Question 1

Isoquants are usually drawn convex when viewed from the origin,reflecting the standard assumption

Accepted Answer

A) that both factors are subject to the law of diminishing returns. 
B) negative marginal productivity of all factors. 
C) the positive marginal productivity of all factors. 
D) that the variable factor is subject to the law of diminishing returns. 
E) that both factors are subject to increasing returns. 
A) that both factors are subject to the law of diminishing returns. 
B) negative marginal productivity of all factors. 
C) the positive marginal productivity of all factors. 
D) that the variable factor is subject to the law of diminishing returns. 
E) that both factors are subject to increasing returns.

Question 2

A very- long- run consideration that could change a firm's production function is

Accepted Answer

A) increasing returns to scale of operation. 
B) size of the plant. 
C) diminishing returns. 
D) rising cost of the factors of production. 
E) an improvement in education that increases the quality of the economy's labour force. 
A) increasing returns to scale of operation. 
B) size of the plant. 
C) diminishing returns. 
D) rising cost of the factors of production. 
E) an improvement in education that increases the quality of the economy's labour force.

Question 3

Canada has a much lower population density than does Japan.Therefore,the price of land (relative to the price of labour)is lower in Canada than in Japan.Consider a Canadian firm and a Japanese firm,both producing rice,both having access to the same technologies,and both striving to minimize costs.Now suppose that the relative price of land rises in Canada but remains the same in Japan.The effect on the use of inputs will be to

Accepted Answer

A) not change the land/labour ratio for either firm. 
B) increase the land/labour ratio for both the Canadian and the Japanese firms. 
C) increase the land/labour ratio for the Canadian firm. 
D) decrease the land/labour ratio for the Canadian firm. 
E) decrease the land/labour ratio for both the Canadian and the Japanese firms. 
A) not change the land/labour ratio for either firm. 
B) increase the land/labour ratio for both the Canadian and the Japanese firms. 
C) increase the land/labour ratio for the Canadian firm. 
D) decrease the land/labour ratio for the Canadian firm. 
E) decrease the land/labour ratio for both the Canadian and the Japanese firms.

Question 4

What information is displayed by an isoquant?

Accepted Answer

A) the whole set of technically efficient factor combinations that can produce varying levels of output 
B) the whole set of technically efficient factor combinations that can produce a single level of output 
C) various levels of output that can be produced with a fixed factor combination 
D) the alternative factor combinations that require the same expenditure 
E) various levels of output that can be produced with different factor combinations 
A) the whole set of technically efficient factor combinations that can produce varying levels of output 
B) the whole set of technically efficient factor combinations that can produce a single level of output 
C) various levels of output that can be produced with a fixed factor combination 
D) the alternative factor combinations that require the same expenditure 
E) various levels of output that can be produced with different factor combinations

Question 5

FIGURE 8- 4  
-Refer to Figure 8- 4.The firm is initially producing 1000 units and minimizing its production cost at point B.Suppose the prices of capital and labour each fall by 20%.If the firm wishes to continue producing the same level of output it will

Accepted Answer

A) move toward point A. 
B) remain at point B. 
C) move toward point C. 
D) move to the left of point B. 
E) move toward point D. 
A) move toward point A. 
B) remain at point B. 
C) move toward point C. 
D) move to the left of point B. 
E) move toward point D.

Question 6

A firm's least- cost position for producing a given output level occurs at that point where

Accepted Answer

A) the isocost and isoquant intersect the vertical axis. 
B) the isocost line and the isoquant are tangent to each other. 
C) the isocost line intersects the highest isoquant. 
D) the isocost and isoquant intersect the horizontal axis. 
E) the isoquant is closest to the origin. 
A) the isocost and isoquant intersect the vertical axis. 
B) the isocost line and the isoquant are tangent to each other. 
C) the isocost line intersects the highest isoquant. 
D) the isocost and isoquant intersect the horizontal axis. 
E) the isoquant is closest to the origin.

