Question 1

If Overstock.com earns a rate of return exactly equal to what is necessary for it to continue operations, then its

Accepted Answer

A)  total revenue exceeds its economic costs. 
B)  economic costs exceed its total revenue. 
C)  normal profit is zero. 
D)  economic profit is zero. 
A)  total revenue exceeds its economic costs. 
B)  economic costs exceed its total revenue. 
C)  normal profit is zero. 
D)  economic profit is zero.

Question 2

Refer to Scenario 7.7 below to answer the question(s) that follow.
SCENARIO 7.7: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively.
-Refer to Scenario 7.7. The average product of labor with four workers is

Accepted Answer

A)  3. 
B)  3.5. 
C)  4. 
D)  14. 
A)  3. 
B)  3.5. 
C)  4. 
D)  14.

Question 3

If the marginal product of labor equals the average product of labor, then the

Accepted Answer

A)  average product is maximized. 
B)  marginal product is maximized. 
C)  marginal product is still increasing. 
D)  average product is still increasing. 
A)  average product is maximized. 
B)  marginal product is maximized. 
C)  marginal product is still increasing. 
D)  average product is still increasing.

Question 4

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor decrease, 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 5

Refer to the information provided in Figure 7.11 below to answer the question(s) that follow.   Figure 7.11
-Refer to Figure 7.11. If the firm's cost of capital is $30 per unit and its cost of labor is $60 per unit, the isocost line represents a total cost of

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $6,000. 
D)  $8,000. 
A)  $2,000. 
B)  $3,000. 
C)  $6,000. 
D)  $8,000.

Question 6

Total revenue minus total cost is equal to

Accepted Answer

A)  the rate of return. 
B)  marginal revenue. 
C)  profit. 
D)  net cost. 
A)  the rate of return. 
B)  marginal revenue. 
C)  profit. 
D)  net cost.

Question 7

In the short run, firms can enter an industry but not exit an industry.

Accepted Answer

A) True 
 B)False

Question 8

Assume that the price of labor and capital have remained the same, but that the average educational level of workers has increased and therefore the productivity of labor has increased. This would lead a firm to

Accepted Answer

A)  use a more capital-intensive production technology. 
B)  use a more labor-intensive technology. 
C)  not change its production technology, but to produce fewer units of output. 
D)  use only labor to produce the product. 
A)  use a more capital-intensive production technology. 
B)  use a more labor-intensive technology. 
C)  not change its production technology, but to produce fewer units of output. 
D)  use only labor to produce the product.

Question 9

An economist is studying the pricing behavior of Las Vegas all-you-can-eat buffets. He says he will limit his analysis to a time period that allows for new buffets to enter the market and for existing ones to leave it. The economist is referring to the ________ time period.

Accepted Answer

A)  market 
B)  industry 
C)  long-run 
D)  short-run 
A)  market 
B)  industry 
C)  long-run 
D)  short-run

Question 10

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow.   Figure 7.9
-Refer to Figure 7.9. The firmʹs isocost line could shift from CD to AB if

Accepted Answer

A)  the price of capital increased. 
B)  the firmʹs total expenditures decreased by 33%. 
C)  the price of capital and labor each increased by 33%. 
D)  either B or C 
A)  the price of capital increased. 
B)  the firmʹs total expenditures decreased by 33%. 
C)  the price of capital and labor each increased by 33%. 
D)  either B or C

Question 11

Refer to the information provided in Figure 7.1 below to answer the following question(s).   Figure 7.1
-Refer to Figure 7.1. This corn producer produces 100 bushels of corn and sells each bushel at $5. The cost of producing each bushel is $2. This corn producer's total revenue is ________ and profit is ________.

Accepted Answer

A)  $200; $300 
B)  $300; $200 
C)  $500; $200 
D)  $500; $300 
A)  $200; $300 
B)  $300; $200 
C)  $500; $200 
D)  $500; $300

Question 12

Refer to Scenario 7.8 below to answer the question(s) that follow.
SCENARIO 7.8: A swimming pool cleaning company has the following production possibilities. With one, two, three, and four workers, the company can clean 5, 12, 17, and 20 pools per day, respectively.
-Refer to Scenario 7.8. The marginal product of the second worker is

Accepted Answer

A)  3. 
B)  5. 
C)  7. 
D)  12. 
A)  3. 
B)  5. 
C)  7. 
D)  12.

