ESFM2-L7 Score:
1.    A firm uses two inputs: labor and capital. In a graph labor is depicted on the
horizontal and capital on the vertical axis. If the slope of an isoquant is lower than
-1 (e.g. -2), we can be sure that
A MP
L
> MP
K
.
B w
L
> w
K
.
C w
L
< w
K
.
D MP
L
< MP
K
.
2.    Which if the following statements is correct? A firm that minimizes costs at a
given level of production searches a point in a given ________ that corresponds to
_____________.
A isoquant; the highest level of product
B isoquant; lowest costs
C isocost; the highest level of product
3.    The cost function answers one of these questions:
A What is the maximum production we can make at given prices?
B What is the minimum amount of inputs we must use to produce a certain level of output?
C What are the combinations of inputs that correspond to a certain level of costs?
D What are the minimum costs necessary to produce a certain level of output?
4.    We have a firm with a production function y = min{x
1
,x
2
} and the price of input 1
and 2 w
1
and w
2
. The conditional demand function of input 1 is
A x
1
(y) = 2y
B x
1
(y) = y/2
C x
1
(y) = y
5.    A firm has a short-run cost function equal to c(y) = 3y + 11 if y > 0, and c(0) = 8.
The quasifixed costs of the firm are
A 11.
B 8.
C 3.
D 0.
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6.    A toy producer has positive fixed costs and increasing marginal costs. The
average cost curve will be _______ and the average variable cost curve will be _______.
A U-shaped; constant
B U-shaped; increasing
C U-shaped; U-shaped
D increasing; increasing
E decreasing; constant
7.    A lemonade producer has positive fixed costs and constant marginal costs. The
average cost curve will be _______ and the average variable cost curve will be _______.
A U-shaped; constant
B U-shaped; increasing
C U-shaped; U-shaped
D increasing; increasing
E decreasing; constant
8.    Short-run average costs are
A always higher than long-run average costs.
B always equal to long-run average costs.
C always equal to long-run average costs at least for one of the quantities of output.
9.    The area under the marginal costs curve up to a certain produce y represents
________ costs needed to produce y units of output.
A total
B total variable
C total fixed
D average variable
E average fixed
10.    Choose a statement that is not true. If all the statements are true, select E.
A Marginal costs intersect the average total costs in their minimum.
B Marginal costs intersect the average variable costs in their minimum.
C If the average total cost curve is increasing, the marginal cost curve will be below the average total
cost curve.
D It is true for discrete goods that marginal costs equal to average variable costs if output equals to 1.
E All of the above statements are true.
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