Chapter 4: Costs and Cost Minimization
1. Suppose you are a star basketball player at a major university in your sophomore year. You are sought after by several NBA teams. Which of the following choices best characterizes your opportunity cost if you choose to drop out of college and enter the NBA? a) The value of your college scholarship that you have given up. b) The skills that two more years of playing at your college would have given you along with their additional value over the rest of your life, in addition to the educational value of the college degree. c) The total of explicit costs that have been incurred in the past. d) The total of implicit costs that have been…show more content… b) are the same as implicit costs. c) the same total expenditure on the inputs to the production process. d) the sum of all past explicit costs
12. When isocost lines shift outward from the origin, it represents a) increasing levels of expenditure on the inputs to the production process. b) increasing sunk costs c) increasing opportunity costs d) decreasing levels of expenditure on the inputs to the production process.
13. An isocost line represents a) all combinations of inputs in which the firm produces the same level of output. b) all combinations of inputs in which the firm has the same level of total cost. c) for a given level of output, the various points that will produce that same level of output at the same cost. d) all combinations of output that yield the same total cost level.
14. The cost-minimization problem of the firm is to a) maximize output subject to a given cost constraint. b) minimize total cost. c) minimize average cost. d) minimize total cost of producing a particular level of output.
15. The long-run is a) a time period in which all input levels are fixed. b) a time period in which at least one input level is fixed. c) one year. d) a time period in which no input levels are fixed.
16. A difference between the short run and the long run is that a firm in the short