ECON 303 Week 6 (Ch. 7)
As long as marginal cost is below average cost, average cost will be a. falling b. rising c. constant d. changing in direction that cannot be determined without more information
a. falling
Technical progress will a. shift a firm's production function and its related cost curves b. not affect the production function, but may shift cost curves c. shift a firm's production function and alter its marginal revenue curve d. shift a firm's production function and cause more capital (and less labor) to be hired
a. shift a firm's production function and its related cost curves
If the marginal cost of production is increasing and is also below the average cost of production, then a. the average cost of production will decrease b. the average cost of production will remain unchanged c. the average cost of production will increase d. the impact on the average cost of production can't be determined
a. the average cost of production will decrease
The accountant's cost of producing a bike refers to a. the out of pocket payments made to produce the bike b. the value of the goods that were given up to produce the bike c. the bike's retail price d. the marginal cost of the last bike produced
a. the out of pocket payments made to produce the bike
A firm whose production function displays increasing returns to scale will have a total cost curve that is a. a straight line through the origin b. a curve with a positive and continually decreasing slope c. a curve with a positive and continually increasing slope d. a curve with a negative and continually decreasing slope
b. a curve with a positive and continually decreasing slope
In the long run a. all inputs are fixed b. all inputs are variable c. some inputs are fixed d. production levels never change
b. all inputs are variable
The total cost of production for a given level of output q is minimized when a. an isoquant is tangent to the expansion path b. an isoquant is tangent to the total cost curve c. an isoquant is tangent to the marginal product of labor curve d. an isoquant is tangent to the marginal product of capital curve
b. an isoquant is tangent to the total cost curve
For a constant returns to scale production function a. marginal costs are constant but the average cost curve has a U shape b. both average and marginal costs are constant c. marginal cost has a U shape; average costs are constant d. both average and marginal cost curves are U shaped
b. both average and marginal costs are constant
An increase in the wage rate will have a greater effect on average costs a. the larger the proportion labor costs are of total costs and the easier it is to substitute capital for labor b. the larger the proportion labor costs are of total costs and the harder it is to substitute capital for labor c. the greater is the diminishing marginal product of labor d. the greater are returns to scale
b. the larger the proportion labor costs are of total costs and the harder it is to substitute capital for labor
For any given output level, a firm's long run costs a. are always greater than or equal to its short run costs b. are usually greater than or equal to its short run costs except in the case of diminishing returns to scale c. are always less than or equal to its short run costs d. are usually less than or equal to its short run costs except in the case of diminishing return to scale
c. are always less than or equal to its short run costs
A linear total cost curve which passes through the origin implies that a. the average cost is constant and marginal cost is variable b. average cost is variable and marginal cost is constant c. average cost and marginal costs are constant and equal d. need more information to answer question
c. average cost and marginal costs are constant and equal
Suppose that a lawn mowing services production function for lawns mowed in a week is M=(LK)^1/2, where L is labor hours and K is the amount of capital (mowers and trimmers). The expansion path depends on a. the wage rate only b. the rental rate only c. both the wage and rental rates d. neither the wage nor rental rates
c. both the wage and rental rates
The firm's expansion path records a. profit maximizing output choices for every possible price b. cost-minimizing input choices for all possible output levels for when input prices expand along with production c. cost-minimizing input choices for all possible output levels for a fixed set of input prices d. cost-minimizing input choices for all profit maximizing output levels
c. cost-minimizing input choices for all possible output levels for a fixed set of input prices
The expansion path for a constant-returns-to-scale production function a. is a straight line through the origin with a slope greater than 1 if w>v b. is a straight line through the origin with a slope greater than 1 if w<v c. is a straight line through the origin, though its slope cannot be determined by w and v alone d. has a positive slope but is not necessarily a straight lone
c. is a straight line through the origin, though its slope cannot be determined by w and v alone
In the short run a. all inputs are fixed b. all inputs are variable c. some inputs are fixed d. no production occurs
c. some inputs are fixed
The shape of a firm's expansion path depends upon a. the price of the labor input b. the price of the capital input c. the shape of the firm's production function d. all of these factors
d. all of these factors
Suppose pigs (P)can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P=2C+5S. If the price of corn feed is $2 and the price of soybean feed is $5, what is the cost minimizing feed combination producing P=100? a. C=50 b. S=20 c. C=25, S=10 d. all points on the P=100 isoquant, including those listed in a-c, would cost the same
d. all points on the P=100 isoquant, including those listed in a-c, would cost the same
A firm's marginal cost curve a. is always U shaped b. always had a positive slope c. is always below its average cost curve d. always intersects its average cost curve at its minimum point
d. always intersects its average cost curve at its minimum point
Suppose pigs (P)can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P=2C+5S. The expansion path depends a. on the price of corn-based feed only b. on the price of soybean-based feed only c. on neither the price of corn-based or soybean-based feed d. on whether the price of corn-based feed is greater than or less than 2/5 the price of soybean-based feed
d. on whether the price of corn-based feed is greater than or less than 2/5 the price of soybean-based feed
Short run total cost is the sum of a. short run fixed cost, short run variable cost, and short run marginal costs b. short run fixed cost and short run marginal costs c. short run variable cost and short run costs d. short run fixed cost and short run variable cost
d. short run fixed cost and short run variable cost
If the wage rate of labor, w, increases relative to the rental cost of capital, v, what is the likeliest outcome is labor and capital may be substituted for each other in the production function? a. labor will be substituted for capital to produce a fixed level of output q b. capital will be substituted for labor to produce a fixed level of output q c. the proportion of labor and capital in the production process will remain unchanged d. labor will be substituted for capital only if the increase w is small
b. capital will be substituted for labor to produce a fixed level of output q
A firm's short run average cost is defined as a. the ratio of total output to short run total cost b. the ratio of short run total cost to total output c. the additional cost of producing one more unit of output while some input is fixed d. the additional cost of producing one more unit of output while all inputs are fixed
b. the ratio of short run total cost to total output
The shape of a firm's long run average cost curve is determined by a. the degree to which each input encounters diminishing marginal productivity b. the underlying nature of the firm's production function when all inputs are able to be varied c. how much the firm decides to produce d. the way in which the firm's expansion oath reacts to changes in the rental rate on capital
b. the underlying nature of the firm's production function when all inputs are able to be varied
The opportunity cost of producing a bike refers to a. the out of pocket payments made to produce the bike b. the value of the goods that were given up to produce the bike c. the bike's retail price d. the marginal cost of the last bike produced
b. the value of the goods that were given up to produce the bike
A firm's marginal cost is defined as a. the ratio of total cost to total output b. the ratio of total output to total cost c. the additional cost of producing one more unit of output d. the reciprocal of total average cost
c. the additional cost of producing one more unit of output
If the marginal cost of production is increasing and is also above the average cost pf production, then a. the average cost of production will decrease b. the average cost of production will remain unchanged c. the average cost of production will increase d. the impact on the average cost of production can't be determined
c. the average cost of production will increase
If the wage rate for labor increases relative to the rental cost of capital, how will the slope of the TC curve change? a. the slope will remain unchanged, but the TC will shift inward b. the slope will decrease i.e. become flatter c. the slope will increase i.e. will steepen d. the slope will remain unchanged, but the TC will shift outward
c. the slope will increase i.e. will steepen
A firm's economic profits are given by a. the total revenue minus total accounting costs b. the owner's opportunity cost c. total revenue minus total economic cost d. total revenue minus the cost of capital
c. total revenue minus total economic cost
