ECON 315 EXAM 2 CHAPTER 5

Consider the table. If workers cost w = $28 and the price of product is $3, we should hire up to how many workers

4

Given that budget is $200 and the price of capital is $40, what is the vertical intercept of the isocost

5

Under constant returns to scale

A given percentage change in all inputs causes an equal percentage in output

At the point of cost-minimization

All of the above

The marginal product of an input is defined as

change in total output attributable to the last unit of an input

If, by increasing the quantity of labor by 1 unit the firm can give up 2 units of capital and still product the same output, then the MRTS is

2

If we move downward along the isoquant, the MRTS

Decreases

If the graph of MPPK is negatively sloped but is still positive, this means that adding more capital

Increases total output, but at a slower rate

A firm is currently employing 10 workers. The marginal product of an additional worker is 4 units of output per hour. The wage rate for additional workers is $20/hr. The price of the product is $5. The firm should increases profits by

Keeping the number of workers unchanged

A firm is producing in the short run with output given by: Q = 10L - 0.25L^2. The firm hires labor at a wage rate of $16 and sells the good for P = $8. How many workers does the firm hire?

L = 16

The production function is Q = K^1/2L^1/2. In the short run, the firm sells its output at a price of $10 per unit, and can hire labor at a wage rate of $5 per unit. Capital is fixed at 25 units. The amount of labor that minimizes costs is

L = 25

A firm produces according to the following production function: F(L,K) = L^7/10K3/10. The price of capital is $3 and the way rate is $7. What is the optimal combination of labor and capital to produce 100 units of output

L* = 100 and K* = 10

Total product begins to fall when

Marginal product is negative

As we move downwards along the isoquant

None of the above because MRTS is diminishing

If the production function is F(L,K) = KL and capital is fixed at 1 unit, then the marginal product of labor when L = 25 is

None of the above, When plugging K=1 we have K=1

Isoquants are normally drawn with a convex shape because inputs are

Not perfectly substitutable

If a good is produced only by manual labor, the graph of the isoquant will be

Perfectly vertical

If the last unit of input increases total product we know that the marginal product is

Positive

If the graph of a production function which uses only labor is a linear function, then the slope of MPPL is

Zero

Determine the type of returns to scale exhibited by the education function: F(L,K) = lnL + 2k^1/2 + 5

decreasing

Determine whether MPPL and MPPK of the production function F(L,K) = lnL + 2K^1/2 + 5 are

decreasing in labor and decreasing in capital

If MRTS < w/r you should

hire less labor and more capital

If the wage rate increases, what will happen to the isocost line

it will become steeper

If the price of capital declines and at the same time higher taxes are imposes on employers, what will happen to the isocost line

it will become steeper and shift inwards

If your budget as a manager decreases, what will happen to the isocost line

it will shift inward

In which of the following production functions are inputs perfect substitutes

linear

A production function

represents the technology available for turning inputs into output

You are an efficiency expert hire by a manufacturing firm that uses K and L as inputs. the firm produces and sells a given output. if w = $40, r = $100, MPPL = 4 and MPPK = 40

the firm should use more K and less L to cost minimize

Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should

use more labor and less capital