Question 1

The opportunity cost of any business decision is

Accepted Answer

Opportunity cost is the cost of the next best alternative which a business has to give up in order to pursue a particular decision. It is not the accounting cost or cost per unit of output, nor is it the cost of doing business in the future. Therefore, option C is the correct answer.

Question 2

If a company has a cost curve of TC = 300 + 2Q + Q² and it produces 300 units per day,then its marginal cost is

Accepted Answer

Marginal cost is the change in total cost divided by the change in quantity. In this case, the change in quantity is 1 unit, so the marginal cost is:MC = dTC/dQ = 2 + 2Q = 2 + 2(300) = 602

Question 3

If the price of a variable input increases,then

Accepted Answer

If the price of a variable input increases, it will lead to an increase in the cost of production. This increase in cost will cause the total cost curve to shift upward because at any level of output, the firm will now have to incur a higher cost compared to before the increase in the input price.

Question 4

A firm produces 10 widgets that they sell for $15 each.The average variable cost for the production of 10 widgets is $13/unit.The fixed cost for this firm equals $20.What is the value of this firm's profits?

Accepted Answer

The answer of A firm produces 10 widgets that they...

Question 5

If a company has a cost curve of TC = 300 + 2Q + Q² and it produces 300 units per day,then its average (total)cost is

Accepted Answer

The total cost (TC) formula given is TC = 300 + 2Q + Q, which simplifies to TC = 300 + 3Q when considering Q as the quantity produced. To find the average total cost (ATC), we divide the total cost by the quantity produced. Substituting Q with 300 units, we get TC = 300 + 3(300) = 300 + 900 = 1200. The average total cost is then 1200 / 300 = $4. However, since none of the provided options match this calculation, it appears there was a misunderstanding in interpreting the options based on the calculation provided. The correct calculation method shows an average cost that does not match the given options, suggesting a possible error in the question or the interpretation of the formula.

Question 6

As output expands from 199 to 200 units,total costs rise from $2,985 to $3,000.At this stage,the marginal cost and average cost of production are

Accepted Answer

The marginal cost is the change in total cost when output increases by one unit, which is $3,000 - $2,985 = $15. The average cost is the total cost divided by the number of units, which is $3,000 / 200 = $15.

Question 7

Economies of scale arise when

Accepted Answer

Economies of scale occur when increasing all inputs at the same rate leads to a more than proportional increase in output, reducing the average cost of production.

Question 8

Refer to Figure 5.1.Observe the three isoquants depicted and determine which of the following statements is true.

Accepted Answer

The answer of Refer to Figure 5.1.Observe the three isoquants...

Question 9

The general rule for profit maximization in a firm is to

Accepted Answer

The general rule for profit maximization is to produce where marginal revenue equals marginal cost. At this point, the firm is producing the optimal quantity where the additional cost of producing one more unit is equal to the additional revenue earned from selling that unit. This ensures that the firm is not producing too little or too much, and is maximizing its profits.

Question 10

A firm's average total cost is minimized at <>$5/unit when it produces 10 units.What is the marginal cost when the firm produces 10 units?

Accepted Answer

When the average total cost is minimized, the marginal cost equals the average total cost. Therefore, the marginal cost is $5/unit when the firm produces 10 units.

Question 11

A firm that produces widgets must pay a fixed cost of $150.It costs an additional $30 for every widget that they produce.If the market price is $40,how many widgets does the firm have to sell so that it does not incur a loss?

Accepted Answer

To break even and not incur a loss, the firm's total revenue must equal its total costs. The total cost (TC) is the sum of fixed costs (FC) and variable costs (VC), where VC is $30 per widget. The total revenue (TR) is the market price per widget ($40) times the number of widgets sold (x). The break-even point is where TR = TC. Thus, $40x = $150 + $30x. Solving for x gives x = 15.

Question 12

Refer to Figure 5.2.On the graph that shows total costs,what is the level of variable costs when 6 units are produced?

Accepted Answer

The answer of Refer to Figure 5.2.On the graph that...

Question 13

An independent trucker has to choose one of the four possible combinations of inputs listed below.The two inputs are drivers and machinery.If he buys expensive machinery,then he can hire fewer drivers to deliver the same output.The input combinations are Method 1: 20 drivers,10 machines;
Method 2: 50 drivers,2 machines;
Method 3: 100 drivers,0 machines;
Method 4: 10 drivers,12 machines.
Hiring a driver costs $10.Each machine costs $100.Which method should he use?

Accepted Answer

The answer of An independent trucker has to choose one...

Question 14

Isoquants from fixed-proportion production functions are

Accepted Answer

Isoquants from fixed-proportion production functions are shaped as right angles because fixed proportion technology produces output in a fixed ratio of inputs, leading to a constant substitution rate of factors of production. As a result, the isoquants are L-shaped, which means that one factor of production can be increased without any effect on output until a certain threshold is reached, after which an increase in the other factor is necessary to maintain output.

Question 15

The curve showing all the combinations of inputs that can be purchased with a given outlay of funds is called a(n)

Accepted Answer

An isocost curve represents all the combinations of two inputs that can be purchased with a given amount of money or outlay. It helps in determining the most cost-effective input combination for a given level of output or production. Total cost curve represents the total cost of production at different levels of output, isoquant shows all the combinations of two inputs that produce a specific level of output, and the production function shows the maximum output that can be produced with different combinations of inputs.

Question 16

In general,which of the following implies that a marginal cost curve will eventually increase as a firm produces more output?

Accepted Answer

The law of diminishing returns states that as a firm increases the quantity of a variable input while holding the quantities of all other inputs fixed, eventually the marginal product of the variable input will decline. As a result, the marginal cost of producing each additional unit of output will increase, leading to an upward-sloping marginal cost curve. Choices A, B and D do not necessarily imply an upward-sloping marginal cost curve.

Question 17

Bob owns an auto parts firm.He uses a combination of steel and aluminum to produce his auto parts.All of the following combinations will finish the task on time.Steel costs $15 per unit and the aluminum costs $50 per unit.What combination of steel and aluminum should he use?

Accepted Answer

To determine the best choice, we need to find the combination that minimizes costs while still producing the required number of auto parts. We can begin by calculating the total cost for each combination:

A) 10 steel units + 10 aluminum units = (10 x $15) + (10 x $50) = $650
B) 12 steel units + 8 aluminum units = (12 x $15) + (8 x $50) = $740
C) 15 steel units + 7 aluminum units = (15 x $15) + (7 x $50) = $645
D) 20 steel units + 6 aluminum units = (20 x $15) + (6 x $50) = $810

Therefore, the combination that minimizes costs while still producing the required number of auto parts is C: 15 units of steel and 7 units of aluminum.

Question 18

If a company has significant economies of scale in the long run-assuming a large market -the company will tend to

Accepted Answer

When a company has significant economies of scale in the long run, it means that as it increases its production, it will experience decreasing average costs. This is because the fixed costs are spread over a larger quantity of output, resulting in lower average costs per unit. As the company grows larger, it will continue to benefit from economies of scale and its average cost curve will decline. Therefore, the correct answer is A.

Question 19

If the generic production function Q = f (K,L)displays increasing returns to scale,the value of K is fixed in the short run,and the prices of all inputs are held constant,then

Accepted Answer

With increasing returns to scale, a proportional increase in inputs results in a larger percentage increase in output. Therefore, as the firm expands its scale of production in the long run (by adjusting both K and L), the average cost of production will decrease. Thus, the long-run average cost curve must be strictly decreasing.

Question 20

Which of the following statements about the average total cost curve is false?

Accepted Answer

The statement that the average total cost curve is always downward sloping because the average fixed costs will always decrease as quantity increases is false. While average fixed costs may decrease as quantity increases, the average variable cost may increase, resulting in an upward sloping average total cost curve.

Quiz 5: Production and Cost

The opportunity cost of any business decision is

If a company has a cost curve of TC = 300 + 2Q + Q² and it produces 300 units per day,then its marginal cost is

If the price of a variable input increases,then

A firm produces 10 widgets that they sell for $15 each.The average variable cost for the production of 10 widgets is $13/unit.The fixed cost for this firm equals $20.What is the value of this firm's profits?

If a company has a cost curve of TC = 300 + 2Q + Q² and it produces 300 units per day,then its average (total) cost is

As output expands from 199 to 200 units,total costs rise from $2,985 to $3,000.At this stage,the marginal cost and average cost of production are

Economies of scale arise when

Refer to Figure 5.1.Observe the three isoquants depicted and determine which of the following statements is true.

The general rule for profit maximization in a firm is to

A firm's average total cost is minimized at <>$5/unit when it produces 10 units.What is the marginal cost when the firm produces 10 units?

A firm that produces widgets must pay a fixed cost of $150.It costs an additional $30 for every widget that they produce.If the market price is $40,how many widgets does the firm have to sell so that it does not incur a loss?

Refer to Figure 5.2.On the graph that shows total costs,what is the level of variable costs when 6 units are produced?

Isoquants from fixed-proportion production functions are

The curve showing all the combinations of inputs that can be purchased with a given outlay of funds is called a(n)

In general,which of the following implies that a marginal cost curve will eventually increase as a firm produces more output?

Bob owns an auto parts firm.He uses a combination of steel and aluminum to produce his auto parts.All of the following combinations will finish the task on time.Steel costs $15 per unit and the aluminum costs $50 per unit.What combination of steel and aluminum should he use?

If a company has significant economies of scale in the long run-assuming a large market -the company will tend to

If the generic production function Q = f (K,L) displays increasing returns to scale,the value of K is fixed in the short run,and the prices of all inputs are held constant,then

Which of the following statements about the average total cost curve is false?

Quiz 5: Production and Cost

The opportunity cost of any business decision is

If a company has a cost curve of TC = 300 + 2Q + Q2 and it produces 300 units per day,then its marginal cost is

If the price of a variable input increases,then

A firm produces 10 widgets that they sell for $15 each.The average variable cost for the production of 10 widgets is $13/unit.The fixed cost for this firm equals $20.What is the value of this firm's profits?

If a company has a cost curve of TC = 300 + 2Q + Q2 and it produces 300 units per day,then its average (total) cost is

As output expands from 199 to 200 units,total costs rise from $2,985 to $3,000.At this stage,the marginal cost and average cost of production are

Economies of scale arise when

Refer to Figure 5.1.Observe the three isoquants depicted and determine which of the following statements is true.

The general rule for profit maximization in a firm is to

A firm's average total cost is minimized at <>$5/unit when it produces 10 units.What is the marginal cost when the firm produces 10 units?

A firm that produces widgets must pay a fixed cost of $150.It costs an additional $30 for every widget that they produce.If the market price is $40,how many widgets does the firm have to sell so that it does not incur a loss?

Refer to Figure 5.2.On the graph that shows total costs,what is the level of variable costs when 6 units are produced?

Isoquants from fixed-proportion production functions are

The curve showing all the combinations of inputs that can be purchased with a given outlay of funds is called a(n)

In general,which of the following implies that a marginal cost curve will eventually increase as a firm produces more output?

Bob owns an auto parts firm.He uses a combination of steel and aluminum to produce his auto parts.All of the following combinations will finish the task on time.Steel costs $15 per unit and the aluminum costs $50 per unit.What combination of steel and aluminum should he use?

If a company has significant economies of scale in the long run-assuming a large market -the company will tend to

If the generic production function Q = f (K,L) displays increasing returns to scale,the value of K is fixed in the short run,and the prices of all inputs are held constant,then

Which of the following statements about the average total cost curve is false?

If a company has a cost curve of TC = 300 + 2Q + Q² and it produces 300 units per day,then its marginal cost is

If a company has a cost curve of TC = 300 + 2Q + Q² and it produces 300 units per day,then its average (total) cost is