Question 1

The increased participation of married women in the work force reflects the increasing opportunity cost of not working.

Accepted Answer

A) True 
 B)False  True

Question 2

Isoquants reflect the fact that in the long run:

Accepted Answer

A) inputs can be substituted for each other. 
B) a fixed set of inputs can produce different levels of output. 
C) inputs used in production are complementary in nature. 
D) different levels of input can be used to satisfy a budget constraint. 
A) inputs can be substituted for each other. 
B) a fixed set of inputs can produce different levels of output. 
C) inputs used in production are complementary in nature. 
D) different levels of input can be used to satisfy a budget constraint. A

Question 3

In an industry characterized by a natural monopoly, which of the following characteristics will be observed?

Accepted Answer

A) The long-run average cost curve will be upward sloping. 
B) The market price of the product will be very low. 
C) Competition is both impossible and inefficient. 
D) Number of producers operating in this market will be low. 
A) The long-run average cost curve will be upward sloping. 
B) The market price of the product will be very low. 
C) Competition is both impossible and inefficient. 
D) Number of producers operating in this market will be low. C

Question 4

_____ is the locus of the minimum points of various short-run average cost curves depicting different plant sizes.

Accepted Answer

A) Long-run marginal cost 
B) Expansion path 
C) Long-run average cost 
D) Isocost 
A) Long-run marginal cost 
B) Expansion path 
C) Long-run average cost 
D) Isocost

Question 5

A firm's cost can decrease for each of the following reasons, EXCEPT:

Accepted Answer

A) an increase in productivity due to experience. 
B) an improvement in productivity of capital employed. 
C) an improvement in work environment and quality of management. 
D) an increase in input prices. 
A) an increase in productivity due to experience. 
B) an improvement in productivity of capital employed. 
C) an improvement in work environment and quality of management. 
D) an increase in input prices.

Question 6

The following figure shows the cost curves of a firm producing good X.
  
-Refer to Figure. The area EFGH is:

Accepted Answer

A) the loss incurred by the firm when market price is $3.5. 
B) the profit earned by the firm when the market price is $3.5. 
C) the loss incurred by the firm when the market price is $5. 
D) the revenue earned by the firm when the market price is $5. 
A) the loss incurred by the firm when market price is $3.5. 
B) the profit earned by the firm when the market price is $3.5. 
C) the loss incurred by the firm when the market price is $5. 
D) the revenue earned by the firm when the market price is $5.

Question 7

What is a natural monopoly?

Accepted Answer

The situation in which technology makes

Question 8

The following figure shows the cost curves of a firm producing good X.
  
-Refer to Figure .What does the area ABCD signify?

Accepted Answer

A) The total revenue earned when the market price is $8 per unit of X. 
B) The total profit earned when the market price is $8 per unit of X. 
C) The total revenue earned when the market price is $5 per unit of X. 
D) The total profit earned when the market price is $5 per unit of X. 
A) The total revenue earned when the market price is $8 per unit of X. 
B) The total profit earned when the market price is $8 per unit of X. 
C) The total revenue earned when the market price is $5 per unit of X. 
D) The total profit earned when the market price is $5 per unit of X.

Question 9

Burkes Inc.should stop production in the short run if the market price of its product is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 10

The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children.The market price for a doll is $4 per unit.

-Refer to Figure .If the firm produces 2,000 dolls per month when the market price is $4:

Accepted Answer

A) it will incur a loss. 
B) it will earn maximum profit. 
C) it will minimize cost on inputs. 
D) it will earn the highest revenue. 
A) it will incur a loss. 
B) it will earn maximum profit. 
C) it will minimize cost on inputs. 
D) it will earn the highest revenue.

Question 11

Which of the following cases exhibit increasing returns to scale?

Accepted Answer

A) Output increases by 5 percent when inputs are increased by 6 percent. 
B) Output increases by 6 percent when inputs are increased by 5 percent. 
C) Output increases by 7 percent when inputs are increased by 7 percent. 
D) Output declines by 2 percent when inputs are increased by 1 percent. 
A) Output increases by 5 percent when inputs are increased by 6 percent. 
B) Output increases by 6 percent when inputs are increased by 5 percent. 
C) Output increases by 7 percent when inputs are increased by 7 percent. 
D) Output declines by 2 percent when inputs are increased by 1 percent.

Question 12

You decide that it is time to buy a big family car.The opportunity cost you consider is:

Accepted Answer

A) the cost of the car. 
B) the increase in comfort for your family while traveling. 
C) the return this money would have earned if it was invested otherwise. 
D) the inconvenience you and your family are bearing on account of your old car. 
A) the cost of the car. 
B) the increase in comfort for your family while traveling. 
C) the return this money would have earned if it was invested otherwise. 
D) the inconvenience you and your family are bearing on account of your old car.

Question 13

The average cost of production at the profit maximizing output level for Jones Inc., is $4 per unit.The average variable cost of production is $3.5 per unit at this output level.The introduction of cheaper substitutes reduces the demand drastically and the market price falls to $1.5 per unit.If the minimum average variable cost the firm must incur is $2.5, identify the correct statement from the following.

Accepted Answer

A) There are output levels where revenue exceeds variable cost when the price is $1.5 per unit. 
B) The firm will continue to operate in the short run. 
C) The firm will breakeven at the price of $1.5 per unit. 
D) The firm will shut down. 
A) There are output levels where revenue exceeds variable cost when the price is $1.5 per unit. 
B) The firm will continue to operate in the short run. 
C) The firm will breakeven at the price of $1.5 per unit. 
D) The firm will shut down.