Question 13

If labor is a variable input in production, the law of diminishing marginal returns implies that in the short run

Accepted Answer

A)  labor's marginal product is constant. 
B)  labor's marginal product decreases after a certain point. 
C)  total product is negative. 
D)  total product is negative after a certain point has been reached. 
A)  labor's marginal product is constant. 
B)  labor's marginal product decreases after a certain point. 
C)  total product is negative. 
D)  total product is negative after a certain point has been reached.

Question 14

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.   Figure 7.8
-Refer to Figure 7.8. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Accepted Answer

A)  $10. 
B)  $20. 
C)  $80. 
D)  indeterminate from this information. 
A)  $10. 
B)  $20. 
C)  $80. 
D)  indeterminate from this information.

Question 15

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow.   Figure 7.9
-Refer to Figure 7.9. The firm is currently along isocost CD. If the price of labor is $42, then the price of capital is

Accepted Answer

A)  $21. 
B)  $42. 
C)  $63. 
D)  $84. 
A)  $21. 
B)  $42. 
C)  $63. 
D)  $84.

Question 16

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow.   Figure 7.9
-Refer to Figure 7.9. The slope of isocost AB is

Accepted Answer

A)  greater than the slope of isocost CD. 
B)  less than the slope of isocost CD. 
C)  equal to the slope of isocost CD. 
D)  indeterminate from this information, as the prices of capital and labor are not given. 
A)  greater than the slope of isocost CD. 
B)  less than the slope of isocost CD. 
C)  equal to the slope of isocost CD. 
D)  indeterminate from this information, as the prices of capital and labor are not given.

Question 17

Deciding to invest in capital is a short-run decision.

Accepted Answer

A) True 
 B)False

Question 18

At the Larson Bakery the marginal products of the first, second, and third sales clerks are 20, 17, and 11 customers served, respectively. The total product (number of customers served) of the first two sales clerks is

Accepted Answer

A)  3. 
B)  17. 
C)  37. 
D)  48. 
A)  3. 
B)  17. 
C)  37. 
D)  48.

Question 19

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow.   Figure 7.10
-Refer to Figure 7.10. At Point C the slope of the q2 = 200 isoquant is

Accepted Answer

A)  -2. 
B)  -1/2. 
C)  -1. 
D)  indeterminate from this information. 
A)  -2. 
B)  -1/2. 
C)  -1. 
D)  indeterminate from this information.

Question 20

Refer to Scenario 7.2 below to answer the question(s) that follow.
SCENARIO 7.2: You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year.
-Refer to Scenario 7.2. During the year your economic costs were

Accepted Answer

A)  $70,000. 
B)  $60,000. 
C)  $50,000. 
D)  $20,000. 
A)  $70,000. 
B)  $60,000. 
C)  $50,000. 
D)  $20,000.

Exam 7: The Production Process: the Behavior of Profit-Maximizing Firms

If Overstock.com earns a rate of return exactly equal to what is necessary for it to continue operations, then its

If the marginal product of labor equals the average product of labor, then the

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor decrease, its isocost line

Refer to the information provided in Figure 7.11 below to answer the question(s) that follow. Figure 7.11 -Refer to Figure 7.11. If the firm's cost of capital is $30 per unit and its cost of labor is $60 per unit, the isocost line represents a total cost of

Total revenue minus total cost is equal to

In the short run, firms can enter an industry but not exit an industry.

Assume that the price of labor and capital have remained the same, but that the average educational level of workers has increased and therefore the productivity of labor has increased. This would lead a firm to

An economist is studying the pricing behavior of Las Vegas all-you-can-eat buffets. He says he will limit his analysis to a time period that allows for new buffets to enter the market and for existing ones to leave it. The economist is referring to the ________ time period.

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9 -Refer to Figure 7.9. The firmʹs isocost line could shift from CD to AB if

If labor is a variable input in production, the law of diminishing marginal returns implies that in the short run

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9 -Refer to Figure 7.9. The firm is currently along isocost CD. If the price of labor is $42, then the price of capital is

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost AB is

Deciding to invest in capital is a short-run decision.

At the Larson Bakery the marginal products of the first, second, and third sales clerks are 20, 17, and 11 customers served, respectively. The total product (number of customers served) of the first two sales clerks is

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow. Figure 7.10 -Refer to Figure 7.10. At Point C the slope of the q2 = 200 isoquant is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow. Figure 7.10 -Refer to Figure 7.10. At Point C the slope of the q² = 200 isoquant is