Question

16. The rate at which a person is willing to give up a gallon of gasoline to get one more pound of coffee and remain on the same indifference curve is called his or her A) relative cost of coffee in terms of gasoline. B) indifference cost of coffee. C) personal price of coffee. D) marginal rate of substitution. 17. Which of the following costs are part of a firm's opportunity costs? I. costs for resources bought in markets II. costs for resources the firm owns III. costs for resources supplied by the owner A) I and II B) I and III C) I only D) I, II, and III 18. A method that is technologically inefficient A) might or might not be economically efficient. B) can never be economically efficient. C) results from failure to calculate the ratio of the cost of labor to the cost of capital. D) means that it uses too much labor and too little capital. 19. A cost that has already been made and cannot be recovered is called a A) variable cost. B) fixed cost. C) sunk cost. D) marginal cost. 20. All the production points that lie ________ the total product curve are attainable and ________. A) above; efficient B) above; inefficient C) below; efficient D) below; inefficient

Answer 1

16. The rate at which a person is willing to give up a gallon of gasoline to get one more pound of coffee and remain on the same indifference curve is called his or her marginal rate of substitution.The rate at which a person can give up some quantity of one good in place for another good while keeping the same level of utility is known as marginal rate of substitution. Therefore the correct option is D.

17. All the three costs i.e. costs for resources bought in markets, costs for resources the firm owns and costs for resources supplied by the owner are firm's opportunity costs.The value of the resource when it is put to its best alternative use is known as opportunity cost. It includes both implicit and eplicit costs. Therefore, the correct option is D.

18. A method that is technologically inefficient can never be economically efficient. An economy is efficient if can produce output at least cost. If the economy uses technologically inefficient method then it will not be able to produce at least cost and therefore it can never be economically efficient. Therefore the correct option is B.

19. A cost that has already been made and cannot be recovered is sunk cost. Sunk costs are not included in future decision making because they won't change no matter what the outcome of the decision will be. Therefore, the correct option is C.

20 All the production points that lie below the total product curve are attainable and inefficient. Therefore the correct option is D.