Chapter 05 Quiz

The short run is defined as the time frame

in which there are fixed factors of production

Variable factors of production are the inputs that a manager

may adjust in order to alter production

When there are economies of scope between products, selling off an unprofitable subsidiary could lead to

only a minor reduction in costs

Suppose the cost function is C(Q) = 50 + Q − 10Q2 + 2Q3. What is the total cost of producing 10 units?

$1,060

Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $15 and the per-unit wage, w, is $5, then the average fixed cost of using 16 units of capital and 25 units of labor is

$12

Suppose you are a manager of a factory. You purchase five (5) new machines at one million dollars each. If you can resell two of the machines for $500,000 and three of the machines for $200,000, what are the sunk costs of purchasing the machines?

$3.4 million

Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the average variable cost of using 81 units of capital and 9 units of labor is

$5

For the cost function C(Q) = 50 + 4Q + 2Q2, the total variable cost of producing 7 units of output is

126

Suppose the production function is given by Q = min{K, L}. How much output is produced when 4 units of labor and 9 units of capital are employed?

4

At the point of tangency between the isoquant curve and the isocost line

MPL/MPK = w/r

The Cobb-Douglas production function is

Q = KaLb

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

The marginal product per dollar spent on all inputs is equal

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of

all factors of production.

If a firm's production function is Leontief and the price of capital goes down, the

cost-minimizing combination of capital and labor does not change

Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing stage, there exist

diseconomies of scale

The demand for an input is

the VMP of the input

The marginal product of an input is defined as the change in

total output attributable to the last unit of an input

Given that Q = 2K + L, what is the absolute value of the MRTS between capital and labor?

½