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61
145) A production function shows the greatest amount that a firm will produce given the amount of labor
input.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-17
146) The additional output that can be produced by adding one additional unit of a specific input is called
marginal product.
Answer: TRUE
Diff: 1
Topic: The Production Process
Skill: Definition
Learning Outcome: Micro-17
7.3 Choice of Technology
1) Costs of production are determined
A) only by the technologies that are available.
B) only by the input prices that are available.
C) by the technologies that are available and by input prices.
D) by the technologies that are available and by the demand for the output.
Topic: Choice of Technology
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-17
2) Related to the Economics in Practice on page 151: Which of the following is the best analysis of the
question of how fast delivery truck drivers should drive in order to reduce costs?
A) They should drive as quickly as possible in order to make more deliveries per day.
B) They should drive at the most fuel-efficient rate in order to reduce fuel consumption costs.
C) They should balance the concerns of speed and fuel efficiency and drive at a speed that minimizes
total expenses.
D) They should drive as close to the legal speed limit as possible.
Topic: Choice of Technology: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
62
3) Related to the Economics in Practice on page 151: Which of the following would be most likely to make it
more efficient for delivery trucks to drive more quickly?
A) an increase in the hourly wage of truck drivers and a decrease in the cost of gasoline
B) an increase in the hourly wage of truck drivers and an increase in the cost of gasoline
C) a decrease in the hourly wage of truck drivers and a decrease in the cost of gasoline
D) a decrease in the hourly wage of truck drivers and an increase in the cost of gasoline
Topic: Choice of Technology: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-9
4) Factors of production such as labor and capital
A) are complementary.
B) are substitutable.
C) can be complements and also substitutes.
D) can be neither complements nor substitutes.
Topic: Choice of Technology
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-17
5) Related to the Economics in Practice on page 151: You own a truck and use it to deliver merchandise to
retailers and hire a driver to make such deliveries. The speed at which you instruct the driver to drive
depends on
A) the driver's wage only.
B) the price of gasoline only.
C) the driver's wage and the price of gasoline.
D) neither the driver's wage nor the price of gasoline.
Topic: Choice of Technology: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-17
63
6) Related to the Economics in Practice on page 151: Suppose you own a truck and use it to deliver
merchandise to retailers and hire a driver to make such deliveries. At higher rates of speed the truck gets
fewer miles per gallon of gas. Holding all else constant, as the price of gasoline continues to rise
A) you will instruct your driver to drive faster.
B) you will instruct your driver to drive slower.
C) you will ask your driver to change their driving in any way.
D) you will make more deliveries to cover the increasing cost of fuel.
Topic: Choice of Technology: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-17
7) A key decision that all firms make is which technology to use in the production of their products.
Topic: Choice of Technology
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-9
8) The flexibility of a firm's techniques of production is an important determinant of its costs.
Topic: Choice of Technology
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-9
7.4 Appendix: Isoquants and Isocosts
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)
A) indifference curve.
B) isoquant.
C) isocost line.
D) production function.
Topic: Appendix: Isoquants and Isocosts
Skill: Definition
Learning Outcome: Micro-17
64
Refer to the information provided in Figure 7.7 below to answer the question(s) that follow.
Figure 7.7
2) Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant A to isoquant B, the number
of roller skates produced
A) decreases.
B) increases.
C) remains constant, but Roller Skates Unlimited uses more capital and more labor.
D) remains constant, but input prices have risen.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
3) Refer to Figure 7.7 above. If Roller Skates Unlimited moves from isoquant B to isoquant A, the number
of roller skates produced
A) decreases.
B) increases.
C) remains constant, but Roller Skates Unlimited uses more capital and more labor.
D) remains constant, but input prices have risen.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
65
4) Isoquants are downward sloping because
A) as more units of an input are used to produce a product, total cost increases.
B) as more units of an input are used to produce a product, the firm's marginal productivity increases.
C) if more of one input is used, then less of the other input must be used to keep output constant.
D) Both B and C
Topic: Appendix: Isoquants and Isocosts
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-17
5) A graph showing all the combinations of capital and labor available for a given total cost is the
A) isocost line.
B) isoquant.
C) budget constraint.
D) expenditure set.
Topic: Appendix: Isoquants and Isocosts
Skill: Definition
Learning Outcome: Micro-17
Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.
Figure 7.8
6) Refer to Figure 7.8. If the price of capital is $20, then along isocost line AB total cost is
A) $300.
B) $1,200.
C) $2,400.
