Question 1

A change in input prices has no impact on the budget line.

Accepted Answer

A) True 
 B)False

Question 2

In the short run the firm has no more than one fixed input.

Accepted Answer

A) True 
 B)False

Question 3

The following table depicts the production relationship between units of labor and output of pepper on Pietrov's Pepper Farm.
 $\begin{array}{cccc}
 \underline{\text { Labor }} &  \underline{\text { Peppers }} &   \underline{ \text { Labar } } &  \underline{\text { Peppers }} \
1 & 10 & 6 & 75 \
2 & 25 & 7 & 77 \
3 & 45 & 8 & 78 \
4 & 60 & 9 & 77 \
5 & 70 & 10 & 75
\end{array}$ 
Graphically show the three zones of production corresponding to increasing, decreasing, and negative marginal product, noting the point of diminishing returns.

Accepted Answer

Zone 1 shows rising marginal physical pr

Question 4

How long is the long run?

Accepted Answer

In the long run, all inputs are variable

Question 5

Some costs cannot be varied no matter how long the period in question.These are called

Accepted Answer

A)  overheads. 
B)  total costs. 
C)  fixed costs. 
D)  variable costs. 
A)  overheads. 
B)  total costs. 
C)  fixed costs. 
D)  variable costs.

Question 6

Marginal cost

Accepted Answer

A)  is the increase in total cost resulting from production of one additional unit of output. 
B)  is the cost of the marginal unit of output. 
C)  and the average cost curve are U-shaped. 
D)  All of the above are correct. 
A)  is the increase in total cost resulting from production of one additional unit of output. 
B)  is the cost of the marginal unit of output. 
C)  and the average cost curve are U-shaped. 
D)  All of the above are correct.

Question 7

Table 7-4
 $\begin{array}{c}
\text { CAPITAL }
 \begin{array}{rrrrrrr}
0 & 340 & 490 & 600 & 692 & 773 & 840 \
5 & 316 & 448 & 548 & 632 & 705 & 775 \
4 & 282 & 400 & 480 & 564 & 632 & 692 \
3 & 245 & 346 & 423 & 490 & 548 & 600 \
2 & 200 & 282 & 346 & 400 & 448 & 490 \
1 & 141 & 200 & 245 & 282 & 316 & 346 \
0 & 1 & 2 & 3 & 4 & 5 &6
\end{array}\
\quad\quad\quad\quad\quad\text { LABOR }
\end{array}$

-The production relationship in Table 7-4 indicates a process characterized by

Accepted Answer

A)  decreasing returns to scale. 
B)  constant returns to scale. 
C)  increasing returns to scale. 
D)  increasing then decreasing returns to scale. 
A)  decreasing returns to scale. 
B)  constant returns to scale. 
C)  increasing returns to scale. 
D)  increasing then decreasing returns to scale.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A firm's AC will eventually begin to rise because

Accepted Answer

A)  managers' salaries rise with output. 
B)  bottlenecks may be reached for some inputs. 
C)  MFC begins to rise near capacity. 
D)  the range of negative returns is reached. 
A)  managers' salaries rise with output. 
B)  bottlenecks may be reached for some inputs. 
C)  MFC begins to rise near capacity. 
D)  the range of negative returns is reached.

Question 10

A change in one input price will cause the slope of the budget line to change.

Accepted Answer

A) True 
 B)False

Question 11

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

Accepted Answer

A)  MRP/$ of additional labor falls below MRP/$ of additional tools. 
B)  MRP/$ of additional capital increases above MRP/$ of additional tools. 
C)  MRP/$ of additional labor becomes equal to MRP/$ of additional tools. 
D)  MRP/$ of the additional labor falls to zero. 
A)  MRP/$ of additional labor falls below MRP/$ of additional tools. 
B)  MRP/$ of additional capital increases above MRP/$ of additional tools. 
C)  MRP/$ of additional labor becomes equal to MRP/$ of additional tools. 
D)  MRP/$ of the additional labor falls to zero.

Question 12

A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.

Accepted Answer

A) True 
 B)False

Question 13

"Optimal input curve analysis is useless.Since firms never know the demand for their product with certainty, they will rarely operate at the optimal input combination." Agree or disagree?

Accepted Answer

Disagree.Optimal input analysis is a gui

Question 14

Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

Accepted Answer

A) True 
 B)False

Question 15

If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its inputs

Accepted Answer

A)  output will be below optimal. 
B)  the MRP of the input will be below its price. 
C)  costs will not be minimal. 
D)  relative input prices need to change. 
A)  output will be below optimal. 
B)  the MRP of the input will be below its price. 
C)  costs will not be minimal. 
D)  relative input prices need to change.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Production indifference curves bow inward toward the graph's origin because of

Accepted Answer

A)  the law of diminishing returns to a single input. 
B)  the law of diminishing marginal returns to scale. 
C)  constant returns to scale. 
D)  minimizing costs in the short run. 
A)  the law of diminishing returns to a single input. 
B)  the law of diminishing marginal returns to scale. 
C)  constant returns to scale. 
D)  minimizing costs in the short run.

Question 18

The marginal cost curve shows the per-unit cost associated with various levels of output.

Accepted Answer

A) True 
 B)False

Question 19

Marginal revenue product equals the marginal physical product multiplied by the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 20

The long run is a period long enough so that one of the firm's commitments ends.

Accepted Answer

A) True 
 B)False

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

A change in input prices has no impact on the budget line.

In the short run the firm has no more than one fixed input.

How long is the long run?

Some costs cannot be varied no matter how long the period in question.These are called

Marginal cost

Table 7-4 CAPITAL 0 340 490 600 692 773 840 5 316 448 548 632 705 775 4 282 400 480 564 632 692 3 245 346 423 490 548 600 2 200 282 346 400 448 490 1 141 200 245 282 316 346 0 1 2 3 4 5 6 LABOR -The production relationship in Table 7-4 indicates a process characterized by

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

A firm's AC will eventually begin to rise because

A change in one input price will cause the slope of the budget line to change.

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.

"Optimal input curve analysis is useless.Since firms never know the demand for their product with certainty, they will rarely operate at the optimal input combination." Agree or disagree?

Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its inputs

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

Production indifference curves bow inward toward the graph's origin because of

The marginal cost curve shows the per-unit cost associated with various levels of output.

Marginal revenue product equals the marginal physical product multiplied by the quantity demanded.

The long run is a period long enough so that one of the firm's commitments ends.

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 I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

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

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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