Question 7

A downward- sloping LRAC curve will shift downward because of

Accepted Answer

A) the use of large,specialized machinery as the volume of output increases. 
B) specialization. 
C) a decrease in factor prices. 
D) economies of scale. 
E) factor substitution. 
A) the use of large,specialized machinery as the volume of output increases. 
B) specialization. 
C) a decrease in factor prices. 
D) economies of scale. 
E) factor substitution.

Question 8

Canada has a much lower population density than does Japan.Therefore,the price of land (relative to the price of labour)is lower in Canada than in Japan.Consider a Canadian firm and a Japanese firm,both producing rice,both having access to the same technologies,and both striving to minimize their costs.The Canadian firm will use the two inputs,land and labour,in such a way that its land/labour ratio is

Accepted Answer

A) lower than that of the Japanese firm. 
B) indeterminate as there is insufficient information to know. 
C) equal to that of the Japanese firm. 
D) equal to one. 
E) higher than that of the Japanese firm. 
A) lower than that of the Japanese firm. 
B) indeterminate as there is insufficient information to know. 
C) equal to that of the Japanese firm. 
D) equal to one. 
E) higher than that of the Japanese firm.

Question 9

Suppose Commercial Footware Inc.is making a cost- minimizing decision about the level of output to produce with a given technology.Which of the following is a long- run decision?

Accepted Answer

A) Should we invest in research for a new,improved technology for shoe production? 
B) Should we change to a lower- cost leather supplier? 
C) Should we hire additional labour to work in the existing facility? 
D) Should we hire more accountants to investigate ways to reduce our corporate tax payments? 
E) Should we build a larger shoe manufacturing facility? 
A) Should we invest in research for a new,improved technology for shoe production? 
B) Should we change to a lower- cost leather supplier? 
C) Should we hire additional labour to work in the existing facility? 
D) Should we hire more accountants to investigate ways to reduce our corporate tax payments? 
E) Should we build a larger shoe manufacturing facility?

Question 10

Suppose RioTintoAlcan is considering the construction of a new aluminum smelter in Northern Quebec,the operation of which requires a great deal of electricity.Suppose also that the price of electricity is predicted to rise significantly in the near future.As a result,the firm decides to embark on new research and development which leads to the development of a new production technique that uses less electricity per tonne of aluminum produced.This is an example of

Accepted Answer

A) short- run cost minimization. 
B) short- run profit maximization. 
C) innovation away from increases in factor prices. 
D) long- run economies of scale. 
E) the marginal rate of substitution between factors. 
A) short- run cost minimization. 
B) short- run profit maximization. 
C) innovation away from increases in factor prices. 
D) long- run economies of scale. 
E) the marginal rate of substitution between factors.

Question 11

A profit- maximizing firm will increase its use of capital and decrease its use of labour when the

Accepted Answer

A) marginal product of capital is higher than the marginal product of labour. 
B) average product of capital is higher than the average product of labour. 
C) marginal product of capital,per dollar spent on capital,is greater than the marginal product of labour,per dollar spent on labour. 
D) marginal product of capital,per dollar spent on capital,is less than the marginal product of labour,per dollar spent on labour. 
E) total product of capital is higher than the total product of labour. 
A) marginal product of capital is higher than the marginal product of labour. 
B) average product of capital is higher than the average product of labour. 
C) marginal product of capital,per dollar spent on capital,is greater than the marginal product of labour,per dollar spent on labour. 
D) marginal product of capital,per dollar spent on capital,is less than the marginal product of labour,per dollar spent on labour. 
E) total product of capital is higher than the total product of labour.

Question 12

What is the definition of productivity?

