Question 1

If Harold runs a grocery store and is making a normal rate of return, we can infer that he is also making an economic profit.

Accepted Answer

A) True 
 B)False

Question 2

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 average product of the third worker is

Accepted Answer

A)  10. 
B)  14. 
C)  30. 
D)  126. 
A)  10. 
B)  14. 
C)  30. 
D)  126.

Question 3

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 $20, 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 4

The cost minimizing equilibrium condition can be written as

Accepted Answer

A)  MPL = MPK. 
B)  PL = PK. 
C)  (MPL)(PL) = (MPK)(PK). 
D)  MPL/PL = MPK/PK. 
A)  MPL = MPK. 
B)  PL = PK. 
C)  (MPL)(PL) = (MPK)(PK). 
D)  MPL/PL = MPK/PK.

Question 5

If diminishing marginal returns have already set in for The Picture Perfect Framing Store and the marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer must be

Accepted Answer

A)  negative. 
B)  zero. 
C)  less than 20. 
D)  greater than 20. 
A)  negative. 
B)  zero. 
C)  less than 20. 
D)  greater than 20.

Question 6

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 average product of the fifth worker is

Accepted Answer

A)  1. 
B)  2.5. 
C)  5. 
D)  11. 
A)  1. 
B)  2.5. 
C)  5. 
D)  11.

Question 7

At the Larson Bakery the marginal products of the first, second, and third sales clerks are 20, 17, and 11 customers served, respectively. The total product (number of customers served) of the first two sales clerks is

Accepted Answer

A)  3. 
B)  17. 
C)  37. 
D)  48. 
A)  3. 
B)  17. 
C)  37. 
D)  48.

Question 8

Refer to the information provided in Figure 7.5 below to answer the questions that follow.   Figure 7.5
-Refer to Figure 7.5. Diminishing marginal returns set in after the ________ worker is hired.

Accepted Answer

A)  first 
B)  fifth 
C)  eighth 
D)  sixteenth 
A)  first 
B)  fifth 
C)  eighth 
D)  sixteenth

Question 9

The slope of the isoquant is

Accepted Answer

A)  -MPL/MPK. 
B)  the marginal rate of technical substitution. 
C)  negative. 
D)  All of the above are correct. 
A)  -MPL/MPK. 
B)  the marginal rate of technical substitution. 
C)  negative. 
D)  All of the above are correct.

Question 10

Firms have an incentive to substitute labor for capital as the

Accepted Answer

A)  price of capital increases. 
B)  price of capital decreases. 
C)  price of labor increases. 
D)  marginal product of labor decreases. 
A)  price of capital increases. 
B)  price of capital decreases. 
C)  price of labor increases. 
D)  marginal product of labor decreases.

Question 11

Assume that capital and labor are complementary inputs. If the firm increases the amount of capital it employs, this would

Accepted Answer

A)  cause the firm to move down along the MP schedule for labor. 
B)  cause the firm to move up along its MP schedule for labor. 
C)  shift the firm's MP schedule for labor to the left. 
D)  shift the firm's MP schedule for labor to the right. 
A)  cause the firm to move down along the MP schedule for labor. 
B)  cause the firm to move up along its MP schedule for labor. 
C)  shift the firm's MP schedule for labor to the left. 
D)  shift the firm's MP schedule for labor to the right.

Question 12

Refer to the information provided in Figure 7.11 below to answer the questions that follow.   Figure 7.11
-Refer to Figure 7.11. If the firm's level of total cost is represented by the given isocost line, the firm's optimal combination of capital and labor is given by

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  50 units of capital and 50 of labor. 
A)  point A. 
B)  point B. 
C)  point C. 
D)  50 units of capital and 50 of labor.

Question 13

Related to the Economics in Practice on page 157: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?

Accepted Answer

A)  an increase in the hourly wage of truck drivers and a decrease in the cost of gasoline 
B)  an increase in the hourly wage of truck drivers and an increase in the cost of gasoline 
C)  a decrease in the hourly wage of truck drivers and a decrease in the cost of gasoline 
D)  a decrease in the hourly wage of truck drivers and an increase in the cost of gasoline 
A)  an increase in the hourly wage of truck drivers and a decrease in the cost of gasoline 
B)  an increase in the hourly wage of truck drivers and an increase in the cost of gasoline 
C)  a decrease in the hourly wage of truck drivers and a decrease in the cost of gasoline 
D)  a decrease in the hourly wage of truck drivers and an increase in the cost of gasoline

Question 14

The formula for the marginal product of labor is

Accepted Answer

A)  L/q. 
B)  (ΔL)(Δq). 
C)  q/L. 
D)  Δq/ΔL. 
A)  L/q. 
B)  (ΔL)(Δq). 
C)  q/L. 
D)  Δq/ΔL.

Question 15

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labor if the

Accepted Answer

A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of capital decreases. 
D)  marginal product of labor increases. 
A)  price of capital increases. 
B)  price of labor decreases. 
C)  price of capital decreases. 
D)  marginal product of labor increases.

Question 16

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the three worker is

Accepted Answer

A)  15.33. 
B)  30. 
C)  46. 
D)  138. 
A)  15.33. 
B)  30. 
C)  46. 
D)  138.

Question 17

Refer to the information provided in Figure 7.11 below to answer the questions that follow.   Figure 7.11
-Refer to Figure 7.11. The firm's level of total cost is represented by the given isocost line. At the optimal combination of capital and labor, the firm produces ________ units of output.

Accepted Answer

A)  100. 
B)  200. 
C)  300. 
D)  indeterminate from this information. 
A)  100. 
B)  200. 
C)  300. 
D)  indeterminate from this information.

Question 18

The marginal products of the first, second, and third workers are 20, 12, and 8, respectively. If four workers can produce 45 units of output, then the marginal product of the fourth worker is ________.

Accepted Answer

A)  4 
B)  5 
C)  40 
D)  45 
A)  4 
B)  5 
C)  40 
D)  45

Question 19

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the first two workers is

Accepted Answer

A)  16. 
B)  20. 
C)  36. 
D)  46. 
A)  16. 
B)  20. 
C)  36. 
D)  46.

Question 20

The point of tangency between an isocost line and an isoquant is necessarily

Accepted Answer

A)  the profit-maximizing combination of inputs that should be hired to produce that output level. 
B)  the least costly combination of inputs that can be hired to produce the output level. 
C)  both the profit-maximizing and least costly combination of inputs that can be used to produce the output level. 
D)  the minimum amount of output that can be attained for that level of expenditure. 
A)  the profit-maximizing combination of inputs that should be hired to produce that output level. 
B)  the least costly combination of inputs that can be hired to produce the output level. 
C)  both the profit-maximizing and least costly combination of inputs that can be used to produce the output level. 
D)  the minimum amount of output that can be attained for that level of expenditure.

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

If Harold runs a grocery store and is making a normal rate of return, we can infer that he is also making an economic profit.

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 average product of the third worker 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. If the price of capital is $20, then along isocost line AB total cost is

The cost minimizing equilibrium condition can be written as

If diminishing marginal returns have already set in for The Picture Perfect Framing Store and the marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer must be

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 average product of the fifth worker is

At the Larson Bakery the marginal products of the first, second, and third sales clerks are 20, 17, and 11 customers served, respectively. The total product (number of customers served) of the first two sales clerks is

Refer to the information provided in Figure 7.5 below to answer the questions that follow. Figure 7.5 -Refer to Figure 7.5. Diminishing marginal returns set in after the ________ worker is hired.

The slope of the isoquant is

Firms have an incentive to substitute labor for capital as the

Assume that capital and labor are complementary inputs. If the firm increases the amount of capital it employs, this would

Refer to the information provided in Figure 7.11 below to answer the questions that follow. Figure 7.11 -Refer to Figure 7.11. If the firm's level of total cost is represented by the given isocost line, the firm's optimal combination of capital and labor is given by

Related to the Economics in Practice on page 157: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?

The formula for the marginal product of labor is

You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labor if the

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the three worker is

Refer to the information provided in Figure 7.11 below to answer the questions that follow. Figure 7.11 -Refer to Figure 7.11. The firm's level of total cost is represented by the given isocost line. At the optimal combination of capital and labor, the firm produces ________ units of output.

The marginal products of the first, second, and third workers are 20, 12, and 8, respectively. If four workers can produce 45 units of output, then the marginal product of the fourth worker is ________.

At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the first two workers is

The point of tangency between an isocost line and an isoquant is necessarily

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

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