labor, the slope of an isocost line when labor is measured on the horizontal axis is

Exhibit 7-20 -In Exhibit 7-20, the movement from CD to AB might reflect a(n)

Just as the marginal product of labor first rises and then declines so does the

A production function

The point of tangency between the isocost line and an isoquant illustrates the maximum cost of producing a specific level of output.

The slope of the isocost line is constant.

Exhibit 7-16 -In terms of output produced, which of the following expresses the relationships illustrated in Exhibit 7-16?

The statement that firms minimize cost means all of the following except that

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 auto workers' wages decreased?

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

Exhibit 7-16 -Which combination of capital and labor illustrated in Exhibit 7-16 will maximize the producers revenue?

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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