Question 1

Which of the following assumptions is made by economists while constructing a firm's marginal cost [MC] and average cost [AC] curves?

Accepted Answer

A) Input prices are constant. 
B) Output is constant. 
C) Output price is constant. 
D) Technology will vary. 
A) Input prices are constant. 
B) Output is constant. 
C) Output price is constant. 
D) Technology will vary. A

Question 2

In the short run,a firm's marginal cost rises because of:

Accepted Answer

A) a decline in output prices. 
B) a decline in marginal productivity of inputs. 
C) decreasing returns to scale. 
D) the flexibility in input usage. 
A) a decline in output prices. 
B) a decline in marginal productivity of inputs. 
C) decreasing returns to scale. 
D) the flexibility in input usage. B

Question 3

Which of the following most completely describes the cost to a firm associated with the use of its resources in a particular way?

Accepted Answer

A) Its monetary outlay for inputs 
B) Its explicit cost 
C) The implicit cost of not renting its own resources 
D) The opportunity cost of its resources 
A) Its monetary outlay for inputs 
B) Its explicit cost 
C) The implicit cost of not renting its own resources 
D) The opportunity cost of its resources D

Question 4

Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:

Accepted Answer

A) increasing marginal product of labor. 
B) constant returns scale. 
C) increasing returns to scale. 
D) diminishing marginal product of labor. 
A) increasing marginal product of labor. 
B) constant returns scale. 
C) increasing returns to scale. 
D) diminishing marginal product of labor.

Question 5

Although isocost lines and budget lines are similar,they differ in that:

Accepted Answer

A) budget lines are linear while isocost lines can be curved. 
B) the consumer is constrained to the budget line while the firm can have more than one isocost line. 
C) the slope of a budget line equals the price ratio while the slope of an isocost line is not related to prices. 
D) budget lines do not have a constant expenditure. 
A) budget lines are linear while isocost lines can be curved. 
B) the consumer is constrained to the budget line while the firm can have more than one isocost line. 
C) the slope of a budget line equals the price ratio while the slope of an isocost line is not related to prices. 
D) budget lines do not have a constant expenditure.

Question 6

A firm incurs a total cost of $500 per day for producing 10 semi-electronic toys.When its production increases to 15 toys,the total cost rises to $700.The firm observes that at each level of output between 10 toys and 15 toys,the marginal cost of production is below the average cost of production.Which of the following can be definitely concluded about the firm's cost curves when its output is anywhere between 10 toys and 15 toys?

Accepted Answer

A) The marginal cost curve is positively sloped for this range of output 
B) The total fixed cost curve is negatively sloped for this range of output. 
C) The average cost curve is negatively sloped for this range of output. 
D) The average variable cost curve is positively sloped for this range of output. 
A) The marginal cost curve is positively sloped for this range of output 
B) The total fixed cost curve is negatively sloped for this range of output. 
C) The average cost curve is negatively sloped for this range of output. 
D) The average variable cost curve is positively sloped for this range of output.

Question 7

Which of the following factors can lead to learning by doing?

Accepted Answer

A) Substantial loss suffered in the long run 
B) Decreasing returns to scale 
C) Significant addition to inventory stock 
D) Increased skill of the existing workforce 
A) Substantial loss suffered in the long run 
B) Decreasing returns to scale 
C) Significant addition to inventory stock 
D) Increased skill of the existing workforce

Question 8

When labor is the only variable input used in production,marginal cost [MC]:

Accepted Answer

A) is inversely related to the marginal product of labor [MPL]. 
B) is inversely related to the wage rate [w]. 
C) is positively related to MPL. 
D) is negatively related to labor supply [SL]. 
A) is inversely related to the marginal product of labor [MPL]. 
B) is inversely related to the wage rate [w]. 
C) is positively related to MPL. 
D) is negatively related to labor supply [SL].

Question 9

Which of the following is true for the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1?

Accepted Answer

A) Marginal cost equals average total cost 
B) Marginal cost equals average variable cost 
C) Total cost equals total variable cost 
D) Total cost equals total fixed cost 
A) Marginal cost equals average total cost 
B) Marginal cost equals average variable cost 
C) Total cost equals total variable cost 
D) Total cost equals total fixed cost

Question 10

Which of the following is true of the total variable cost curve in the short run?

