FIN321 Fail

In the long run... A. a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. B. the expansion path shows how the input marginal products change as the firm's output level changes. C. all inputs are fixed. D. None of these options are correct.

A. a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio.

Marginal cost... A. is less than average cost when average cost is decreasing. B. measures how average cost changes when one more unit of output is produced. C. measures how total cost changes when input prices change. D. None of these options are correct.

A. is less than average cost when average cost is decreasing.

If average product is increasing, then marginal product A. must be greater than average product. B. must be less than average product. C. must be increasing. D. cannot be decreasing. E. both "must be greater than average product" and "must be increasing".

A. must be greater than average product.

Monopolistic competition is similar to perfect competition in that A. there are a large number of firms. B. firms earn economic profits in the long run. C. firms face downward-sloping demand curves. D. both "there are a large number of firms" and "firms earn economic profits in the long run". E. All of the choices are correct.

A. there are a large number of firms.

A monopolistic competitor is similar to a monopolist in that: A. both earn positive economic profit in the long run. B. both have market power. C. both produce the output at which long-run average cost is at a minimum. D. All of these options are correct

B. both have market power.

A firm with market power is producing a level of output at which price is $8, marginal revenue is $5, average variable cost is $6, and marginal cost is $10. In order to maximize profit, the firm should A. decrease price. B. increase price. C. keep price the same. D. increase output. E. shut down.

B. increase price.

The marginal rate of technical substitution is A. the rate at which the firm can substitute labor for capital while holding total cost constant. B. the rate at which the firm can substitute labor for capital while holding output constant. C. the slope of the isocost curve. D. both "the rate at which the firm can substitute labor for capital while holding total cost constant" and "the slope of the isocost curve". E. None of the choices are correct.

B. the rate at which the firm can substitute labor for capital while holding output constant.

If a firm is producing a given level of output in a technically-efficient manner, then it must be the case that... A. it is choosing the lowest-cost method of producing that output. B. this output level is the most that can be produced with the given levels of inputs. C. each input is producing its maximum marginal product. D. None of these options are correct.

B. this output level is the most that can be produced with the given levels of inputs.

The slope of an isoquant is... Multiple Choice A. ΔLTC / ΔQ B. MPK / MPL C. -ΔK / ΔL D. ΔTVC / ΔQ

C. -ΔK / ΔL

Which of the following statements is TRUE? A. A firm plans in the short run and operates in the long run. B. In the long run a firm can change all but one input. C. In the long run all inputs are variable. D. In the short run all inputs are fixed.

C. In the long run all inputs are variable.

A fixed cost is A. the cost of any input with a fixed price per unit. B. a cost which increases in a fixed proportion as output increases. C. a cost that does not vary with output and the firm must pay it even if output is zero. D. a cost that does not vary with output but the firm can avoid paying it if output is zero.

C. a cost that does not vary with output and the firm must pay it even if output is zero.

Economies of scope... A. can arise when the joint cost of producing two or more goods is greater than the sum of the separate costs of producing the goods. B. can arise from purchasing economies of scale. C. can arise when firms employ common inputs in production. D. ensure the profit-maximization of the firm.

C. can arise when firms employ common inputs in production.

When a perfectly-competitive industry is in long-run equilibrium, A. firms have incentives to enter or exit the industry. B. market price is equal to minimum long-run total cost. C. each firm earns zero economic profit. D. All of these options are correct.

C. each firm earns zero economic profit.

A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. The producer A. is using the optimal combination of capital and labor B. should use more labor and less capital C. should use more capital and less labor D. cannot determine without more information

C. should use more capital and less labor

The expansion path shows how A. input prices change as the firm's output level changes. B. the marginal products change as the firm's output level changes. C. the cost-minimizing input choices change as the firm's output level changes. D. the profit-maximizing input choices change as the firm's output level changes. E. the cost-minimizing input prices change as the firm's output level changes.

C. the cost-minimizing input choices change as the firm's output level changes.

If a firm is producing the level of output at which short-run average cost equals long-run average cost, then... A. the firm is not following its long-run expansion path. B. with a fixed amount of capital, long-run average cost is greater than short-run average cost at all other levels of output. C. the firm has chosen the cost-minimizing combination of inputs to produce this level of output. D. None of these options are correct.

C. the firm has chosen the cost-minimizing combination of inputs to produce this level of output.

If a firm is producing a given level of output in a technically efficient manner, then it must be the case that A. this is the lowest cost method of producing that output. B. each input is producing its maximum marginal product. C. this output level is the most that can be produced with the given levels of inputs. D. both "this is the lowest cost method of producing that output" and "this output level is the most that can be produced with the given levels of inputs" E. All of the choices are correct.

C. this output level is the most that can be produced with the given levels of inputs.

In order to minimize losses in the short run, a perfectly competitive firm should shut down if A. total revenue is less than total cost. B. total revenue is less than total fixed cost. C. total revenue is less than total variable cost. D. total revenue is less than the difference between total fixed cost and total variable cost.

C. total revenue is less than total variable cost.

A firm is using a single variable input, labor, with a given amount of a fixed input, capital. If the level of capital is decreased, A. the total product curve of labor curve shifts downward. B. the average product curve of labor curve shifts downward. C. the marginal product curve of labor shifts downward. D. All of the choices are correct.

D. All of the choices are correct.

Suppose that a profit-maximizing monopolist has a plant of optimal size and is producing a level of output at which price is $30, average total cost is $55, and average fixed cost is $40. The firm should A. operate in the short run. B. shut down in the short run. C. exit the market in the long run.continue to operate in the long run. D. both "operate in the short run" and "exit the market in the long run".

D. both "operate in the short run" and "exit the market in the long run".

A monopoly is producing a level of output at which price is $80, marginal revenue is $40, average total cost is $100, marginal cost is $40, and average fixed cost is $10. In order to maximize profit, the firm should A. produce more. B. keep output the same. C. produce less. D. shut down.

D. shut down.

A manufacturer has two plants -- one in Ohio and one in Tennessee. At the current allocation of total output between the two plants, the last unit of output produced in the Ohio plant added $10 to total cost, while the last unit of output produced in the Tennessee plant added $8 to total cost. In order to decrease total costs, the firm should... A. keep the allocation between plants unchanged. B. produce all its output in the Tennessee plant. C. produce all its output in the Ohio plant. D. switch some output from the Ohio to the Tennessee plant.

D. switch some output from the Ohio to the Tennessee plant.

To minimize losses in the short run, a perfectly competitive firm should shut down if... A. total revenue is less than total cost (TR < TC). B. total revenue is less than total fixed cost (TR < TFC). C. total revenue is less than the difference between total fixed cost and total variable cost (TR < TFC - TVC). D. total revenue is less than total variable cost (TR < TVC).

D. total revenue is less than total variable cost (TR < TVC).

A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output. The firm A. is using the cost-minimizing combination of capital and labor. B. should use more of both inputs in equal proportions. C. should use less of both inputs in equal proportions. D. could produce the same level of output at a lower cost by using more capital and less labor. E. could produce the same output at a lower cost by using less capital and more labor.

E. could produce the same output at a lower cost by using less capital and more labor.