AGEC 2003- Exam 2

A. Isorevenue Line

1. The line representing all possible combinations of two products sold that will bring the same total revenue is referred to as the

True

10. The Expansion Path shows the revenue (and profit) maximizing proportions of Y1 and Y2 as the firm expands or contracts.

True

11. The isocost curve identifies all the combinations of the two given inputs that can be afforded given a specific expenditure level to produce a given level of output.

False

12. The Budget Line shows all possible combinations of two products sold that will bring the same total revenue

True

13. The Marginal Rate of Product Substitution measures the differing rates at which either product will substitute for the other along the production possibilities curve.

False

14. The Isoquant shows all possible combinations of two products that can be produced given the set of resources in the firm's control.

False

15. Similar to the budget line in consumer economics, the isoquant identifies all the combinations of the two given inputs that can be afforded to produce a given level of output.

A. Imperfect substitutes

16. The form of resource (input) substitution where larger and larger amounts of a second variable resource (input) are required to replace equal incremental reductions of the first resource (input) while maintaining the same level of output is known as

D. Perfect complements

17. The form of resource (input) substitution where two inputs can only be used in production in a fixed ratio and cannot be substituted for one another is known as

C. Perfect Substitutes

18. The form of resource (input) substitution where one input can be exactly substituted for another in production is known as

D. Resource Substitution

19. The technical relationship that occurs when one input can be substituted for another in production while yielding the same level of output

B. Least-Cost Combination

2. Minimizing the resource cost of producing a particular commodity is referred to as the

True

20. An isoquant is a curve that shows all combinations of the two variable inputs that can be used to produce a given quantity of output.

False

21. An isoquant is the graphical equivalent in production economics to what the budget line is to consumption economics.

True

22. As the TPP curve was the graphical representation of the one variable input production function, the isoquant is the graphical representation of the two variable input production function

True

23. Production is a process by which resources are transformed into products and services that are usable by consumers.

True

24. A resource is a factor that can be used to produce a product that can satisfy a human want or desire.

True

25. Labor is the physical act or effort of performing a task by humans.

True

26. Land is defined by all its physical characteristics used to yield a product, including the soil and the natural environment within which it is contained.

True

27. Capital is the physical or tangible resources used to aid or enhance production.

True

28. A production function is the particular set or combination of resources used to produce a given level of output.

False

29. The boundary between stages I and II of production occurs where total physical product is maximized and marginal physical product has decreased to zero.

C. Isocost Line

3. The line which shows the amounts of two resources that can be bought for a given amount of money is referred to as the

False

30. The boundary between stages II and III of production occurs where average physical product is maximized and marginal physical product is equal to average physical product.

False

31. Stage II is an irrational stage of production.

A. 0.150

32. Based on Table 1, what is the Marginal Rate of Product Substitution in cell H (between choice C and D)?

B. 0.350

33. Based on Table 1, what is the Marginal Rate of Product Substitution in cell J (between choice D and E)?

C. 292,000

34. Based on Table 1, what is the Total Revenue in cell K?

D. 260,000

35. Based on Table 1, what is the Total Revenue in cell L?

A. 254,000

36. Based on Table 1, what is the Total Revenue in cell M?

C. C

37. Based on Figure 1, which curve is the Average Variable Cost Curve?

D. A

38. Based on Figure 1, which curve is the Marginal Cost Curve?

A. B

39. Based on Figure 1, which curve is the Average Total Cost Curve?

D. Production Possibilities

4. The full range of feasible allocations for a firm is referred to as its

B. A

40. Based on Figure 1, which curve best represents the Supply Curve?

A. D

41. Based on Figure 1, which curve is the Average Fixed Cost Curve?

D. Both a and b

42. The lowest point on the firm level supply curve is

C. Marginal cost intersects marginal revenue

43. The "shut down point" is where

C. 1.0

44. Assuming two points on a supply curve where the first point is represented by (P1 = 1; Q1 = 100) and the second point is represented by (P2 = 2; Q2 = 200), the price elasticity of supply is

B. 2.0

45. Assuming two points on a supply curve where the first point is represented by (P1 = 1.5; Q1 = 50) and the second point is represented by (P2 = 2.5; Q2 = 150), the price elasticity of supply is

D. elastic

46. A Supply Elasticity that is greater than 1.0 is referred to as

A. inelastic

47. A Supply Elasticity that is less than 1.0 is referred to as

C. Shortage

48. The government fixing the price of a commodity at some level below the equilibrium price will result in a

D. Surplus

49. The government fixing the price of a commodity at some level above the equilibrium price will result in a

A. Isoquant

5. The line showing all combinations of inputs that result in the same quantity of an output is referred to as the

A. 100

50. Based on Table 3, what is the Total Fixed Cost in cell F?

C. 215

51. Based on Table 3, what is the Total Cost in cell M?

B. 35

52. Based on Table 3, what is the Average Variable Cost in cell V?

E. none of the above

53. Based on Table 3, what is the Average Variable Cost in cell S?

C. 100

54. Based on Table 3, what is the Average Fixed Cost in cell AA?

A. 25

55. Based on Table 3, what is the Average Fixed Cost in cell AD?

C. 60

56. Based on Table 3, what is the Average Total Cost in cell AM?

B. 55

57. Based on Table 3, what is the Average Total Cost in cell AN?

E. None of the above

58. Based on Table 3, what is the lowest Marginal Cost?

A. 25

59. Based on Table 3, what is the Marginal Cost in cell AU?

B. Expansion Path

6. The line showing the revenue and profit maximizing proportions of two products as the firm increases or decreases its level of output is referred to as the

A. 25

60. Based on Table 3, what is the Marginal Cost in cell AT?

D. 7

61. Based on Table 3, what is the profit maximizing quantity (Output Level) when Marginal Revenue is 70?

E. 390

62. Based on Table 3 and your answer to question 61, what is the Total Cost at the profit maximizing output level when Marginal Revenue is 70?

D. 490

63. Based on Table 3 and your answer to question 61, what is the Total Revenue at the profit maximizing output level when Marginal Revenue is 70?

B. 100

64. Based on Table 3 and your answer to question 61, what is the amount of Profit at the profit maximizing output level when Marginal Revenue is 70?

C. Marginal rate of product substitution

7. The slope of the production possibilities curve is referred to as the

D. Marginal rate of substitution

8. The slope of an isoquant is known as the

True

9. The optimal combination of two products is to produce where the Marginal Rate of Product Substitution is equal to the ratio of the output prices.