Question 1

A firm uses two inputs, A and B.At its optimal choice of input proportions,

Accepted Answer

A) MRP of A = MRP of B. 
B) MRPA/PA = MRPB/PB. 
C) MPP of A = MPP of B. 
D) All of the above are correct. 
A) MRP of A = MRP of B. 
B) MRPA/PA = MRPB/PB. 
C) MPP of A = MPP of B. 
D) All of the above are correct.

Question 2

Economies of scale is another term for

Accepted Answer

A) increasing returns to scale. 
B) constant returns to scale. 
C) increasing marginal physical productivity. 
D) decreasing returns to scale. 
A) increasing returns to scale. 
B) constant returns to scale. 
C) increasing marginal physical productivity. 
D) decreasing returns to scale.

Question 3

Figure 7-5  
-Which of the graphs in Figure 7-5 could be a firm's total fixed cost curve?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
A) (a) 
B) (b) 
C) (c) 
D) (d)

Question 4

A production indifference curve shows all combinations of input quantities capable of producing a given quantity of output.

Accepted Answer

A) True 
 B)False

Question 5

Figure 7-6  
-Which of the following is correct?

Accepted Answer

A) AC = AFC/Q 
B) AC = AFC + AVC 
C) AC = MFC + MVC 
D) TFC + TMC = MFC + MVC 
A) AC = AFC/Q 
B) AC = AFC + AVC 
C) AC = MFC + MVC 
D) TFC + TMC = MFC + MVC

Question 6

Input choices in the present are often affected by past decisions.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following observations is true?

Accepted Answer

A) TFC remains the same irrespective of units of output produced. 
B) TVC remains the same irrespective of units of output produced. 
C) TVC falls as the unit of output increases. 
D) AFC increases as output increases further and further. 
A) TFC remains the same irrespective of units of output produced. 
B) TVC remains the same irrespective of units of output produced. 
C) TVC falls as the unit of output increases. 
D) AFC increases as output increases further and further.

Question 8

Determining the optimal choice of input combinations generally does not involve

Accepted Answer

A) substitution of one input for another. 
B) fixing the level of technology in the long run. 
C) minimizing cost, given the prices of inputs. 
D) assessing the productivity of various inputs. 
A) substitution of one input for another. 
B) fixing the level of technology in the long run. 
C) minimizing cost, given the prices of inputs. 
D) assessing the productivity of various inputs.

Question 9

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster.For the roller coaster operator, electricity is

Accepted Answer

A) an opportunity cost. 
B) a variable cost. 
C) a fixed cost. 
D) a sunk cost. 
A) an opportunity cost. 
B) a variable cost. 
C) a fixed cost. 
D) a sunk cost.

Question 10

Cost curves in the long run differ from cost curves in the short run.

Accepted Answer

A) True 
 B)False

Question 11

"Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve." True or false?

Accepted Answer

A) True 
 B)False

Question 12

In most businesses there is only one way to produce output.

Accepted Answer

A) True 
 B)False

Question 13

When the marginal revenue product of an input is less than its price, the

Accepted Answer

A) producer should expand the use of that input. 
B) price of the input will automatically rise in a free market. 
C) producer should reduce the use of that input. 
D) marginal physical product of that input must be below its average physical product. 
A) producer should expand the use of that input. 
B) price of the input will automatically rise in a free market. 
C) producer should reduce the use of that input. 
D) marginal physical product of that input must be below its average physical product.

Question 14

Figure 7-2  
-In Figure 7-2 at an output of 500, marginal cost equals

Accepted Answer

A) 10. 
B) 20. 
C) 30. 
D) 40. 
A) 10. 
B) 20. 
C) 30. 
D) 40.

Question 15

The total physical product of an input is the same thing as its

Accepted Answer

A) total revenue product. 
B) marginal physical product times output. 
C) output. 
D) total consumer's surplus. 
A) total revenue product. 
B) marginal physical product times output. 
C) output. 
D) total consumer's surplus.

Question 16

Figure 7-4  
-Following a rash of airplane bombs, the airlines have been forced to increase security at a cost of $30 million per year.The number of inspectors and machines does not vary with the number of passengers-the airlines must have sufficient staff available to handle the full-capacity load.Which graph in Figure 7-4 best illustrates the impact of the security expenditures?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 17

If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing

Accepted Answer

A) increasing returns to scale. 
B) decreasing returns to scale. 
C) constant returns to scale. 
D) increasing costs per unit of output. 
A) increasing returns to scale. 
B) decreasing returns to scale. 
C) constant returns to scale. 
D) increasing costs per unit of output.

Question 18

Average physical product measures the output per unit of input.

Accepted Answer

A) True 
 B)False

Question 19

Average cost curves decline because

Accepted Answer

A) fixed cost is spread out over larger amounts of production. 
B) it becomes cheaper to produce an infinite amount of goods. 
C) additional units of production are inferior. 
D) variable costs increase with each additional amount of production. 
A) fixed cost is spread out over larger amounts of production. 
B) it becomes cheaper to produce an infinite amount of goods. 
C) additional units of production are inferior. 
D) variable costs increase with each additional amount of production.

Question 20

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

Accepted Answer

A) increasing returns to scale. 
B) decreasing returns to scale. 
C) constant returns to scale. 
D) increasing costs per unit of output. 
A) increasing returns to scale. 
B) decreasing returns to scale. 
C) constant returns to scale. 
D) increasing costs per unit of output.

Exam 7: Production Inputs and Cost Building Blocks for Supply Analysis

A firm uses two inputs, A and B.At its optimal choice of input proportions,

Economies of scale is another term for

Figure 7-5 -Which of the graphs in Figure 7-5 could be a firm's total fixed cost curve?

A production indifference curve shows all combinations of input quantities capable of producing a given quantity of output.

Figure 7-6 -Which of the following is correct?

Input choices in the present are often affected by past decisions.

Which of the following observations is true?

Determining the optimal choice of input combinations generally does not involve

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster.For the roller coaster operator, electricity is

Cost curves in the long run differ from cost curves in the short run.

"Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve." True or false?

In most businesses there is only one way to produce output.

When the marginal revenue product of an input is less than its price, the

Figure 7-2 -In Figure 7-2 at an output of 500, marginal cost equals

The total physical product of an input is the same thing as its

If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing

Average physical product measures the output per unit of input.

Average cost curves decline because

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Output Price and Profit the Importance of Marginal Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

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