D) indeterminate from this information, as the price of labor is not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
66
7) Refer to Figure 7.8. The firm is currently along isocost CD. If the price of capital is $10, then the price of
labor is
A) $10.
B) $20.
C) $80.
D) indeterminate from this information.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
8) Refer to Figure 7.8. The firm is currently along isocost CE. If the price of capital is $12, then the price of
labor is
A) $8.
B) $12.
C) $80.
D) $120.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
9) Refer to Figure 7.8. The firm's isocost line would shift from CD to CE if
A) the price of capital fell.
B) the firm's total expenditure on inputs increased.
C) the price of labor fell.
D) either the price of labor fell or the firm's total expenditure on inputs increased.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
10) Refer to Figure 7.8. The slope of isocost AB is
A) -1.
B) 0.
C) 1.
D) indeterminate from this information, as the prices of capital and labor are not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
67
11) Refer to Figure 7.8. The slope of isocost CD is
A) -1.
B) -2/3.
C) 0.
D) indeterminate from this information, as the prices of capital and labor are not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
12) Refer to Figure 7.8. The slope of isocost CE is
A) -1.
B) -2/3.
C) 0.
D) indeterminate from this information, as the prices of capital and labor are not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
13) Refer to Figure 7.8 The firm's isocost line could shift from CD to AB if
A) the price of capital increased.
B) the firm's total expenditures increased by 25%.
C) the price of capital and labor each increased by 25%.
D) the firm's total expenditures decreased by 25% or the price of capital and labor each increased by 33%.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
14) Refer to Figure 7.8 The firm's isocost line could shift from AB to CD if
A) the price of capital increased.
B) the firm's total expenditures decreased by 25%.
C) the price of capital and labor each decreased by 33%.
D) the firm's total expenditures increased by 33% or the price of capital and labor each decreased by 25%.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
68
15) Refer to Figure 7.8. The general formula for the slope of any of the isocost lines is
A) -PK/PL.
B) -PL/PK.
C) TC/PL.
D) TC/PK.
Topic: Appendix: Isoquants and Isocosts
Skill: Definition
Learning Outcome: Micro-17
16) Refer to Figure 7.8. If the price of capital is $40, then along isocost line AB total cost is
A) $300.
B) $1,200.
C) $2,400.
D) indeterminate from this information, as the price of labor is not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
17) Refer to Figure 7.8. If the price of capital is $25, then along isocost line AB total cost is
A) $1,200.
B) $1,500.
C) $2,000.
D) indeterminate from this information since the price of labor is not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
18) Refer to Figure 7.8. The firm is currently along isocost CD. If the price of capital is $25, then the price
of labor is
A) $1.
B) $25.
C) $80.
D) indeterminate from the information given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
69
19) Refer to Figure 7.8. The firm is currently along isocost CE. If the price of capital is $24, then the price
of labor is
A) $16.
B) $24.
C) $80.
D) $120.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
20) Refer to Figure 7.8. The firm's isocost line would shift from CE to CD if
A) the price of capital increased.
B) the price of labor increased.
C) the firm's total expenditure on inputs increased.
D) either the price of labor increased or the firm's total expenditure on inputs increased.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
21) Refer to Figure 7.8. The slope of isocost AB is
A) greater than the slope of isocost CD.
B) less than the slope of isocost CD.
C) equal to the slope of isocost CD.
D) indeterminate from this information, as the prices of capital and labor are not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
22) Refer to Figure 7.8. The slope of isocost CD is
A) greater than the slope of isocost AB.
B) less than the slope of isocost AB.
C) equal to the slope of isocost AB.
D) indeterminate from this information, as the prices of capital and labor are not given.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
70
23) Refer to Figure 7.8. The firm is currently along isocost CE. If the price of labor is $24, then the price of
labor is
A) $16.
B) $24.
C) $36.
D) $80.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
24) Refer to Figure 7.8. The firm's isocost line could shift from CD to CE if the
A) price of labor increased.
B) firm's total expenditures increased by 50%.
C) price of labor decreased by 50%.
D) firm's total expenditures increased by 50% or the price of capital and labor each decreased by 33%.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
25) Refer to Figure 7.8 The firm's isocost line could shift from CE to CD if
A) the price of capital increased.
B) the firm's total expenditures decreased by 33%.
C) the price of labor increased by 33%.
D) the firm's total expenditures decreased by 33% or the price of capital and labor each increased by 50%.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
26) Refer to Figure 7.8. The firm is currently along isocost CE. If the price of labor is $60, then the price of
labor is
A) $40.
B) $60.
C) $80.
D) $90.
Topic: Appendix: Isoquants and Isocosts
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-17