Accepted Answer

A) It depicts the law of decreasing returns to scale. 
B) It is a straight line parallel to the horizontal axis. 
C) It is independent of the production function. 
D) It lies below the short-run total cost curve. 
A) It depicts the law of decreasing returns to scale. 
B) It is a straight line parallel to the horizontal axis. 
C) It is independent of the production function. 
D) It lies below the short-run total cost curve.

Question 11

If $\Delta$TC represents the change in total cost,$\Delta$w the change in the wage rate,$\Delta$TFC the change in total fixed cost,$\Delta$q the change in output,and $\Delta$AC the change in average cost,the marginal cost of the firm can be defined as:

Accepted Answer

A) $\Delta$TC/$\Delta$w. 
B) $\Delta$TFC/$\Delta$q. 
C) $\Delta$AC/$\Delta$q. 
D) $\Delta$TC/$\Delta$q. 
A) $\Delta$TC/$\Delta$w. 
B) $\Delta$TFC/$\Delta$q. 
C) $\Delta$AC/$\Delta$q. 
D) $\Delta$TC/$\Delta$q.

Question 12

The expansion path identifies:

Accepted Answer

A) the least costly combination of inputs required to produce various levels of output. 
B) the firm's demand curves for the inputs. 
C) the various combinations of inputs that can be used to produce a given level of output. 
D) the least-cost combination of outputs. 
A) the least costly combination of inputs required to produce various levels of output. 
B) the firm's demand curves for the inputs. 
C) the various combinations of inputs that can be used to produce a given level of output. 
D) the least-cost combination of outputs.

Question 13

If the marginal cost of pollution abatement differs between two firms,the total cost of pollution abatement can be lowered by:

Accepted Answer

A) increasing abatement where its marginal cost is high and reducing it where marginal cost is lower. 
B) decreasing abatement where its average cost is high and reducing it where average cost is lower. 
C) increasing abatement where its marginal cost is less and reducing it where marginal cost is greater. 
D) decreasing abatement where its marginal cost is less and increasing it where marginal cost is greater. 
A) increasing abatement where its marginal cost is high and reducing it where marginal cost is lower. 
B) decreasing abatement where its average cost is high and reducing it where average cost is lower. 
C) increasing abatement where its marginal cost is less and reducing it where marginal cost is greater. 
D) decreasing abatement where its marginal cost is less and increasing it where marginal cost is greater.

Question 14

Marico Corp.can manufacture 45,000 ball bearings per day at one of its production facilities.If the company uses the same facility for manufacturing rivets,a total of 30,000 rivets can be produced each day.Calculate Marico Corp.'s implicit cost per day of producing rivets at this facility.

Accepted Answer

A) The monetary value of 45,000 ball bearings 
B) The monetary value of 30,000 rivets 
C) The monetary value of 15,000 ball bearings 
D) The monetary value of 15,000 rivets 
A) The monetary value of 45,000 ball bearings 
B) The monetary value of 30,000 rivets 
C) The monetary value of 15,000 ball bearings 
D) The monetary value of 15,000 rivets

Question 15

Which of the following does not decline as output increases?

Accepted Answer

A) Marginal cost 
B) Average fixed cost 
C) Average cost 
D) Total fixed cost 
A) Marginal cost 
B) Average fixed cost 
C) Average cost 
D) Total fixed cost

Question 16

Each point on an expansion path:

Accepted Answer

A) has a constant input price ratio. 
B) has the same marginal rate of technical substitution [MRTS]. 
C) has the same total cost. 
D) is cost-minimizing. 
A) has a constant input price ratio. 
B) has the same marginal rate of technical substitution [MRTS]. 
C) has the same total cost. 
D) is cost-minimizing.

Question 17

The point of tangency between an isoquant and the isocost line indicates:

Accepted Answer

A) that in the long run fixed costs are equal to variable costs. 
B) the maximum cost incurred for producing one unit of output. 
C) that in the long run marginal costs tend to exceed fixed costs. 
D) the minimum cost necessary to produce a particular level of output. 
A) that in the long run fixed costs are equal to variable costs. 
B) the maximum cost incurred for producing one unit of output. 
C) that in the long run marginal costs tend to exceed fixed costs. 
D) the minimum cost necessary to produce a particular level of output.

Question 18

A tangency between an isocost line and an isoquant shows all the following,except:

Accepted Answer

A) the maximum output attainable by a firm at a given cost. 
B) the minimum cost necessary to produce a given output. 
C) an input combination where the ratio of marginal products equals the ratio of the input prices. 
D) an input combination where the returns to labor and capital inputs are equal. 
A) the maximum output attainable by a firm at a given cost. 
B) the minimum cost necessary to produce a given output. 
C) an input combination where the ratio of marginal products equals the ratio of the input prices. 
D) an input combination where the returns to labor and capital inputs are equal.

