Question 1

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Accepted Answer

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is an isoquant.

Question 2

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. The firm is currently along isocost CE. If the price of capital is $12, then the price of labor is

Accepted Answer

The isocost line represents combinations of labor and capital that a firm can purchase for a given total cost. If the price of capital is $12, and the firm is on isocost CE, the slope of the isocost line (which is the ratio of the price of labor to the price of capital) must be consistent with the given options. Given the choices, $8 is the only price that would typically result in a feasible isocost line slope when combined with a capital price of $12.

Question 3

Isoquants are downward sloping because

Accepted Answer

Isoquants are downward sloping because they represent combinations of inputs that produce the same level of output. If more of one input is used, less of the other is needed to maintain the same output level, reflecting the principle of substitution.

Question 4

Related to the Economics in Practice on page 157: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?

Accepted Answer

Option A is not the best analysis because driving as quickly as possible may result in higher fuel consumption, higher maintenance costs and higher probability of accidents that may increase overall costs. 
Option B is also not the best analysis because while driving at the most fuel-efficient rate may help reduce fuel expenditure, it may lead to slower deliveries, reducing the number of deliveries per day. 
Option D is not the best analysis because driving too slow can also be costly due to extended working hours that may lead to increased labor costs, loss of potential deliveries and increased vehicle maintenance due to frequent starts and stops. 
Option C is the best analysis because it seeks to balance the trade-off between speed and fuel efficiency, which can help minimize total expenses. Drivers need to consider factors such as fuel consumption costs, travel time, driver wages and maintenance costs in order to determine an optimal speed that balances all of these factors.

Question 5

Related to the Economics in Practice on page 157: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?

Accepted Answer

An increase in the hourly wage of truck drivers incentivizes faster deliveries to reduce labor costs, while a decrease in gasoline costs makes driving faster less expensive.

Question 6

A production function shows the least amount that a firm will produce given the amount of labor input.

Accepted Answer

A production function shows the maximum amount that a firm can produce, not the least amount.

Question 7

Related to the Economics in Practice on page 156: For pineapple farmers in Ghana, the choice of how much fertilizer to use was highly dependent on how much fertilizer their more successful neighbor farmers used. This process of technology adoption is referred to as

Accepted Answer

The process described in the question is that pineapple farmers in Ghana choose the amount of fertilizer to use based on their more successful neighbor farmers' choices. This process of technology adoption is referred to as social learning, which involves learning from peers and adopting their successful practices. Therefore, the correct answer is C, social learning. The other answer options, which include trial and error, capital-intensive adaptation, and mass production, do not accurately describe the process outlined in the question.

Question 8

Refer to the information provided in Figure 7.7 below to answer the questions that follow.  Figure 7.7
-Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant A to isoquant B, the number of roller skates produced

Accepted Answer

Moving from isoquant A to isoquant B means that Roller Skates Unlimited is able to produce more roller skates using the same amount of inputs (capital and labor). Therefore, the number of roller skates produced increases.

Question 9

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. If the price of capital is $20, then along isocost line AB total cost is

Accepted Answer

Along isocost line AB, the total cost is equal to the product of the price of capital (20) and the quantity of capital used (60) plus the product of the price of labor (10) and the quantity of labor used (60). Therefore, the total cost is: 
TC = (20 x 60) + (10 x 60) = $1,200.

Question 10

A graph showing all the combinations of capital and labor available for a given total cost is the

Accepted Answer

An isocost line represents all the combinations of capital and labor that a firm can hire for a given total cost. Therefore, it is the best choice among the options given. Isoquants represent all the combinations of inputs that produce a given level of output, budget constraint refers to the limitations on spending due to limited income or resources, and expenditure set refers to the set of all possible combinations of goods that can be purchased with a given budget.

Question 11

If the marginal product of labor is less than the average product of labor, then the average product of labor is increasing.

Accepted Answer

If the marginal product of labor is less than the average product of labor, then adding another unit of labor will decrease the average product of labor. Therefore, the average product of labor is decreasing, not increasing.

Question 12

One worker produces 5 rocking chairs. To produce 10 rocking chairs it will be necessary to hire more than two workers, if diminishing returns have set in.

Accepted Answer

Diminishing returns means that as more workers are hired, the additional output produced by each additional worker decreases. Therefore, to produce double the amount of output (10 rocking chairs instead of 5), it will likely require more than double the amount of workers (more than 2 in this case).

Question 13

Costs of production are determined

Accepted Answer

The costs of production are determined by the technologies that are available and by the input prices. The technologies available determine how efficiently inputs can be used and the input prices determine the cost to acquire those inputs. Therefore, both factors are important in determining the costs of production. The demand for the output can also affect the price producers can charge for their products, but it is not directly related to the costs of production.

Question 14

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor decrease, its isocost line

Accepted Answer

If the relative prices of capital and labor have not changed, then the slope of the isocost line will remain constant. As both expenditures for capital and labor decrease, the isocost line will shift inward parallel to the original isocost line. This is because the firm can now produce the same output with lower expenditures on both inputs. Thus, the firm can shift its spending inward while still maintaining the same level of output.

Question 15

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. The slope of isocost AB is

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 16

Refer to the information provided in Figure 7.8 below to answer the questions that follow.  Figure 7.8
-Refer to Figure 7.8 above. If Roller Skates Unlimited moves from isoquant B to isoquant A, the number of roller skates produced

Accepted Answer

Roller Skates Unlimited moves from isoquant B to isoquant A, which means it is producing more roller skates with the same amount of inputs.

Question 17

If the first worker produces five custom picture frames a day, and the second worker produces five additional custom picture frames a day, it is clear that diminishing marginal returns have not yet set in.

Accepted Answer

Diminishing marginal returns would set in if the second worker's additional input resulted in a decrease in the marginal production of each frame. However, since the marginal production remains constant, it can be inferred that diminishing marginal returns have not yet set in.

Question 18

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 19

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. The slope of isocost CD is

Accepted Answer

The slope of an isocost line is equal to the negative of the ratio of the price of capital to the price of labor. Since the prices of capital and labor are not given in the figure, the slope of the isocost line cannot be determined from the information provided.

Question 20

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. The firm's isocost line would shift from CD to CE if

Accepted Answer

The isocost line shows the combinations of labor and capital that the firm can hire for a given total cost. If the price of labor falls, the firm can afford to buy more units of labor for the same total cost, so the isocost line would shift inward (to the right) from CD to CE.  If the price of capital falls, the firm can afford to buy more units of capital for the same total cost, so the isocost line would shift outward (to the right) from CD to CB. If the firm's total expenditure on inputs increases, the isocost line would shift outward (to the right) from CD to DF. However, this is not one of the options given.

Quiz 7: The Production Process: the Behavior of Profit-Maximizing Firms

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The firm is currently along isocost CE. If the price of capital is $12, then the price of labor is

Isoquants are downward sloping because

Related to the Economics in Practice on page 157: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?

Related to the Economics in Practice on page 157: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?

A production function shows the least amount that a firm will produce given the amount of labor input.

Related to the Economics in Practice on page 156: For pineapple farmers in Ghana, the choice of how much fertilizer to use was highly dependent on how much fertilizer their more successful neighbor farmers used. This process of technology adoption is referred to as

Refer to the information provided in Figure 7.7 below to answer the questions that follow. Figure 7.7 -Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant A to isoquant B, the number of roller skates produced

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. If the price of capital is $20, then along isocost line AB total cost is

A graph showing all the combinations of capital and labor available for a given total cost is the

If the marginal product of labor is less than the average product of labor, then the average product of labor is increasing.

One worker produces 5 rocking chairs. To produce 10 rocking chairs it will be necessary to hire more than two workers, if diminishing returns have set in.

Costs of production are determined

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor decrease, its isocost line

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost AB is

Refer to the information provided in Figure 7.8 below to answer the questions that follow. Figure 7.8 -Refer to Figure 7.8 above. If Roller Skates Unlimited moves from isoquant B to isoquant A, the number of roller skates produced

If the first worker produces five custom picture frames a day, and the second worker produces five additional custom picture frames a day, it is clear that diminishing marginal returns have not yet set in.

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost CD is

Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9 -Refer to Figure 7.9. The firm's isocost line would shift from CD to CE if