Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect
The price of steel to fall.
The demand curve for steel to shift to the right.
The demand curve for plastic to shift to the left.
Nothing to happen to steel because it is only a substitute for plastic.
The demand curve for steel to shift to the left.
Which of the following will not cause a shift in the supply of gasoline?
An increase in the wage in the rate of refinery workers.
A decrease in the price of gasoline
An improvement in oil refining technology.
A decrease in the price of crude oil.
A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. the assumption that leads to this conclusion is
All goods are good
Assumption of rationality
The slope of an indifference curve reveals:
That preferences are complete
The marginal rate of substitution of one good for another good
The ratio of market prices
That preferences are transitive
None of the above
Refer to the figure below. At any consumption bundle with the quantity of good X exceeding the quantity of good Y (that is, a bundle located below the 45 degree line, like point A) Alvin’s marginal rate of substitution of good X for good Y is
Constant and positive
Consider the following three market baskets. If baskets A and B are on the same indifference curve and if indifference curves exhibit diminishing MRS:
C is preferred to both A and B
A and B are both preferred to C
C is on the same indifference curve as A and B
There is not enough information to determine preferences for
C relative to the other goods
If Jill’s MRS of popcorn for candy is 2, Jill would willingly give up:
2, but no more than 2 units of popcorn for an additional unit of candy.
2, but no more than 2, units of candy for an additional unit of popcorn.
1, but no more than 1 unit of candy for an additional 2 units of popcorn.
2, but no more than, units of popcorn for an additional 2 units of candy.
According to the law of diminishing returns
The total product of an input will eventually be negative
The total product of an input will eventually decline
The marginal product of an input will eventually be negative
The marginal product of an input will eventually decline
What describes the graphical relationship between average product and marginal product?
Average product cuts marginal product from above, at the maximum point of marginal product.
Average product cuts marginal product from below, at the maximum point of marginal product.
Marginal product cuts average product from above, at the maximum point of average product.
Marginal product cuts average product from below, at the maximum point of average product.
Average and marginal product do not intersect.
An examination of the production isoquants in the diagram below reveals that :
Capital and labor must be used in fixed proportions
Capital and labor are perfectly substitutable
The MRTS is constant along the line
The MRTS is constant along the line 7 Capital and labor are perfectly substitutable are
The isoquant below is illustrating
Two inputs are perfect substitutes
Diminishing marginal rate of technical substitution (MRTS)
Diminishing Marginal returns.
In a production process, all inputs are increased by 10%, but output increases less than 10%. This means that the firm experiences
Decreasing return to scale
Constant returns to scale
Increasing returns to scale
Negative returns to scale
Refer to the figure. The situation pictured is one of..
Constant returns to scale, because the line through the origin is linear
Decreasing returns to scale, because the isoquants are convex.
Decreasing returns to scale, because doubling inputs results in less than double the amount of output.
Increasing returns to scale, because the isoquants are convex.
14. Constantine purchased 100 shares of IBM stock several years ago for $150 per share. The price of these shares has fallen to $55 per share. Constantine’s investment strategy is “buy low, sell high.” Therefore he will not sell his IBM stock until the price rises above $150 per share. If he sells at a price lower than 150 per share he will have “bought high and sold low.” Constantine’s decision:
Is correct and shows solid command of the nature of opportunity cost
Is incorrect because the original price paid for he shares is a sunk cost and should have no bearing on whether the shares should be held or sold.
Is incorrect because when the price of a stock falls, the law of demanded states that he should buy more shares.
Is incorrect because it treats the price of the shares as an explicit cost.
The difference between the economic and accounting costs of a firm are
The accountant’s fees
The corporate tax on profits.
The opportunity costs of the factors of production that the firm owns.
The sunk costs incurred by the firm.
The explicit costs of the firm.
When marginal product is increasing, which of the following is true?
Marginal cost is decreasing
Average cost is decreasing
Average product is decreasing
Marginal Cost is increasing
Average product is increasing
Consider the following statements when answering this question.
I---Whenever a firim’s average variable costs are falling as output rises, marginal costs must be falling oo.
II----Whenever a firms average total costs are rising as output rises, average variable costs must be rising too.
I is true, II is false
I is false, and II is true
I and II are both true
I and II are both false
In the long run,
All inputs and costs are variable
Fixed cost is a positive constant
Which of the following is always true along the isoquant curve?
MRTS-slope of the isoquant
All of the above
Only MRTS-slope of the isoquant & MRTS=MPl/MPk are correct
If a firms average cost decreases as the produce more outputs, the firm is experiencing
Economies of scale
Diseconomies of scale
Constant return to scale
Diminishing marginal returns