All MBA 651 Quiz Questions for Final

Given the production function Q = min {4K, 3L}, What is the average product of capital when 8 units of capital and 16 units of labor are used?

4

The average product of labor depends on;

how many units of labor and capital are used.

Total product begins to fall when:

marginal product is zero

The absolute value of the slope of the indifference curve is called the:

marginal rate of substitution

We would expect the demand for jeans to be:

more elastic than the demand for clothing

With a linear production function:

there is a perfect substitutable relationship between all inputs.

The property that rules out indifference curves that cross is:

transivitivity

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What is the total cost of producing 10 units? $2,060. $1,060. $560. $1,010.

1,060

If the production function is Q = K.5L.5 and capital is fixed at 1 unit, then the average product of labor when L = 36 is

1/6

For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is...?

14

If the income elasticity for lobster is .6, a 25% increase in income will lead to a

15% increase in demand for lobster

The equilibrium consumption bundle is:

the affordable bundle that yields the greatest satisfaction to the consumer.

Which of the following is not a supply shifter? a. the level of technology. b. the prices of inputs. c. the average income level. d. the weather.

the average income level

The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production is defined by the:

Long run average total cost curve.

The horizontal intercept of the budget line is:

M/Px

For the multiproduct cost function C(Q1,Q2) = 100 + 2Q1Q2 + 4Q12, what is the marginal cost function for good one?

MC1 = 2Q2 + 8Q1.

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

diseconomies of scale.

If you include in your offerings some inferior goods, the demand for these products will increase

during bad economic times

Most workers view leisure and income as..?

goods

If you were running an advertising campaign for designer men's suits, you should target families with:

higher income

A price decrease causes a consumer's "real" income to:

increase

A decrease in the price of good Y will have what effect on the budget line on a normal X-Y graph?

increase the vertical intercept

If there are few close substitutes for a good, demand tends to be relatively

inelastic

The marginal rate of technical substitution...?

is the absolute value of the slope of the isoquant.

what is Producer surplus?

is the area above the supply curve but below the market price of the good.

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?

it decreases

Suppose both supply and demand decrease. What effect will this have on price?

it may rise or fall

If the price of good X decreases, what will happen to the budget line?

it will become flatter

The substitution affect isolates the change in the consumption of a good caused by:

the change in the market rate of substitution.

If the own price elasticity of demand is infinite in absolute value, then

the demand curve is horizontal

The elasticity of variable G with respect to variable S is defined as

the percentage change in variable G that results from a given percentage change in variable S.

Consumers adjust their purchasing behavior so that:

the ratio of prices they pay equals their marginal rate of substitution.

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

$1,010.

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the minimum the worker can earn in a day?

$100

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure?

$7

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the market rate of substitution between leisure and income?

$8

For the cost function C(Q) = 75 + 4Q + 2Q2, the marginal cost of producing 5 units of output is

24

Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 5 units of capital and 10 units of labor are employed?

3

Suppose the production function is given by Q = 4K + 6L. What is the average product of capital when 10 units of capital and 5 units of labor are employed?

7

Suppose Q xd = 10,000 - 2 Px + 3 Py - 4.5M , where Px = $100, Py = $50, and M = $2,000. How much of good X is consumed?

950 units

The difference between a price decrease and an increase in income is that:

An increase in income does not affect the slope of the budget line while a decrease in price does change the slope.

In order for isoquants to have a diminishing marginal rate of substitution they must be: L-shaped. Straight lines. Vertical. Concave to the origin. None of the above.

None of the above

Which is more preferred between a cash gift and an in-kind gift? a. a cash gift. b. an in-kind gift. c. both are equally preferred. d. none of the above

a

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from...?

a decrease in income

Good X is a normal good and its demand is given by Q xd = a0 + aXPX + aYPY + aMM + aHH. Then we know that:

aM > 0.

Which of the following measures of fit penalizes a researcher for estimating many coefficients with relatively little data?

adjusted r-square

An income elasticity less than zero tells us that the good is:

an inferior good

If an increase in the price of good X leads to a decrease in the consumption of good Y, then goods X and Y are called

compliments

At any point on an indifference curve, the slope indicates: a. the market rate of substitution between the two goods. b. the way the consumer's budget is allocated between the two goods. c. how the total satisfaction of the consumer changes with different market baskets. d. none of the above.

d

Along the same indifference curve, MRS is

decreasing as one good is obtained

If the own price elasticity of demand is infinite in absolute value, then...?

demand is perfectly elastic.

For a cost function C = 100 + 10Q + Q2, the marginal cost of producing 10 units of output is 10. 200. 210. None of the above.

none of the above

Many gourmet shops go out of business during recessions since they sell almost exclusively

normal goods

When the price of sugar was "low", consumers in the U.S. spent a total of $3 billion annually on sugar consumption. When the price doubled, consumer expenditures increased to $5 billion annually. This data indicates that:

The demand for sugar is inelastic.

An increase in the price of good X will have what effect on the budget line on a normal X-Y graph?

decrease the horizontal intercept.

When the price of a good increases with other things unchanged, the real income of the consumer... ?

decreases

If widgets and gidgets are complements and both are normal goods, then an increase in the demand for widgets will result from...?

a decrease in the price of gidgets.

The substitution effect reflects how a consumer will react to..?

a different market rate of substitution.

If you wish to open a store and you do not like risk, it would be wise to sell:

a mix of normal and inferior goods.

The budget set defines the combinations of good X and Y:

are affordable to the consumer

The difference between average total costs and average variable costs is

average fixed cost

An ad valorem tax causes supply curve to?

become steeper.

When there are economies of scope between two products which are separately produced by two firms, merging into a single firm..?

can accomplish a reduction in costs.

Demand shifters do not include: which one? the price of the good. the consumer's income. the level of advertising. the price of the other goods.

price of the good

For a wood furniture manufacturer, an increase in the cost of lumber will cause the supply curve to:

shift to the left

Firms advertise in order to cause the demand for their products to

shift to the right