Question 19

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is the marginal cost of the second unit?

Accepted Answer

A) $0 
B) $0.50 
C) $1 
D) $2 
A) $0 
B) $0.50 
C) $1 
D) $2

Question 20

Economies of scale:

Accepted Answer

A) is the same thing as increasing returns to scale. 
B) exist if a firm increases its output more than in proportion to its total input cost. 
C) exist if a firm increases its output precisely proportional to its total input cost. 
D) refers to the ability to make large-scale investments in capital. 
A) is the same thing as increasing returns to scale. 
B) exist if a firm increases its output more than in proportion to its total input cost. 
C) exist if a firm increases its output precisely proportional to its total input cost. 
D) refers to the ability to make large-scale investments in capital.

Which of the following assumptions is made by economists while constructing a firm's marginal cost [MC] and average cost [AC] curves?

In the short run,a firm's marginal cost rises because of:

Which of the following most completely describes the cost to a firm associated with the use of its resources in a particular way?

Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:

Although isocost lines and budget lines are similar,they differ in that:

Which of the following factors can lead to learning by doing?

When labor is the only variable input used in production,marginal cost [MC]:

Which of the following is true for the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1?

Which of the following is true of the total variable cost curve in the short run?

If $\Delta$ TC represents the change in total cost, $\Delta$ w the change in the wage rate, $\Delta$ TFC the change in total fixed cost, $\Delta$ q the change in output,and $\Delta$ AC the change in average cost,the marginal cost of the firm can be defined as:

The expansion path identifies:

If the marginal cost of pollution abatement differs between two firms,the total cost of pollution abatement can be lowered by:

Marico Corp.can manufacture 45,000 ball bearings per day at one of its production facilities.If the company uses the same facility for manufacturing rivets,a total of 30,000 rivets can be produced each day.Calculate Marico Corp.'s implicit cost per day of producing rivets at this facility.

Which of the following does not decline as output increases?

Each point on an expansion path:

The point of tangency between an isoquant and the isocost line indicates:

A tangency between an isocost line and an isoquant shows all the following,except:

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is the marginal cost of the second unit?

Economies of scale:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 8: The Cost of Production

Which of the following assumptions is made by economists while constructing a firm's marginal cost [MC] and average cost [AC] curves?

In the short run,a firm's marginal cost rises because of:

Which of the following most completely describes the cost to a firm associated with the use of its resources in a particular way?

Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:

Although isocost lines and budget lines are similar,they differ in that:

Which of the following factors can lead to learning by doing?

When labor is the only variable input used in production,marginal cost [MC]:

Which of the following is true for the cubic total cost function TC = a + bQ + cQ2 + dQ3,where a = 0,b = 25,c = -10,and d = 1?

Which of the following is true of the total variable cost curve in the short run?

If Δ\DeltaΔ TC represents the change in total cost, Δ\DeltaΔ w the change in the wage rate, Δ\DeltaΔ TFC the change in total fixed cost, Δ\DeltaΔ q the change in output,and Δ\DeltaΔ AC the change in average cost,the marginal cost of the firm can be defined as:

The expansion path identifies:

If the marginal cost of pollution abatement differs between two firms,the total cost of pollution abatement can be lowered by:

Marico Corp.can manufacture 45,000 ball bearings per day at one of its production facilities.If the company uses the same facility for manufacturing rivets,a total of 30,000 rivets can be produced each day.Calculate Marico Corp.'s implicit cost per day of producing rivets at this facility.

Which of the following does not decline as output increases?

Each point on an expansion path:

The point of tangency between an isoquant and the isocost line indicates:

A tangency between an isocost line and an isoquant shows all the following,except:

If there are no fixed costs and variable costs are constant at $1.00 per unit over the relevant range of output,what is the marginal cost of the second unit?

Economies of scale:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Which of the following is true for the cubic total cost function TC = a + bQ + cQ² + dQ³,where a = 0,b = 25,c = -10,and d = 1?

If $\Delta$ TC represents the change in total cost, $\Delta$ w the change in the wage rate, $\Delta$ TFC the change in total fixed cost, $\Delta$ q the change in output,and $\Delta$ AC the change in average cost,the marginal cost of the firm can be defined as: