Question 1

A line that illustrates all the different combinations of two inputs that result in the same total cost is called a(n)

Accepted Answer

An isocost line represents all the different combinations of two inputs that result in the same total cost. Therefore, option B is the correct choice. Option A refers to the cost per unit of output, option C refers to the total cost of production at different levels of output, option D refers to the different combinations of two goods that can be purchased with a given income, and option E refers to the different combinations of two inputs that can produce a given level of output.

Question 2

The slope of an isoquant is called the

Accepted Answer

The slope of an isoquant represents the rate at which one input can be substituted for another while keeping output constant, which is called the rate of technical substitution. The other options are not correct descriptions of the slope of an isoquant.

Question 3

Fill in the table below about the cost structure of a firm.

Accepted Answer

The answer of Fill in the table below about the...

Question 4

Plot the following data for quantity of production and long-run average cost for a firm. Are there economies of scale, diseconomies of scale, or constant returns to scale? Indicate these areas in your diagram.

Accepted Answer

The answer of Plot the following data for quantity of...

Question 5

Explain the difference between economies of scale and economies of scope.

Accepted Answer

The answer of Explain the difference between economies of scale...

Question 6

Use the cost function information provided in the table below to answer the following questions.

Accepted Answer

The answer of Use the cost function information provided in...

Question 7

A firm can experience economies of scope by reducing the variety of products it produces.

Accepted Answer

Economies of scope occur when a firm can produce multiple products or services using the same resources, leading to cost savings. Therefore, reducing the variety of products produced would lead to less potential for economies of scope.

Question 8

An isocost line has a

Accepted Answer

An isocost line represents all the combinations of two inputs that give a certain total cost. As the price of one input increases, the firm must use less of that input and more of the other input in order to maintain the same level of cost. This means that the two inputs can replace each other in production, resulting in a negative slope to the isocost line.

Question 9

The slope of an isoquant depends on the ratio of

Accepted Answer

The slope of an isoquant depends on the ratio of the marginal products of inputs, reflecting how inputs can be substituted for one another while maintaining the same level of output.

Question 10

Are there economies of scale for a waiter serving customers in a restaurant? What economies of scale are realized if party sizes increase? Is there a maximum party size beyond which scale diseconomies are experienced?

Accepted Answer

The answer of Are there economies of scale for a...

Question 11

An isoquant is a line that

Accepted Answer

An isoquant, also known as an iso-product curve, shows different combinations of two inputs that will produce the same level of output. This means that if a firm wants to produce a specific amount of output, it can use different combinations of inputs.

Question 12

Suppose the average total cost curves for a firm for three different amounts of capital are as shown in the table below:

Accepted Answer

The answer of Suppose the average total cost curves for...

Question 13

If a profit-maximizing firm is producing at the tangency between an isoquant and an isocost line, then a movement along the current isocost line

Accepted Answer

The answer of If a profit-maximizing firm is producing at...

Question 14

Consider the relationship between the average test score of a class and one student's test score. Suppose there are 10 students with an average test score of 80. Suppose the marginal score is the test score of a new student, Kelly.

Accepted Answer

The answer of Consider the relationship between the average test...

Question 15

Draw typical average total cost, average variable cost, and marginal cost curves for a competitive firm with price at the shutdown point. Show that total revenue equals variable costs at this quantity. Also show the firm's losses at this quantity.

Accepted Answer

The answer of Draw typical average total cost, average variable...

Question 16

Economies of scale and economies of scope are related and occur for the same reason.

Accepted Answer

Economies of scale refer to cost advantages that enterprises obtain due to size, output, or scale of operation, with costs per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Economies of scope, however, refer to cost advantages that a business obtains through the variety of products it offers, stemming from the ability to share or utilize the same operations, knowledge, or processes to produce different types of goods or services, rather than just producing more of a single product. While both can lead to cost savings, they occur for different reasons related to the scale and variety of production, respectively.

Question 17

The slope of an isocost line depends on the ratio of

Accepted Answer

The slope of an isocost line is determined by the ratio of the input prices. The isocost line is a straight line that shows all the combinations of labor and capital that can be purchased at a given cost. The steeper the slope, the higher the cost of the input. Therefore, the slope of the isocost line depends on the ratio of input prices, which is captured in choice B.

Question 18

Fill in the table below for a competitive firm that can sell its product for $7 a unit.

Accepted Answer

The answer of Fill in the table below for a...

Question 19

The combination of two inputs that results in a given quantity of output at least cost occurs where

Accepted Answer

The answer of The combination of two inputs that results...

Question 20

Consider the weight of the people in a theater. Suppose the first person you notice weighs 160 pounds, the second and third weigh 132 and 108 pounds, respectively.

Accepted Answer

The answer of Consider the weight of the people in...

Quiz 8: Costs and the Changes at Firms Over Time