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

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Question 61

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Refer to Scenario 7.3 below to answer the questions that follow. SCENARIO 7.3: Upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $60,000 annually. Last year you earned a total revenue of $100,000. Rent and supplies last year were $50,000. -Refer to Scenario 7.3. Your annual economic costs are

A) $0.
B) $50,000.
C) $60,000.
D) $110,000.

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Question 62

Multiple Choice

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Refer to the information provided in Figure 7.4 below to answer the questions that follow. Figure 7.4 -Refer to Figure 7.4. Diminishing marginal returns begin when the ________ worker is hired.

A) first
B) second
C) third
D) fifth

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Question 63

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Refer to the information provided in Figure 7.12 below to answer the questions that follow. Figure 7.12 -Refer to Figure 7.12. If the firm's level of total cost is represented by the given isocost line, the firm's optimal combination of capital and labor is given by

Refer to Scenario 7.3 below to answer the questions that follow. SCENARIO 7.3: Upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $60,000 annually. Last year you earned a total revenue of $100,000. Rent and supplies last year were $50,000. -Refer to Scenario 7.3. Your annual economic profit 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

Refer to the information provided in Figure 7.4 below to answer the questions that follow. Figure 7.4 -Refer to Figure 7.4. The average product of the sixth worker is

Refer to the information provided in Figure 7.12 below to answer the questions that follow. Figure 7.12 -Refer to Figure 7.12. At Point C, the slope of isoquant q2 = 200 is

The optimal method of production is the one that

Use the information provided in Table 7.1 below to answer the questions that follow. Table 7.1 Inputs Required to Produce a Product Using Alternative Technologies $\begin{array} { c c c } \text { Technology } & \text { Units of Capital } & \text { Number of Employees } \\\hline \text { A } & 4 & 18 \\\text { B } & 6 & 12 \\\text { C } & 8 & 8 \\\text { D } & 12 & 6\end{array}$ -Refer to Table 7.1. If the hourly wage rate is $10 and the hourly price of capital is $25, which production technology should be selected?

Perfectly competitive firms must make all of the following decisions EXCEPT

For economic analysis, the short run is considered less than one year.

Costs of production are determined

Refer to Scenario 7.4 below to answer the questions that follow. SCENARIO 7.4: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively. -Refer to Scenario 7.4. The marginal product of the third worker is

Refer to the information provided in Figure 7.11 below to answer the questions that follow. Figure 7.11 -Refer to Figure 7.11. If this firm's cost of capital is $20 per unit and its cost of labor is $10 per unit, the isocost line represents a total cost of

Isoquants are downward sloping because

Refer to the information provided in Figure 7.6 below to answer the questions that follow. Figure 7.6 -Refer to Figure 7.6. The shoe manufacturer currently produces 50 units of output. If this shoe manufacturer increases labor from 15 to 20, the marginal product of the 20th worker

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

The least costly way to produce any given level of output is indicated by

Refer to the information provided in Figure 7.3 below to answer the questions that follow. Figure 7.3 -Refer to Figure 7.3. The average product of the second worker is ________ yards raked.

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 could shift from CD to AB if