question
A sunk cost is
answer
a past cost that cannot be recovered
question
Which of the following is most likely to have declining opportunity costs?
An acre of land in San Francisco.
A delivery van.
A park in downtown London.
An apartment building in Manhattan.
An acre of land in San Francisco.
A delivery van.
A park in downtown London.
An apartment building in Manhattan.
answer
A delivery van.
question
If producing more output has no effect on average cost then
answer
there are no economies of scale.
question
If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as
answer
the rent the firm could earn if it rented the building to another firm.
question
Assume Congress decides that oil companies are making too much profit and decides to increase the tax on oil companies for each gallon of gasoline produced. This would
guarantee a decrease in profits.
guarantee an increase in profits.
guarantee an increase in tax revenues.
NOne
guarantee a decrease in profits.
guarantee an increase in profits.
guarantee an increase in tax revenues.
NOne
answer
None of these.
question
One problem with measuring a durable good's cost is
answer
how to allocate the initial purchase cost.
question
An old friend takes you out to dinner and pays for your meal. Which of the following best represents your opportunity cost?
Unable to determine with the information given.
going to the beach
attending a concert
studying for your exam
Unable to determine with the information given.
going to the beach
attending a concert
studying for your exam
answer
Unable to determine with the information given.
question
The Nifty Gum Co. has purchased a large parcel of land for $1 million. The company recently discovered that the land is contaminated and is worthless to all possible buyers. The opportunity cost of the land is
answer
$0.
question
The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. Assume that the firm's capital is fixed at 250 units, the rental rate of capital is $5 per unit, and the wage rate is $10 per hour. The amount of labor needed to produce q units of output is
answer
0.0124q1.67.
question
A firm's cost curve is determined by
answer
the firm's production function.
question
Which of the following statements is NOT true?
answer
AVC = wage/MPL
question
If the cost of capital decreases, the isocost line will
answer
rotate outward around the point where only labor is employed in production.
question
The slope of the isoquant tells the firm how much
answer
capital must decrease to keep output constant when labor increases by one unit.
question
If the cost of labor increases the isocost line will
answer
rotate inward around the point where only capital is employed in production.
question
Variable costs
answer
decrease with decreasing output.
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