Exam 2 Multiple Choices

The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 800 + 10Q + 3Q^2 What is the average total cost?

(800/Q) + 10 + 3Q

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $30 per hour, the slope of the isocost curve will be

-2/3

The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 800 + 10Q + 3Q^2 What is the marginal cost function

10+6Q

The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 800 + 10Q + 3Q^2 What is the fixed cost?

800

Which of the following statements is true regarding the differences between economic and accounting costs?

Accounting costs include only explicit costs.

Which of following is a key assumption of a perfectly competitive market?

Each seller has a very small share of the market.

Which of the following BEST describes a sunk cost?

It is money that has been spent, and is not recoverable

A production function in which the inputs are perfectly substitutable would have isoquants that are

Linear

Suppose there are 35 identical manufacturing firms that produce computer chips with machinery (capital, K) and labor (L), and each firm has a production function of the form q = 10K0.3L. What is the industry-level production function?

Q = 350K0.3L

The short run is

a time period in which at least one input is fixed.

In an increasing-cost industry, expansion of output

causes input prices to rise as demand for them grows.

In long-run competitive equilibrium, a firm that owns factors of production will have an

economic profit = $0 and accounting profit > $0.

A firm's producer surplus equals its economic profit when

fixed costs are zero.

When the TR and TC curves have the same slope

profit is maximized

The marginal rate of technical substitution is equal to the

ratio of the marginal products of the inputs

When labor usage is at 12 units, output is 48 units. From this we may infer that

the average product of labor is 4.

If a graph of a perfectly competitive firm shows that the P = MC point occurs where P is below both ATC and AVC,

the firm is earning negative profit, and will shut down rather than produce that level of output since it cannot cover its variable costs.

The cost-output elasticity measures the percentage change in the cost of production resulting from a percent increase in output. Suppose the cost-output elasticity equals 1.4. This implies that:

there are diseconomies of scale.