Question 1

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. B

Question 2

For economic analysis, the long run is any period in which all inputs are variable (regardless of the length of time involved).

Accepted Answer

A) True 
 B)False  True

Question 3

Refer to the information provided in Figure 7.10 below to answer the questions that follow.   Figure 7.10
-Refer to Figure 7.10. The firm is currently along isocost CD. If the price of capital is $30, then the price of labor is

Accepted Answer

A)  $4. 
B)  $30. 
C)  $180. 
D)  indeterminate from this information. 
A)  $4. 
B)  $30. 
C)  $180. 
D)  indeterminate from this information. B

Question 4

Refer to the information provided in Figure 7.4 below to answer the questions that follow.   Figure 7.4
-Refer to Figure 7.4. The marginal product of the sixth worker is

Accepted Answer

A)  -50. 
B)  -5. 
C)  5. 
D)  8.33. 
A)  -50. 
B)  -5. 
C)  5. 
D)  8.33.

Question 5

Refer to the information provided in Figure 7.3 below to answer the questions that follow.   Figure 7.3
-Refer to Figure 7.3. The marginal product of the second worker is ________ yards raked.

Accepted Answer

A)  2 
B)  13.5 
C)  17 
D)  27 
A)  2 
B)  13.5 
C)  17 
D)  27

Question 6

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

Accepted Answer

A)  total costs exceed total revenue. 
B)  total costs exceed a normal rate of return. 
C)  the normal rate of return is zero. 
D)  the firm is earning an economic profit. 
A)  total costs exceed total revenue. 
B)  total costs exceed a normal rate of return. 
C)  the normal rate of return is zero. 
D)  the firm is earning an economic profit.

Question 7

Refer to Scenario 7.1 below to answer the questions that follow.
SCENARIO 7.1: You are the owner and only employee of a company that writes computer software that is used by gamblers to collect sports data. Last year you earned a total revenue of $90,000. Your costs for equipment, rent, and supplies were $60,000. To start this business you invested an amount of your own capital that could pay you a return of $40,000 a year.
-Refer to Scenario 7.1. Your accounting profit last year was

Accepted Answer

A)  $10,000. 
B)  $30,000. 
C)  $50,000. 
D)  $60,000. 
A)  $10,000. 
B)  $30,000. 
C)  $50,000. 
D)  $60,000.

Question 8

Assume that the price of labor and capital have remained the same, but that the average educational level of workers has increased and therefore the productivity of labor has increased. This would lead a firm to

Accepted Answer

A)  use a more capital-intensive production technology. 
B)  use a more labor-intensive technology. 
C)  not change its production technology, but to produce fewer units of output. 
D)  use only labor to produce the product. 
A)  use a more capital-intensive production technology. 
B)  use a more labor-intensive technology. 
C)  not change its production technology, but to produce fewer units of output. 
D)  use only labor to produce the product.

Question 9

Refer to the information provided in Figure 7.9 below to answer the questions that follow.   Figure 7.9
-Refer to Figure 7.9. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Accepted Answer

A)  $10. 
B)  $20. 
C)  $80. 
D)  indeterminate from this information. 
A)  $10. 
B)  $20. 
C)  $80. 
D)  indeterminate from this information.

Question 10

Refer to the information provided in Figure 7.9 below to answer the questions that follow.   Figure 7.9
-Refer to Figure 7.9. The slope of isocost CD is

Accepted Answer

A)  -1. 
B)  -2/3. 
C)  0. 
D)  indeterminate from this information, as the prices of capital and labor are not given. 
A)  -1. 
B)  -2/3. 
C)  0. 
D)  indeterminate from this information, as the prices of capital and labor are not given.

Question 11

Refer to Scenario 7.1 below to answer the questions that follow.
SCENARIO 7.1: You are the owner and only employee of a company that writes computer software that is used by gamblers to collect sports data. Last year you earned a total revenue of $90,000. Your costs for equipment, rent, and supplies were $60,000. To start this business you invested an amount of your own capital that could pay you a return of $40,000 a year.
-Refer to Scenario 7.1. Your economic profit last year was

Accepted Answer

A)  -$40,000. 
B)  -$10,000. 
C)  $10,000. 
D)  $30,000. 
A)  -$40,000. 
B)  -$10,000. 
C)  $10,000. 
D)  $30,000.

Question 12

Assume the total product of two workers is 130 and the total product of three workers is 150. The average product of three workers is ________, and the marginal product of the third worker is ________.

Accepted Answer

A)  40; 10 
B)  50; 20 
C)  13.33; 6.67 
D)  120; 100 
A)  40; 10 
B)  50; 20 
C)  13.33; 6.67 
D)  120; 100

Question 13

To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following EXCEPT

Accepted Answer

A)  the market price of output. 
B)  the technologies of production that are available to the firm. 
C)  the prices of inputs. 
D)  the prices charged by its rivals. 
A)  the market price of output. 
B)  the technologies of production that are available to the firm. 
C)  the prices of inputs. 
D)  the prices charged by its rivals.

