Ch.7 Flashcards
Why might a police officer not pull over someone speeding two miles over the speed
limit?
The opportunity costs of stopping the driver are too high
Fixed costs are
a production expense that does not vary with output
Joey’s Lawncutting Service rents office space from Joey’s dad for $300 per month. Joey’s
dad is thinking of increasing the rent to $400 per month. As a result Joey’s marginal cost
of cutting grass will
not change.
Suppose the short-run production function is q
= 10 * L. If the wage rate is $10 per unit of labor, then MC equals
1.
If average cost is decreasing
marginal cost is less than average cost
If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?
MPL is falling
Which of the following will cause the marginal cost curve of making cigarettes to shift?
A $1 per pack tax on cigarettes
A specific tax of $1 per unit of output will affect a firm’s
average total cost, average variable cost, and marginal cost
True or False: The marginal cost curve intersects the average fixed cost curve at its
minimum
False
The slope of the isoquant tells the firm how much
capital must decrease to keep output constant when labor increases by one unit
If an isocost line crosses the isoquant twice, a cost minimizing firm will
use a different isocost line to
select the bundle of inputs
A change in relative factor
prices will always result in
a rotation of the isocost lines
True or False: If increasing returns to scale are present, the long-run average cost
increases as more
output is produced
False
Which of the following statements best explains why long-run average cost is never
greater than short-run average cost?
In the long run, tangency of the isocost and isoquant is attainable. This is not necessarily true in the short run.
In the long run, the expansion path is
Not enough information
