Question 1

If a firm is currently minimizing per-unit costs of producing 1,000 units of output, a movement along the current isocost line will

Accepted Answer

A)   increase total cost
B)   reduce total cost
C)   increase output
D)   reduce output
E)   keep output constant

Question 2

Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $15 per hour, how many hours of labor can the firm hire if it spends nothing on machines?

Accepted Answer

A)   3/4 hour
B)   75 hours
C)   2,667 hours
D)   20,000 hours
E)   300,000 hours

Question 3

The expansion path

Accepted Answer

A)   is always a straight line that slopes upward
B)   shows the least-cost input combinations for producing each level of output, if input prices are constant
C)   shows the utility-maximizing combinations of products that society can produce, given resources and technology
D)   shows the economic growth made possible when technology improves
E)   shows the firm's profit-maximizing quantity of output at various product prices

Question 4

Which of the following is not true of isoquants?

Accepted Answer

A)   isoquants farther from the origin represent greater output
B)   isoquants slope downward to the right
C)   isoquants never intersect one another
D)   isoquants shift leftward when input prices increase
E)   isoquants tend to be convex to the origin (bowed toward the origin)

Question 5

Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor)  intercept of the isocost line is 3 million, and the vertical (robot)  intercept is 5 million. The slope of the isocost line is

Accepted Answer

A)   -6.67
B)   -2.4
C)   -1.67
D)   -60
E)   -5.3

Question 6

When a firm has the option of using two different inputs and it elects to use only one (e.g., labor), it will be at the vertical or horizontal intercept of its isocost line.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not true of isoquants?

Accepted Answer

A)   They slope down and to the right.
B)   They are convex to the origin.
C)   Their slope equals the marginal rate of technical substitution.
D)   Output rises as you move along a specific isoquant.
E)   Isoquants closer to the origin represent lower output levels.

Question 8

An isoquant is negatively sloped because

Accepted Answer

A)   labor is productive and capital is not
B)   both labor and capital are costly
C)   labor and capital can replace each other in production
D)   labor and capital can replace each other in expenditure
E)   the ratio of marginal productivities rises, then falls

Question 9

Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor)  intercept of Manny Motors' isocost line is 3 million, and the vertical (robot)  intercept of the isocost line is 5 million. Manny Motors' operating budget must be

Accepted Answer

A)   $4.5 million
B)   $8 million
C)   $60 million
D)   $80 million
E)   $120 million

Question 10

A firm that produces where the isocost line is tangent to an isoquant line must be

Accepted Answer

A)   maximizing profit
B)   maximizing revenues
C)   minimizing the total cost of producing that output level
D)   minimizing output for a given total cost
E)   paying the same prices for capital and labor

Question 11

-At point b in Exhibit 7-17, output is

Accepted Answer

A)   higher than at points a and c, but cost is the same
B)   the same as at points a and c, but cost is lower
C)   the same as at points a and c, but cost is higher
D)   lower than at points a and c and so is cost
E)   higher than at point a

Question 12

Upon opening a printing and copy shop, a firm budgets $30,000 for copy machines and labor. If the price of labor is $30 per hour, what is the vertical intercept of the isocost line when labor is measured on the horizontal axis?

Accepted Answer

A)   75 hours
B)   1,000 hours
C)   90,000 hours
D)   300,000 hours
E)   It is impossible to tell from the information given.

Question 13

At the point of tangency between an isoquant and an isocost line,

Accepted Answer

A)   the firm is minimizing the cost of producing a given amount of output
B)   the firm is maximizing the cost of producing a given amount of output
C)   the household is maximizing its total utility given its income
D)   the society is maximizing the social value of output, given its resources and technology
E)   none of the above

Question 14

All combinations of inputs along an isoquant line represent the same total output.

Accepted Answer

A) True 
 B)False

Question 15

Isoquants do not intersect except when a firm doubles the amounts of resources employed.

Accepted Answer

A) True 
 B)False

Question 16

The horizontal (labor)  intercept of Manny Motors' isocost line is 3 million, and the vertical (robot)  intercept is 5 million. Which of the following best describes what would happen to the isocost line if Manny Motors' operating budget decreased?

Accepted Answer

A)   It would shift rightward to a parallel position.
B)   It would shift rightward to a nonparallel position.
C)   It would shift leftward to a parallel position.
D)   It would shift leftward to a nonparallel position.
E)   Nothing.

Question 17

-In Exhibit 7-17, the firm would prefer producing at point b to

Accepted Answer

A)   points a and c only because b represents the same output at lower cost
B)   points a and c only because b represents higher output at the same cost
C)   points a and c only because b represents higher output at lower cost
D)   point e only because b represents lower cost
E)   all other points on the graph

Question 18

-From the firm's perspective, point e in Exhibit 7-17 is preferable to which other point?

Accepted Answer

A)   Point a because e represents the same output at lower cost.
B)   Point a because e represents higher output at the same cost.
C)   Point b because e represents the same output at lower cost.
D)   Point b because e represents higher output at the same cost.
E)   Point b because e represents higher output at lower cost.

Question 19

A firm can increase output by moving along a given isoquant.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a characteristic of isoquants?

Accepted Answer

A)   They slope downward.
B)   They do not intersect.
C)   Their slope represents the ratio of the input prices.
D)   They represent efficient combinations of two resources.
E)   Isoquants further from the origin represent higher output levels.

Exam 7: Appendix: a Closer Look at Production and Cost

When a firm has the option of using two different inputs and it elects to use only one (e.g., labor), it will be at the vertical or horizontal intercept of its isocost line.

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-At point b in Exhibit 7-17, output is

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-In Exhibit 7-17, the firm would prefer producing at point b to

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All combinations of inputs along an isoquant line represent the same total output.

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Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million, and the vertical (robot) intercept is 5 million. The slope of the isocost line is

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Which of the following is not true of isoquants?

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-From the firm's perspective, point e in Exhibit 7-17 is preferable to which other point?

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Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of Manny Motors' isocost line is 3 million, and the vertical (robot) intercept of the isocost line is 5 million. Manny Motors' operating budget must be

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A firm that produces where the isocost line is tangent to an isoquant line must be

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Upon opening a printing and copy shop, a firm budgets $30,000 for copy machines and labor. If the price of labor is $30 per hour, what is the vertical intercept of the isocost line when labor is measured on the horizontal axis?

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An isoquant is negatively sloped because

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If a firm is currently minimizing per-unit costs of producing 1,000 units of output, a movement along the current isocost line will

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Which of the following is not true of isoquants?

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The horizontal (labor) intercept of Manny Motors' isocost line is 3 million, and the vertical (robot) intercept is 5 million. Which of the following best describes what would happen to the isocost line if Manny Motors' operating budget decreased?

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Isoquants do not intersect except when a firm doubles the amounts of resources employed.

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The expansion path

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A firm can increase output by moving along a given isoquant.

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At the point of tangency between an isoquant and an isocost line,

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Which of the following is not a characteristic of isoquants?

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Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $15 per hour, how many hours of labor can the firm hire if it spends nothing on machines?

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