Misc Test Econ - Econ Test 2

BMI company hires labor and rents machines to produce widgets. The hourly wage rate is $10, and the rental rate of machines is $15. In production equilibrium, the marginal productivity of labor is 150 units of output per period. The marginal productivity of machines is

MPL/w = MPK/w 150/10 = MPK/15 MPK = 15*15 = 225

The marginal product of labor in the production of computer chips is 80 chips per hour. The marginal product of capital is 120. The marginal rate of technical substitution of hours of labor for hours of machine capital is?

RTSLK = MPL/MPK =80/120

In the short run, TC equation is

TC = TFC + TVC

Average Fixed Cost equation

AFC = TFC/q

The production function of a firm producing hockey sticks is given by Q=8KL, where K is capital and L is labor. What is the average product of labor when 4 units of capital are employe?

32. APL = Q/L Q=8KL Q=8(4)L Q=32L APL = 32L/L APL = 32

A firm's total cost of producing 40 units of output is $1,000. At this output level, average fixed costs are equal to $5. It follows that the firm's average variable costs are equal to:

AC=TC/q =1000/40 =25 AC = AFC + AVC 25 = 5 + AVC AVC = 20

Average Variable Cost equation

AVC = TVC/q

Suppose a firm's production function is given by Q=4KL, where Q is output per week and K and L are the quantities of capital and labor employed per week. Which of the following combination pairs of K and L lie on the same isoquant? A. K=2, L=6 and K=4, L=4 B. K=3, L=4 and K=6, L=2 C. K=5, L=2 and K=1, L=9

B. K=3, L=4 and K=6, L=2 Because Q=4*3*4 = 48, Q=4*6*2 =48

When average cost is falling, marginal cost is _____________ and when average cost is rising, marginal cost is _______________.

When average cost is falling, marginal cost is below average cost. When average cost is rising, marginal cost is above average cost.

If price is less than marginal cost of production at its current level of output per month, a price-taking firm striving to maximize profits must

decrease its output

The demand curve facing a price-taking firm is

downward sloping to the right

The long-run total cost to Firm Beta of producing 100 units of output is $3,000. If Firm Beta's production function is characterized by decreasing returns to scale, then firm Beta's long-run total cost of producing 200 units of output would be:

greater than $6,000

Suppose you are the owner of Doggie 'D', a dog grooming operation. Presently, 20 dogs are groomed daily, for which the only inputs required are scissors and groomers. If, upon, doubling the number of scissors and groomers, you are able to groom 42 dogs daily, your dog grooming production function exhibits:

increasing returns to scale.

The short-run supply curve for a price-taking firm is given by

its short-run marginal cost curve above minimum average variable cost

If a firm is a price-taker, then marginal revenue is....

marginal revenue is equal to price and equal to total revenue

The marginal product of an input is defined to be

the additional output that can be produced by increasing the input by one unit, holding all other inputs constant

If a firm is producing an output level for which marginal revenue is less than marginal cost,

the firm can increase profits by producing and selling less output

SMC is the rate of change of

the rate of change of short-run TVC with respect to output AND rate of change of short-run TC with respect to output

To lie on the same isoquant, Q (output) must be

the same output