Question 1

Suppose the production function for widgets is given by Y = KL - 0.8K2 - 0.2L2 where Y represents the annual quantity of widgets produced, K represents annual capital input, and L represents annual labour input.
i)Supposing K = 10, graph the total and average product of labour curves. At what level of labour input does this average product reach a maximum? How many widgets are produced at that point?
ii)Again assuming that K = 10 graph the marginal product of labour (MPL)curve. At what level of labour input does MPL = 0?
iii)Suppose that the capital inputs were increased to K = 20. How would your answers to parts a and b change?

Accepted Answer

i)TP(L)= 10L - 80 - 0.2L2, AP(L)= 10 - 8...

Question 2

A profit maximizing firm would like to produce at least the number of units which minimizes short run:

Accepted Answer

A)  average fixed cost.
B)  average variable cost.
C)  marginal cost.
D)  average cost.E) C) and D)
F) A) and C)

Question 3

A fixed- proportions production function is one in which:

Accepted Answer

A)  a unit of output is produced using inputs equally.
B)  more of one input cannot be substituted for less of another.
C)  inputs can be substituted for one another in a limited range.
D)  increasing the use of an input requires decreasing another by the same amount.E) A) and B)
F) B) and C)

Question 4

Suppose that the average product of labour is 100 and the marginal product of labour is 50 when 5 workers are employed. It therefore must be true that the average product of labour will be greater than 100 when one more worker is hired.

Accepted Answer

A) True 
 B)False

Question 5

If STC = 3q2 + 7q, then:

Accepted Answer

A)  VC = 0.
B)  ATC = AFC.
C)  FC = 7.
D)  ATC = AVC.E) None of the above
F) A) and B)

Question 6

The US "cash for clunkers" program took roughly 7 million cars off the road. Economists would consider this a colossal failure because:

Accepted Answer

A)  the total number of cars was not reduced
B)  7 million cars was not enough to put a dent in global warming
C)  those 7 million cars had economic value
D)  the program reduced the price of recycled steelE) None of the above
F) C) and D)

Question 7

SMC may be defined as the rate at which:

Accepted Answer

A)  variable cost increases as output increases.
B)  variable cost increases as more variable inputs are used.
C)  TC increases as marginal increments in all inputs are used.
D)  variable cost increases as the firm produces more products.E) A) and D)
F) A) and C)

Question 8

If a firm's Short- Run Total Cost function is given by STC = 4 + q2, then:

Accepted Answer

A)  AVC = q and MC = q.
B)  FC = 4 and AVC = q.
C)  ATC = 4 + q and MC = 2q.
D)  AFC = 4/q and MC = 4 + q.E) A) and B)
F) None of the above

Question 9

Which of the following statements is necessarily false?

Accepted Answer

A)  AP falls when it is less than MP.
B)  AFC is horizontal.
C)  MP is constant when it equals AP.
D)  MP falls when it exceeds AP.E) A) and B)
F) A) and C)

Question 10

The cost to an airline of letting its employees fly at no charge:

Accepted Answer

A)  is zero.
B)  depends on the elasticity of supply for airline services.
C)  depends upon the alternatives available to the employees.
D)  will be higher at Christmas time.E) C) and D)
F) All of the above

Question 11

Self- interested commuters may choose a suboptimal equilibrium because:

Accepted Answer

A)  when MC is increasing, the marginal commuter pays only AC.
B)  some commuters stay home.
C)  total costs are minimized.
D)  when MC is constant, MC is greater than AC.E) A) and B)
F) None of the above

Question 12

Which of the following is most likely to be a variable cost in the short run?

Accepted Answer

A)  a fee paid to obtain a license
B)  the energy cost of running a factory
C)  the cost of owning machinery
D)  rent payments for office spaceE) B) and C)
F) A) and D)

Question 13

If STC = 7q3 + 3q + 7, then AFC is:

Accepted Answer

A)  7q3 + 3q.
B)  3q + 7.
C)  7.
D)  7/q.E) A) and C)
F) B) and C)

Question 14

In a community where poor people do not associate with members of the opposite sex until they are 21 years old, the cost of hiring a teenage babysitter on weekends will be:

Accepted Answer

A)  lower than in other communities.
B)  zero.
C)  higher than in other communities.
D)  prohibitive.E) B) and D)
F) A) and C)

Question 15

Capital inputs may cause confusion if they are purchased because firms must:

Accepted Answer

A)  pay interest on borrowed money.
B)  choose whether to rent or buy.
C)  determine the equivalent rental price.
D)  determine whether the input is a lemon.E) B) and D)
F) B) and C)

Question 16

In order to maximize output from a technology that uses one variable input, one must employ the input in such a way that its:

Accepted Answer

A)  MP is zero.
B)  AP is at a maximum.
C)  AP is zero.
D)  MP is equal to its per- unit price.E) A) and B)
F) A) and C)

Question 17

Suppose that a firm uses a technology for which the MP of a variable factor is initially rising. Then:

Accepted Answer

A)  the firm will never reach diminishing marginal productivity.
B)  MP is maximized before AP.
C)  MP is maximized when AP is falling.
D)  total and AP are maximized when MP is zero.E) A) and C)
F) C) and D)

Question 18

The law of diminishing returns to a variable input:

Accepted Answer

A)  implies that total output must eventually decline.
B)  implies that the MP of an input must rise initially.
C)  implies that the MP of an input declines.
D)  assumes that there are just two inputs.E) C) and D)
F) None of the above

Question 19

K and L are perfect substitutes in production in the following production function:

Accepted Answer

A)  KL/2.
B)  K + L.
C)  min(K,L) .
D)  max(K,L) .E) All of the above
F) B) and C)

Question 20

Suppose the production function is F(L,K)= 3L + 2K. In the short run Labour is fixed at L =
2. If w = 2 and v = 1, what is the cheapest way to make 12 units of output in the short run?

Accepted Answer

Since L = 2 is fixed in the short- run, ...

Exam 6: Production Cost: One Variable Input

If STC = 3q²+ 7q, then:

Correct Answer
verified

A profit maximizing firm would like to produce at least the number of units which minimizes short run:

Correct Answer
verified

Suppose that the average product of labour is 100 and the marginal product of labour is 50 when 5 workers are employed. It therefore must be true that the average product of labour will be greater than 100 when one more worker is hired.

Correct Answer
verified

If a firm's Short- Run Total Cost function is given by STC = 4 + q², then:

Correct Answer
verified

K and L are perfect substitutes in production in the following production function:

Correct Answer
verified

In order to maximize output from a technology that uses one variable input, one must employ the input in such a way that its:

Correct Answer
verified

The cost to an airline of letting its employees fly at no charge:

Correct Answer
verified

Which of the following is most likely to be a variable cost in the short run?

Correct Answer
verified

Correct Answer
verified
i)TP(L)= 10L - 80 - 0.2L2, AP(L)= 10 - 8...
View Answer

Which of the following statements is necessarily false?

Correct Answer
verified

Suppose the production function is F(L,K)= 3L + 2K. In the short run Labour is fixed at L = 2. If w = 2 and v = 1, what is the cheapest way to make 12 units of output in the short run?

Correct Answer
verified
Since L = 2 is fixed in the short- run, ...
View Answer

Capital inputs may cause confusion if they are purchased because firms must:

Correct Answer
verified

Self- interested commuters may choose a suboptimal equilibrium because:

Correct Answer
verified

In a community where poor people do not associate with members of the opposite sex until they are 21 years old, the cost of hiring a teenage babysitter on weekends will be:

Correct Answer
verified

SMC may be defined as the rate at which:

Correct Answer
verified

Suppose that a firm uses a technology for which the MP of a variable factor is initially rising. Then:

Correct Answer
verified

A fixed- proportions production function is one in which:

Correct Answer
verified

The US "cash for clunkers" program took roughly 7 million cars off the road. Economists would consider this a colossal failure because:

Correct Answer
verified

The law of diminishing returns to a variable input:

Correct Answer
verified

If STC = 7q³+ 3q + 7, then AFC is:

Correct Answer
verified

Exam 6: Production Cost: One Variable Input

If STC = 3q2 + 7q, then:

Correct AnswerverifiedShow Answer

A profit maximizing firm would like to produce at least the number of units which minimizes short run:

Correct AnswerverifiedShow Answer

Suppose that the average product of labour is 100 and the marginal product of labour is 50 when 5 workers are employed. It therefore must be true that the average product of labour will be greater than 100 when one more worker is hired.

Correct AnswerverifiedShow Answer

If a firm's Short- Run Total Cost function is given by STC = 4 + q2, then:

Correct AnswerverifiedShow Answer

K and L are perfect substitutes in production in the following production function:

Correct AnswerverifiedShow Answer

In order to maximize output from a technology that uses one variable input, one must employ the input in such a way that its:

Correct AnswerverifiedShow Answer

The cost to an airline of letting its employees fly at no charge:

Correct AnswerverifiedShow Answer

Which of the following is most likely to be a variable cost in the short run?

Correct AnswerverifiedShow Answer

Correct Answerverifiedi)TP(L)= 10L - 80 - 0.2L2, AP(L)= 10 - 8...View AnswerShow Answer

Which of the following statements is necessarily false?

Correct AnswerverifiedShow Answer

Suppose the production function is F(L,K)= 3L + 2K. In the short run Labour is fixed at L = 2. If w = 2 and v = 1, what is the cheapest way to make 12 units of output in the short run?

Correct AnswerverifiedSince L = 2 is fixed in the short- run, ...View AnswerShow Answer

Capital inputs may cause confusion if they are purchased because firms must:

Correct AnswerverifiedShow Answer

Self- interested commuters may choose a suboptimal equilibrium because:

Correct AnswerverifiedShow Answer

In a community where poor people do not associate with members of the opposite sex until they are 21 years old, the cost of hiring a teenage babysitter on weekends will be:

Correct AnswerverifiedShow Answer

SMC may be defined as the rate at which:

Correct AnswerverifiedShow Answer

Suppose that a firm uses a technology for which the MP of a variable factor is initially rising. Then:

Correct AnswerverifiedShow Answer

A fixed- proportions production function is one in which:

Correct AnswerverifiedShow Answer

The US "cash for clunkers" program took roughly 7 million cars off the road. Economists would consider this a colossal failure because:

Correct AnswerverifiedShow Answer

The law of diminishing returns to a variable input:

Correct AnswerverifiedShow Answer

If STC = 7q3 + 3q + 7, then AFC is:

Correct AnswerverifiedShow Answer

If STC = 3q²+ 7q, then:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If a firm's Short- Run Total Cost function is given by STC = 4 + q², then:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
i)TP(L)= 10L - 80 - 0.2L2, AP(L)= 10 - 8...
View Answer

Correct Answer
verified

Correct Answer
verified
Since L = 2 is fixed in the short- run, ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

If STC = 7q³+ 3q + 7, then AFC is:

Correct Answer
verified