Accepted Answer

A) the efficient use of technology 
B) output produced by a combination of two or more inputs 
C) output produced per unit of input 
D) a measure of input used 
E) the cost of a unit of output 
A) the efficient use of technology 
B) output produced by a combination of two or more inputs 
C) output produced per unit of input 
D) a measure of input used 
E) the cost of a unit of output

Question 13

In the long run,decreasing returns to scale are likely to be caused by

Accepted Answer

A) diminishing returns to the variable factor. 
B) decreasing costs. 
C) increasing specialization of labour. 
D) a decrease in factor prices. 
E) diseconomies of scale associated with management problems. 
A) diminishing returns to the variable factor. 
B) decreasing costs. 
C) increasing specialization of labour. 
D) a decrease in factor prices. 
E) diseconomies of scale associated with management problems.

Question 14

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should in order to minimize its production costs.

Accepted Answer

A) employ more labour and more capital 
B) employ more capital and less labour 
C) employ more labour and less capital 
D) not change its current factor use 
E) There is insufficient information to make a recommendation. 
A) employ more labour and more capital 
B) employ more capital and less labour 
C) employ more labour and less capital 
D) not change its current factor use 
E) There is insufficient information to make a recommendation.

Question 15

Economists collect and analyze data on output per worker and output per hour of work.What are they trying to measure by doing so?

Accepted Answer

A) the ratio of marginal products of factors 
B) productivity 
C) diminishing marginal returns 
D) the principle of substitution 
E) returns to scale 
A) the ratio of marginal products of factors 
B) productivity 
C) diminishing marginal returns 
D) the principle of substitution 
E) returns to scale

Question 16

Assume a firm is using 10 units of capital and 10 units of labour and is producing 10 widgets per hour.Now it doubles both inputs,resulting in output of 30 widgets per hour.This firm is experiencing

Accepted Answer

A) increasing returns. 
B) decreasing returns. 
C) diseconomies of scale. 
D) constant returns. 
E) increasing costs. 
A) increasing returns. 
B) decreasing returns. 
C) diseconomies of scale. 
D) constant returns. 
E) increasing costs.

Question 17

The figure below shows a family of cost curves for a firm.The subscripts 1,2,and 3 for the SRATC curves refer to different plant sizes.
   FIGURE 8- 3
-Refer to Figure 8- 3.Suppose this firm is producing output level Q3 with plant size 2.Now suppose this firm changes to plant size 3 and is producing output level Q5.We can say that

Accepted Answer

A) this firm has experienced economies of scale. 
B) the firm is then operating with the optimal plant size. 
C) output has increased less than in proportion to the increase in inputs. 
D) output has increased more than in proportion to the increase in inputs. 
E) output has increased exactly in proportion to the increase in inputs. 
A) this firm has experienced economies of scale. 
B) the firm is then operating with the optimal plant size. 
C) output has increased less than in proportion to the increase in inputs. 
D) output has increased more than in proportion to the increase in inputs. 
E) output has increased exactly in proportion to the increase in inputs.

Question 18

Suppose a firm experiences decreasing returns to scale.This is shown graphically by

Accepted Answer

A) a downward- sloping long- run marginal- cost curve. 
B) an increasing marginal product curve. 
C) a horizontal long- run average cost curve. 
D) a downward- sloping long- run average cost curve. 
E) an upward- sloping long- run average cost curve. 
A) a downward- sloping long- run marginal- cost curve. 
B) an increasing marginal product curve. 
C) a horizontal long- run average cost curve. 
D) a downward- sloping long- run average cost curve. 
E) an upward- sloping long- run average cost curve.

Question 19

Of the following,which is the least likely to represent a firm's long- run decision?

Accepted Answer

A) By how much should output be expanded from existing plants? 
B) What technique (technology)is the best to use under current factor pricing? 
C) What should be the size and design of a firm's new plant? 
D) Should the firm choose a method of production that uses relatively more capital than labour? 
E) Should the firm invest resources in the development of better technologies? 
A) By how much should output be expanded from existing plants? 
B) What technique (technology)is the best to use under current factor pricing? 
C) What should be the size and design of a firm's new plant? 
D) Should the firm choose a method of production that uses relatively more capital than labour? 
E) Should the firm invest resources in the development of better technologies?

Question 20

Assume a firm is using 10 units of labour and 10 units of capital and is producing 10 units of output per hour.Now both inputs are doubled,resulting in output rising to 18 units per hour.The firm is experiencing

Accepted Answer

A) decreasing returns to scale. 
B) economies of scale. 
C) increasing returns to scale. 
D) constant returns to scale. 
E) decreasing costs. 
A) decreasing returns to scale. 
B) economies of scale. 
C) increasing returns to scale. 
D) constant returns to scale. 
E) decreasing costs.

Isoquants are usually drawn convex when viewed from the origin,reflecting the standard assumption

A very- long- run consideration that could change a firm's production function is

What information is displayed by an isoquant?

FIGURE 8- 4 -Refer to Figure 8- 4.The firm is initially producing 1000 units and minimizing its production cost at point B.Suppose the prices of capital and labour each fall by 20%.If the firm wishes to continue producing the same level of output it will

A firm's least- cost position for producing a given output level occurs at that point where

A downward- sloping LRAC curve will shift downward because of

Suppose Commercial Footware Inc.is making a cost- minimizing decision about the level of output to produce with a given technology.Which of the following is a long- run decision?

A profit- maximizing firm will increase its use of capital and decrease its use of labour when the

What is the definition of productivity?

In the long run,decreasing returns to scale are likely to be caused by

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should in order to minimize its production costs.

Economists collect and analyze data on output per worker and output per hour of work.What are they trying to measure by doing so?

Assume a firm is using 10 units of capital and 10 units of labour and is producing 10 widgets per hour.Now it doubles both inputs,resulting in output of 30 widgets per hour.This firm is experiencing

Suppose a firm experiences decreasing returns to scale.This is shown graphically by

Of the following,which is the least likely to represent a firm's long- run decision?

Assume a firm is using 10 units of labour and 10 units of capital and is producing 10 units of output per hour.Now both inputs are doubled,resulting in output rising to 18 units per hour.The firm is experiencing

Economic Issues and Concepts

Economic Theories,data,and Graphs

Demand,supply,and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Short Run

Competitive Markets

Monopoly,cartels,and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

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Exam 8: Producers in the Long Run

Isoquants are usually drawn convex when viewed from the origin,reflecting the standard assumption

A very- long- run consideration that could change a firm's production function is

What information is displayed by an isoquant?

FIGURE 8- 4 -Refer to Figure 8- 4.The firm is initially producing 1000 units and minimizing its production cost at point B.Suppose the prices of capital and labour each fall by 20%.If the firm wishes to continue producing the same level of output it will

A firm's least- cost position for producing a given output level occurs at that point where

A downward- sloping LRAC curve will shift downward because of

Suppose Commercial Footware Inc.is making a cost- minimizing decision about the level of output to produce with a given technology.Which of the following is a long- run decision?

A profit- maximizing firm will increase its use of capital and decrease its use of labour when the

What is the definition of productivity?

In the long run,decreasing returns to scale are likely to be caused by

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should in order to minimize its production costs.

Economists collect and analyze data on output per worker and output per hour of work.What are they trying to measure by doing so?

Assume a firm is using 10 units of capital and 10 units of labour and is producing 10 widgets per hour.Now it doubles both inputs,resulting in output of 30 widgets per hour.This firm is experiencing

Suppose a firm experiences decreasing returns to scale.This is shown graphically by

Of the following,which is the least likely to represent a firm's long- run decision?

Assume a firm is using 10 units of labour and 10 units of capital and is producing 10 units of output per hour.Now both inputs are doubled,resulting in output rising to 18 units per hour.The firm is experiencing

Economic Issues and Concepts

Economic Theories,data,and Graphs

Demand,supply,and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Short Run

Competitive Markets

Monopoly,cartels,and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters