1. If a fast-food restaurant chain is deciding whether to offer a low-carb menu
ID: 1177603 • Letter: 1
Question
1. If a fast-food restaurant chain is deciding whether to offer a low-carb menu or to add more tables to its restaurant floor, then:
a)it is still relevant to calculate marginal cost; it is just a less straightforward process.
b) the restaurant will incur marginal costs only if the addition of new menu items causes a net increase in sales.
c) the restaurant will not incur marginal costs because new menu items will cause customers to change their orders, but not to order more food.
d) such a decision cannot be analyzed using an economic model because the model can only address the question "should we produce more or less?".
2. At one time, sea lions were depleting the stock of steelhead trout. One idea to scare sea lions away from the Washington coast was to launch fake killer whales, which are predators of sea lions. The cost of making the first whale is $16,000 ($5,000 for materials and $11,000 for the mold). The mold can be reused to make additional whales, so additional whales cost $5,000 each. Based on these numbers, the average total cost of making 5 fake killer whales would be:
a) $5,000.
b) $11,000.
c) $7,200.
d) $36,000.
3. An isocost line is a line that represents combinations of:
a) factors of production that produce equal amounts of output.
b) factors of production that cost the same amount.
c) output that can be produced from the same quantity of inputs.
d) output that can be produced at the same cost.
4. The marginal rate of substitution is the rate at which:
a) inputs must be substituted for one another in order to keep costs constant.
b) inputs are substituted for output.
c) inputs must be substituted for one another in order to keep output constant.
d) the marginal productivity of a factor declines.
5.Expected economic profit per unit is equal to:
a) expected price.
b) expected average total cost.
c) the difference between expected price and expected average total cost.
d) the difference between expected total revenue and expected total cost.
6. The economically efficient method of production:
a) is the same in all countries.
b) is not influenced by the relative scarcity of inputs.
c) is influenced by the relative scarcity of inputs.
d) does not depend on input prices.
7. At the minimum efficient level of production:
a) a firm will be at the only technically efficient level of production.
b) the market has expanded sufficiently to take advantage of all economies of scale.
c) production has expanded to make the firm profitable at any price.
d) a firm will be at the only short run economically efficient level of production.
8. Some children in Siliguri, India work as professional rock breakers. The rocks that they break with a hammer are used in buildings and roads. In terms of the idea of efficiency, having children break rocks with hammers:
a) is not efficient because modern equipment could crush stone with far less effort.
b) is technically efficient but not economically efficient because the job does not pay a living wage.
c) is economically efficient but not technically efficient because it uses too much labor relative to capital.
d) could be efficient given the extremely low price of labor and high price of capital.
9. If technological innovation occurs when a firm is experiencing diseconomies of scale, then:
a) the long run average total cost curve will shift down, but will still rise as output expands.
b) long run average total costs will remain the same as output expands.
c) short run average total costs will fall as output expands.
d) product prices will rise, leading to inflation.
10. The long run average cost curve is horizontal when production exhibits:
a) diminishing marginal returns.
b) diseconomies of scale.
c) economies of scale.
d) constant returns to scale.
Explanation / Answer
ans1-a)it is still relevant to calculate marginal cost; it is just a less straightforward process.
ans2-d) $36,000
ans3-.a) factors of production that produce equal amounts of output.
ans4-c) inputs must be substituted for one another in order to keep output constant.
ans5-d) the difference between expected total revenue and expected total cost.
ans6-a) is the same in all countries.= (Price of Output / Price of Input)
ans7-d) a firm willc) short run average total costs will fall as output expands.
ans8-d) could be efficient given the extremely low price of labor and high price of capital.
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