Question 14

If decreasing long-run average cost is inherent in an industry's technology, then only one supplier can satisfy the entire market.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true about the total product curve?

Accepted Answer

A) If input usage expands uniformly throughout the stages of production, then the slope of the total product curve is one. 
B) The total product curve is inverted U-shaped. 
C) As input usage gradually expands from low levels, total output begins to rise at an increasing pace. 
D) If the use of inputs is too high at the initial stage of production, then the total prod-uct curve becomes horizontal. 
A) If input usage expands uniformly throughout the stages of production, then the slope of the total product curve is one. 
B) The total product curve is inverted U-shaped. 
C) As input usage gradually expands from low levels, total output begins to rise at an increasing pace. 
D) If the use of inputs is too high at the initial stage of production, then the total prod-uct curve becomes horizontal.

Question 16

An isocost line depicts:

Accepted Answer

A) the minimum cost required to produce a certain level of output, given input prices. 
B) the input combination to produce a certain level of output. 
C) the input combinations that satisfy a budget constraint, given input prices. 
D) the maximum output that can be produced by a firm given its budget constraint. 
A) the minimum cost required to produce a certain level of output, given input prices. 
B) the input combination to produce a certain level of output. 
C) the input combinations that satisfy a budget constraint, given input prices. 
D) the maximum output that can be produced by a firm given its budget constraint.

Question 17

Gemma and Emily expect investments A and B to yield an annual return of 15 percent and 10 percent respectively.While Gemma invests in A, Emily invests in B.This implies that Gemma has a higher risk tolerance than Emily.

Accepted Answer

A) True 
 B)False

Question 18

The slope of the total variable cost curve gives the average cost of production.

Accepted Answer

A) True 
 B)False

Question 19

Explain the reason behind the declining gap between average cost (AC) and average variable cost (AVC) curves at higher levels of output.

Accepted Answer

The gap between the AC and the AVC is th

Question 20

The downward-sloping portion of the marginal cost curve is the only portion that matters in production.

Accepted Answer

A) True 
 B)False

The increased participation of married women in the work force reflects the increasing opportunity cost of not working.

Isoquants reflect the fact that in the long run:

In an industry characterized by a natural monopoly, which of the following characteristics will be observed?

_____ is the locus of the minimum points of various short-run average cost curves depicting different plant sizes.

A firm's cost can decrease for each of the following reasons, EXCEPT:

The following figure shows the cost curves of a firm producing good X. -Refer to Figure. The area EFGH is:

What is a natural monopoly?

The following figure shows the cost curves of a firm producing good X. -Refer to Figure .What does the area ABCD signify?

Burkes Inc.should stop production in the short run if the market price of its product is less than its average total cost of production.

The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children.The market price for a doll is $4 per unit. -Refer to Figure .If the firm produces 2,000 dolls per month when the market price is $4:

Which of the following cases exhibit increasing returns to scale?

You decide that it is time to buy a big family car.The opportunity cost you consider is:

If decreasing long-run average cost is inherent in an industry's technology, then only one supplier can satisfy the entire market.

Which of the following statements is true about the total product curve?

An isocost line depicts:

Gemma and Emily expect investments A and B to yield an annual return of 15 percent and 10 percent respectively.While Gemma invests in A, Emily invests in B.This implies that Gemma has a higher risk tolerance than Emily.

The slope of the total variable cost curve gives the average cost of production.

Explain the reason behind the declining gap between average cost (AC) and average variable cost (AVC) curves at higher levels of output.

The downward-sloping portion of the marginal cost curve is the only portion that matters in production.

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters

Exam 4: Cost and Production

The increased participation of married women in the work force reflects the increasing opportunity cost of not working.

Isoquants reflect the fact that in the long run:

In an industry characterized by a natural monopoly, which of the following characteristics will be observed?

_____ is the locus of the minimum points of various short-run average cost curves depicting different plant sizes.

A firm's cost can decrease for each of the following reasons, EXCEPT:

The following figure shows the cost curves of a firm producing good X. -Refer to Figure. The area EFGH is:

What is a natural monopoly?

The following figure shows the cost curves of a firm producing good X. -Refer to Figure .What does the area ABCD signify?

Burkes Inc.should stop production in the short run if the market price of its product is less than its average total cost of production.

The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children.The market price for a doll is $4 per unit. -Refer to Figure .If the firm produces 2,000 dolls per month when the market price is $4:

Which of the following cases exhibit increasing returns to scale?

You decide that it is time to buy a big family car.The opportunity cost you consider is:

If decreasing long-run average cost is inherent in an industry's technology, then only one supplier can satisfy the entire market.

Which of the following statements is true about the total product curve?

An isocost line depicts:

Gemma and Emily expect investments A and B to yield an annual return of 15 percent and 10 percent respectively.While Gemma invests in A, Emily invests in B.This implies that Gemma has a higher risk tolerance than Emily.

The slope of the total variable cost curve gives the average cost of production.

Explain the reason behind the declining gap between average cost (AC) and average variable cost (AVC) curves at higher levels of output.

The downward-sloping portion of the marginal cost curve is the only portion that matters in production.

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters