Question 1

The slope of an isocost line is constant.

Accepted Answer

A) True 
 B)False  True

Question 2

An isoquant is a line that

Accepted Answer

A) illustrates firm demand for an input. 
B) shows different combinations of two goods that yield the same utility. 
C) shows different combinations of two inputs that yield the same output. 
D) shows a firm's preferences. 
E) shows different combinations of two inputs that cost the same. 
A) illustrates firm demand for an input. 
B) shows different combinations of two goods that yield the same utility. 
C) shows different combinations of two inputs that yield the same output. 
D) shows a firm's preferences. 
E) shows different combinations of two inputs that cost the same. C

Question 3

The slope of an isocost line depends on the ratio of

Accepted Answer

A) the output prices. 
B) the input prices. 
C) an output price over an input price. 
D) an input price over an output price. 
E) total profits over total costs. 
A) the output prices. 
B) the input prices. 
C) an output price over an input price. 
D) an input price over an output price. 
E) total profits over total costs. B

Question 4

If a profit-maximizing firm is producing at the tangency between an isoquant and an isocost line,then a movement along the current isocost line

Accepted Answer

A) decreases total cost. 
B) increases total cost. 
C) decreases output. 
D) increases output. 
E) keeps output constant. 
A) decreases total cost. 
B) increases total cost. 
C) decreases output. 
D) increases output. 
E) keeps output constant.

Question 5

Suppose the wage rate is $20 and the price of capital is $100.Graph the isocost line for a firm with a total cost of $400.What happens to the isocost line if the price of capital goes up to $200? Graph this isocost line,assuming that the firm maintains a total cost of $400.What happens to production in this case?

Accepted Answer

The isocost line gets flatter when the p

Question 6

Sketch a typical isocost line and isoquant where a firm is minimizing total cost for a given quantity of output.Suppose the price of labor rises and the price of capital doesn't change.What does the firm do to maintain the original level of output? How does its input use change?

Accepted Answer

If the price of labor rises,the firm wil

Question 7

Exhibit 8A-1  
-Refer to Exhibit 8A-1.A cost-minimizing firm would prefer producing at point C to producing at

Accepted Answer

A) point D because point C represents a lower cost. 
B) point A because point C represents the same output at a lower cost. 
C) point B because point C represents the same output at a higher cost. 
D) point B because point C represents higher output at the same cost. 
E) point B because point C represents higher output with a lower cost. 
A) point D because point C represents a lower cost. 
B) point A because point C represents the same output at a lower cost. 
C) point B because point C represents the same output at a higher cost. 
D) point B because point C represents higher output at the same cost. 
E) point B because point C represents higher output with a lower cost.

Question 8

A line that illustrates all the different combinations of two inputs that result in the same total cost is called a(n)

Accepted Answer

A) average total cost curve. 
B) isocost line. 
C) total cost line. 
D) budget line. 
E) isoquant. 
A) average total cost curve. 
B) isocost line. 
C) total cost line. 
D) budget line. 
E) isoquant.

Question 9

Exhibit 8A-1  
-Refer to Exhibit 8A-1.At point C,output is

Accepted Answer

A) higher than at point A but lower than at point B. 
B) lower than at point A but higher than at point B. 
C) the same as at points A and B,but the cost is lower than at point A. 
D) the same as at points A and B,but the cost is higher than at point A. 
E) the same as at points A and B,and the costs for the three points are the same as well. 
A) higher than at point A but lower than at point B. 
B) lower than at point A but higher than at point B. 
C) the same as at points A and B,but the cost is lower than at point A. 
D) the same as at points A and B,but the cost is higher than at point A. 
E) the same as at points A and B,and the costs for the three points are the same as well.

Question 10

An isoquant indicates different combinations of outputs that can be used to yield the same amount of profits.

Accepted Answer

A) True 
 B)False

Question 11

We are looking at a graph with capital on the vertical axis and labor on the horizontal axis.If the price of labor increases,then the

Accepted Answer

A) isocost line becomes steeper. 
B) isoquants become steeper. 
C) isoquants become flatter. 
D) isocost line becomes flatter. 
E) isocost line and isoquants become flatter. 
A) isocost line becomes steeper. 
B) isoquants become steeper. 
C) isoquants become flatter. 
D) isocost line becomes flatter. 
E) isocost line and isoquants become flatter.

Question 12

The slope of an isoquant depends on the ratio of

Accepted Answer

A) the output prices. 
B) the input prices. 
C) the marginal products of inputs. 
D) an input price over an output price. 
E) total profits over total costs. 
A) the output prices. 
B) the input prices. 
C) the marginal products of inputs. 
D) an input price over an output price. 
E) total profits over total costs.

Question 13

The slope of an isoquant is called the

Accepted Answer

A) rate of change. 
B) input price ratio. 
C) rate of technical substitution. 
D) substitution ratio. 
E) price-cost margin. 
A) rate of change. 
B) input price ratio. 
C) rate of technical substitution. 
D) substitution ratio. 
E) price-cost margin.

Question 14

A firm that maximizes output for a specific total cost is producing at the point where the isocost line is above the highest isoquant.

Accepted Answer

A) True 
 B)False

Question 15

In a given isocost line,any combination of different inputs results in the same total cost.

Accepted Answer

A) True 
 B)False

Question 16

An isocost line has a

Accepted Answer

A) positive slope because the two inputs can replace each other in production. 
B) negative slope because the two inputs can replace each other in production. 
C) negative slope because the two inputs are complementary to each other in production. 
D) positive slope because the two inputs are complementary to each other in production. 
E) slope equal to zero because the two inputs are basically identical. 
A) positive slope because the two inputs can replace each other in production. 
B) negative slope because the two inputs can replace each other in production. 
C) negative slope because the two inputs are complementary to each other in production. 
D) positive slope because the two inputs are complementary to each other in production. 
E) slope equal to zero because the two inputs are basically identical.

Question 17

Explain the similarities and differences between consumer choice theory and producer theory.More specifically,explain how a budget line and indifference curve are related to an isocost line and isoquant,and explain the importance of the tangency point.

Accepted Answer

In consumer choice theory,consumer choic

Question 18

The combination of two inputs that results in a given quantity of output at least cost occurs where

Accepted Answer

A) an isocost line is tangent to the relevant isoquant. 
B) average total cost is at its minimum. 
C) long-run average total cost is at its minimum. 
D) an isoquant reaches its minimum. 
E) an isoquant is at its steepest. 
A) an isocost line is tangent to the relevant isoquant. 
B) average total cost is at its minimum. 
C) long-run average total cost is at its minimum. 
D) an isoquant reaches its minimum. 
E) an isoquant is at its steepest.

Question 19

A firm can minimize the total costs of producing a given output level at the point of tangency between an isoquant and the isocost line.

Accepted Answer

A) True 
 B)False

Exam 33: Producer Theory With Isoquants

The slope of an isocost line is constant.

An isoquant is a line that

The slope of an isocost line depends on the ratio of

If a profit-maximizing firm is producing at the tangency between an isoquant and an isocost line,then a movement along the current isocost line

Sketch a typical isocost line and isoquant where a firm is minimizing total cost for a given quantity of output.Suppose the price of labor rises and the price of capital doesn't change.What does the firm do to maintain the original level of output? How does its input use change?

Exhibit 8A-1 -Refer to Exhibit 8A-1.A cost-minimizing firm would prefer producing at point C to producing at

A line that illustrates all the different combinations of two inputs that result in the same total cost is called a(n)

Exhibit 8A-1 -Refer to Exhibit 8A-1.At point C,output is

An isoquant indicates different combinations of outputs that can be used to yield the same amount of profits.

We are looking at a graph with capital on the vertical axis and labor on the horizontal axis.If the price of labor increases,then the

The slope of an isoquant depends on the ratio of

The slope of an isoquant is called the

A firm that maximizes output for a specific total cost is producing at the point where the isocost line is above the highest isoquant.

In a given isocost line,any combination of different inputs results in the same total cost.

An isocost line has a

Explain the similarities and differences between consumer choice theory and producer theory.More specifically,explain how a budget line and indifference curve are related to an isocost line and isoquant,and explain the importance of the tangency point.

The combination of two inputs that results in a given quantity of output at least cost occurs where

A firm can minimize the total costs of producing a given output level at the point of tangency between an isoquant and the isocost line.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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