Question 14

In the long run,

Accepted Answer

A)  a firm can shut down, but it cannot exit the industry. 
B)  there are no fixed factors of production. 
C)  a firm can vary all inputs, but it cannot change the mix of inputs it uses. 
D)  all firms must make economic profits. 
A)  a firm can shut down, but it cannot exit the industry. 
B)  there are no fixed factors of production. 
C)  a firm can vary all inputs, but it cannot change the mix of inputs it uses. 
D)  all firms must make economic profits.

Question 15

Refer to the information provided in Figure 7.9 below to answer the questions that follow.   Figure 7.9
-Refer to Figure 7.9. If the price of capital is $40, then along isocost line AB total cost is

Accepted Answer

A)  $300. 
B)  $1,200. 
C)  $2,400. 
D)  indeterminate from this information, as the price of labor is not given. 
A)  $300. 
B)  $1,200. 
C)  $2,400. 
D)  indeterminate from this information, as the price of labor is not given.

Question 16

If labor is a variable input in production, the law of diminishing marginal returns implies that in the short run

Accepted Answer

A)  labor's marginal product is constant. 
B)  labor's marginal product decreases after a certain point. 
C)  total product is negative. 
D)  total product is negative after a certain point has been reached. 
A)  labor's marginal product is constant. 
B)  labor's marginal product decreases after a certain point. 
C)  total product is negative. 
D)  total product is negative after a certain point has been reached.

Question 17

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 18

If we assume that labor is the only variable input, the slope of the total product curve in the short run

Accepted Answer

A)  has no economic significance. 
B)  measures the average product of labor. 
C)  measures the marginal product of labor. 
D)  measures both the marginal and average product at all points on the total product curve. 
A)  has no economic significance. 
B)  measures the average product of labor. 
C)  measures the marginal product of labor. 
D)  measures both the marginal and average product at all points on the total product curve.

Question 19

Refer to Scenario 7.4 below to answer the questions that follow.
SCENARIO 7.4: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively.
-Refer to Scenario 7.4. The marginal product of the fourth worker is

Accepted Answer

A)  2 
B)  3 
C)  12 
D)  14 
A)  2 
B)  3 
C)  12 
D)  14

Question 20

Refer to Scenario 7.1 below to answer the questions that follow.
SCENARIO 7.1: You are the owner and only employee of a company that writes computer software that is used by gamblers to collect sports data. Last year you earned a total revenue of $90,000. Your costs for equipment, rent, and supplies were $60,000. To start this business you invested an amount of your own capital that could pay you a return of $40,000 a year.
-Refer to Scenario 7.1. During the year your economic costs were

Accepted Answer

A)  $40,000. 
B)  $60,000. 
C)  $100,000. 
D)  $130,000. 
A)  $40,000. 
B)  $60,000. 
C)  $100,000. 
D)  $130,000.

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

For economic analysis, the long run is any period in which all inputs are variable (regardless of the length of time involved).

Refer to the information provided in Figure 7.10 below to answer the questions that follow. Figure 7.10 -Refer to Figure 7.10. The firm is currently along isocost CD. If the price of capital is $30, then the price of labor is

Refer to the information provided in Figure 7.4 below to answer the questions that follow. Figure 7.4 -Refer to Figure 7.4. The marginal product of the sixth worker is

Refer to the information provided in Figure 7.3 below to answer the questions that follow. Figure 7.3 -Refer to Figure 7.3. The marginal product of the second worker is ________ yards raked.

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

Assume that the price of labor and capital have remained the same, but that the average educational level of workers has increased and therefore the productivity of labor has increased. This would lead a firm to

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost CD is

Assume the total product of two workers is 130 and the total product of three workers is 150. The average product of three workers is , and the marginal product of the third worker is .

To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following EXCEPT

In the long run,

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. If the price of capital is $40, then along isocost line AB total cost is

If labor is a variable input in production, the law of diminishing marginal returns implies that in the short run

Economic costs

If we assume that labor is the only variable input, the slope of the total product curve in the short run

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 Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

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

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

For economic analysis, the long run is any period in which all inputs are variable (regardless of the length of time involved).

Refer to the information provided in Figure 7.10 below to answer the questions that follow. Figure 7.10 -Refer to Figure 7.10. The firm is currently along isocost CD. If the price of capital is $30, then the price of labor is

Refer to the information provided in Figure 7.4 below to answer the questions that follow. Figure 7.4 -Refer to Figure 7.4. The marginal product of the sixth worker is

Refer to the information provided in Figure 7.3 below to answer the questions that follow. Figure 7.3 -Refer to Figure 7.3. The marginal product of the second worker is ________ yards raked.

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

Assume that the price of labor and capital have remained the same, but that the average educational level of workers has increased and therefore the productivity of labor has increased. This would lead a firm to

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost CD is

Assume the total product of two workers is 130 and the total product of three workers is 150. The average product of three workers is ________, and the marginal product of the third worker is ________.

To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following EXCEPT

In the long run,

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. If the price of capital is $40, then along isocost line AB total cost is

If labor is a variable input in production, the law of diminishing marginal returns implies that in the short run

Economic costs

If we assume that labor is the only variable input, the slope of the total product curve in the short run

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 Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Assume the total product of two workers is 130 and the total product of three workers is 150. The average product of three workers is , and the marginal product of the third worker is .