Question 1

A graph showing all the combinations of capital and labor available for a given total cost is the

Accepted Answer

A)  isocost line. 
B)  isoquant. 
C)  budget constraint. 
D)  expenditure set. 
A)  isocost line. 
B)  isoquant. 
C)  budget constraint. 
D)  expenditure set.

Question 2

When Burning Bob's Salsa House hires one worker, 30 customers can be served in an hour. When Burning Bob's Salsa House hires two workers, 50 customers can be served in an hour. The marginal product of the second worker is ________ customers served per hour.

Accepted Answer

A)  20 
B)  30 
C)  50 
D)  67.5 
A)  20 
B)  30 
C)  50 
D)  67.5

Question 3

Refer to the information provided in Table 7.5 below to answer the question that follows.
Table 7.5
 $$\begin{array} { c c c c c c c } 
\hline \mathrm { L } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline \mathrm { Q } & 0 & 15 & 30 & 45 & 60 & 75 \
\hline
\end{array}$$
-Refer to Table 7.5. Suppose output varies, ceteris paribus, with labor input in the manner displayed in the table above. After how many units of labor do diminishing returns set in?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  They do not set in. 
A)  3 
B)  4 
C)  5 
D)  They do not set in.

Question 4

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the first two workers is

Accepted Answer

A)  16. 
B)  20. 
C)  36. 
D)  46. 
A)  16. 
B)  20. 
C)  36. 
D)  46.

Question 5

Use the information provided in Table 7.1 below to answer the question(s) that follow. 
Inputs Required to Produce a Product Using Alternative Technologies 
$\begin{array} { c c c } 
\hline \text { Technology } & \text { Units of Capital } & \text { Number of Employees } \
\hline \text { A } & 4 & 18 \
\text { B } & 6 & 12 \
\text { C } & 8 & 8 \
\text { D } & 12 & 6 \
\hline
\end{array}$
Table 7.1

-Refer to Table 7.1. If the hourly wage rate is $10 and the hourly price of capital is $25, which production technology should be selected?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 6

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 average product of labor with four workers is

Accepted Answer

A)  3. 
B)  3.3. 
C)  5. 
D)  13.5. 
A)  3. 
B)  3.3. 
C)  5. 
D)  13.5.

Question 7

If the product derived from the last dollar spent on labor is less than the product derived from the last dollar spent on capital, then the firm

Accepted Answer

A)  is minimizing costs. 
B)  should use more labor and less capital to minimize costs. 
C)  should use less labor and more capital to minimize costs. 
D)  should increase the price paid to labor and decrease the price paid to capital to minimize costs. 
A)  is minimizing costs. 
B)  should use more labor and less capital to minimize costs. 
C)  should use less labor and more capital to minimize costs. 
D)  should increase the price paid to labor and decrease the price paid to capital to minimize costs.

Question 8

If a company is earning a rate of return less than the return necessary for the business to continue operations in the long run, then

Accepted Answer

A)  total revenue exceeds total costs. 
B)  total costs are less than a normal rate of return. 
C)  the firm's normal rate of return is zero. 
D)  the firm is suffering an economic loss. 
A)  total revenue exceeds total costs. 
B)  total costs are less than a normal rate of return. 
C)  the firm's normal rate of return is zero. 
D)  the firm is suffering an economic loss.

Question 9

The optimal method of production maximizes cost for a given level of output.

Accepted Answer

A) True 
 B)False

Question 10

Economic costs

Accepted Answer

A)  include both a normal rate of return on investment and the opportunity cost of each factor of production. 
B)  are equal to the direct costs of hiring all factors of production. 
C)  are the opportunity cost of each factor of production minus any interest charges paid on borrowed funds. 
D)  are equal to total revenue minus accounting profit. 
A)  include both a normal rate of return on investment and the opportunity cost of each factor of production. 
B)  are equal to the direct costs of hiring all factors of production. 
C)  are the opportunity cost of each factor of production minus any interest charges paid on borrowed funds. 
D)  are equal to total revenue minus accounting profit.

Question 11

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 12

Assume the total product of two workers is 200 and the total product of three workers is 300. The three workers' average product is ________ while the third worker's marginal product is ________.

Accepted Answer

A)  80; 40 
B)  40; 80 
C)  100; 100 
D)  300; 200 
A)  80; 40 
B)  40; 80 
C)  100; 100 
D)  300; 200

Question 13

A firm is operating such that the marginal product of labor is 10 and the marginal product of capital is 20. The firm is minimizing its costs only if

Accepted Answer

A)  the wage is half the rental rate. 
B)  the rental rate is half the wage. 
C)  since capital is more productive than labor, the firm must be minimizing cost. 
D)  Given this information the firm can't be minimizing cost under any circumstances. 
A)  the wage is half the rental rate. 
B)  the rental rate is half the wage. 
C)  since capital is more productive than labor, the firm must be minimizing cost. 
D)  Given this information the firm can't be minimizing cost under any circumstances.

Question 14

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Accepted Answer

A)  indifference curve. 
B)  isoquant. 
C)  isocost line. 
D)  production function. 
A)  indifference curve. 
B)  isoquant. 
C)  isocost line. 
D)  production function.

Question 15

Refer to Scenario 7.6 below to answer the question(s) that follow.
SCENARIO 7.6: Upon graduating with an accounting degree, you open your own accounting firm of which you and your assistant are the only employees. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $50,000 annually. Last year you earned a total revenue of $120,000. Rent and supplies last year were $50,000. Your assistant's salary is $30,000 annually.
-Refer to Scenario 7.6. Your annual operating profit is

Accepted Answer

A)  -$10,000. 
B)  $40,000. 
C)  $70,000. 
D)  $80,000. 
A)  -$10,000. 
B)  $40,000. 
C)  $70,000. 
D)  $80,000.

Question 16

Refer to the information provided in Figure 7.1 below to answer the following question(s).   Figure 7.1
-Refer to Figure 7.1. A corn producer produces 80 bushels of corn and sells each bushel at $5. The cost of producing each unit bushel is $2. This corn producer's total revenue is ________ and profit if ________.

Accepted Answer

A)  $160; $0 
B)  $240; $80 
C)  $400; $240 
D)  $400; $160 
A)  $160; $0 
B)  $240; $80 
C)  $400; $240 
D)  $400; $160

Question 17

Refer to the information provided in Figure 7.7 below to answer the question(s) that follow.   Figure 7.7
-Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant B to isoquant A, the number of roller skates produced

Accepted Answer

A)  decreases. 
B)  increases. 
C)  remains constant, but Roller Skates Unlimited uses more capital and more labor. 
D)  remains constant, but input prices have risen. 
A)  decreases. 
B)  increases. 
C)  remains constant, but Roller Skates Unlimited uses more capital and more labor. 
D)  remains constant, but input prices have risen.

Question 18

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 $25, then the price of labor is

Accepted Answer

A)  $1. 
B)  $25. 
C)  $80. 
D)  indeterminate from the information given. 
A)  $1. 
B)  $25. 
C)  $80. 
D)  indeterminate from the information given.

Question 19

Use the information provided in Table 7.2 below to answer the question(s) that follow. 
Inputs Required to Produce a Product Using Alternative Technologies
$\begin{array} { c c c } 
\hline \text { Technology } & \text { Units of Capital } & \text { Number of Employees } \
\hline \text { A } & 16 & 8 \
\text { B } & 12 & 12 \
\text { C } & 8 & 20 \
\text { D } & 6 & 24 \
\hline
\end{array}$

-Refer to Table 7.2. Which technology is the most capital intensive?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 20

Refer to the information provided in Figure 7.6 below to answer the question(s) that follow.   Figure 7.6
-Refer to Figure 7.6. If this shoe manufacturer increases labor from 20 to 25 (moving along the given isoquant with Q=50), the marginal product of the 25th worker

Accepted Answer

A)  is zero, as the total number of shoes produced remains at 50. 
B)  is 7.5, as capital can be reduced by 7.5 units when the 25th worker is hired. 
C)  cannot be determined because output remains constant. 
D)  cannot be determined because both capital and labor have been increased. 
A)  is zero, as the total number of shoes produced remains at 50. 
B)  is 7.5, as capital can be reduced by 7.5 units when the 25th worker is hired. 
C)  cannot be determined because output remains constant. 
D)  cannot be determined because both capital and labor have been increased.

A graph showing all the combinations of capital and labor available for a given total cost is the

When Burning Bob's Salsa House hires one worker, 30 customers can be served in an hour. When Burning Bob's Salsa House hires two workers, 50 customers can be served in an hour. The marginal product of the second worker is ________ customers served per hour.

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the first two workers is

If the product derived from the last dollar spent on labor is less than the product derived from the last dollar spent on capital, then the firm

If a company is earning a rate of return less than the return necessary for the business to continue operations in the long run, then

The optimal method of production maximizes cost for a given level of output.

Economic costs

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

Assume the total product of two workers is 200 and the total product of three workers is 300. The three workers' average product is while the third worker's marginal product is .

A firm is operating such that the marginal product of labor is 10 and the marginal product of capital is 20. The firm is minimizing its costs only if

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Refer to the information provided in Figure 7.1 below to answer the following question(s). Figure 7.1 -Refer to Figure 7.1. A corn producer produces 80 bushels of corn and sells each bushel at $5. The cost of producing each unit bushel is $2. This corn producer's total revenue is and profit if .

Refer to the information provided in Figure 7.7 below to answer the question(s) that follow. Figure 7.7 -Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant B to isoquant A, the number of roller skates produced

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 $25, then the price of labor is

Use the information provided in Table 7.2 below to answer the question(s) that follow. Inputs Required to Produce a Product Using Alternative Technologies Technology Units of Capital Number of Employees A 16 8 B 12 12 C 8 20 D 6 24 -Refer to Table 7.2. Which technology is the most capital intensive?

Refer to the information provided in Figure 7.6 below to answer the question(s) that follow. Figure 7.6 -Refer to Figure 7.6. If this shoe manufacturer increases labor from 20 to 25 (moving along the given isoquant with Q=50), the marginal product of the 25th worker

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

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

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

A graph showing all the combinations of capital and labor available for a given total cost is the

When Burning Bob's Salsa House hires one worker, 30 customers can be served in an hour. When Burning Bob's Salsa House hires two workers, 50 customers can be served in an hour. The marginal product of the second worker is ________ customers served per hour.

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the first two workers is

If the product derived from the last dollar spent on labor is less than the product derived from the last dollar spent on capital, then the firm

If a company is earning a rate of return less than the return necessary for the business to continue operations in the long run, then

The optimal method of production maximizes cost for a given level of output.

Economic costs

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

Assume the total product of two workers is 200 and the total product of three workers is 300. The three workers' average product is ________ while the third worker's marginal product is ________.

A firm is operating such that the marginal product of labor is 10 and the marginal product of capital is 20. The firm is minimizing its costs only if

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Refer to the information provided in Figure 7.7 below to answer the question(s) that follow. Figure 7.7 -Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant B to isoquant A, the number of roller skates produced

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 $25, then the price of labor is

Refer to the information provided in Figure 7.6 below to answer the question(s) that follow. Figure 7.6 -Refer to Figure 7.6. If this shoe manufacturer increases labor from 20 to 25 (moving along the given isoquant with Q=50), the marginal product of the 25th worker

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

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Assume the total product of two workers is 200 and the total product of three workers is 300. The three workers' average product is while the third worker's marginal product is .