ECON 323 Exam 2

The following figure shows the supply function of a firm.If the government imposes a specific tax of two dollars per unit (collected from the producer), what is the firm's supply if the agent pays 12 dollars for each unit? more than 300 0 200 300 less than 200

200

A firm has production function f(L,K,M)=L+K2+4M, where L is units of labor, K is units of capital, and M is units of materials. If this firm uses 100 units of labor, 40 units of capital, and 100 units of materials, what is the maximal number of units that they can produce? 3200 1250 2200 2100 1200

2100

The following production function is appropriate to represent an industry in which there is free entry: f(L,K)=100L1/2K1/3. True False

False

Consider a firm whose cost function when both L and K are variable is shown in the figure below. Then, the Average cost function associated with this production is: First decreasing and then increasing Flat Decreasing Increasing Vertical

Flat

Consider a firm whose cost function when both L and K are variable is shown in the figure below. Then, the Marginal cost function associated with this production is: First decreasing and then increasing Vertical Decreasing Increasing Flat

Flat

Consider a firm whose cost function when both L and K are variable is shown in the figure below.Then, the supply function for this firm Decreasing Has a flat segment at the level of the marginal cost. Is vertical up to the fixed cost. Is increasing when price below marginal cost. First decreasing and then increasing.

Has a flat segment at the level of the marginal cost

The accounting profit of a firm can be positive even when its economic profit is zero. True False

True

The following production function satisfies constant returns to scale: f(L,K)=3LaK1-a where 0<a<1. True False

True

The following production function satisfies increasing returns to scale: f(L,K)=100LK. True False

True

Suppose that a competitive firm maximizes profits, when capital is fixed, by producing q>0 units of output. Which of the following must be true? p > MC(q) AVC(q)=AC(q) p< AVC(q) p < MC(q) p ≥ AVC(q)

p ≥ AVC(q)

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. If the output price is equal to $30, then the firm's maximal profits is? -$1900 $0 -$1700 $1600 -$1800

$0

A firm has a production function satisfying constant returns to scale (there is free entry in the industry in which it operates). Their cost of producing 100 units of their product is $200,000.00. What is their cost of producing 500 units? $425,000.00 $1,000,000.00 $40,000.00 $20,000,000.00 $50,000.00

$1,000,000.00

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. What is this firm's fixed cost? $0 $1800 $1600 $1900 $1700

$1800

A firm has a production function that has strictly increasing returns to scale. That is, for any combination of factors, say (L,K), f(2L,2K)>2f(L,K). Their cost of producing 500 units of their product is $100,000.00. From the following options, which can be the cost of producing 1000 units? $395,000.00 $200,000.00 $215,000.00 $190,000.00 $210,000.00

$190,000.00

A firm has a production function that has strictly decreasing returns to scale. That is, for any combination of factors, say (L,K), f(2L,2K)<2f(L,K). Their cost of producing 500 units of their product is $100,000.00. From the following options, which can be the cost of producing 1000 units? $210,000.00 $190,000.00 $200,000.00 $95,000.00 $115,000.00

$210,000.00

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph.If the output price is equal to $16, then the firm's maximal profits is? -$1900 $1600 -$1800 -$1700 $0

-$1800

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. If the output price is equal to $8, then the firm maximizes profits by producing? 120 units 25 units 100 units 0 units 50 units

0 Units

If the output price is equal to $10, then the firm maximizes profits by producing? 0 units 120 units 100 units 50 units 25 units

0 Units

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph.If the output price is equal to $12, then the firm maximizes profits by producing? more than 120 units 0 units more than 100 but less than 120 units more than 0 but less than 50 units more than 50 but less than 100 units

0 units

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph.If the output price is equal to $16, then the firm maximizes profits by producing? 120 units 75 units 10 units 50 units 100 units

100 units

A firm has supply function S(p)=40p. If consumers pay a price p=30 and the government is collecting an ad-valorem tax of 8.25% from the producers' revenue, then the amount supplied by the firm is? 8350 units 9175 units 1200 units 99 units 1101 units

1101 units

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. If the output price is equal to $30, then the firm maximizes profits by producing? 125 units 100 units 0 units 50 units 120 units

120 units

The following figure shows the graph of the production function of a firm when capital is fixed at some level K. From the following options, which can be the labor necessary to produce 40 units for this firm? (Hint: you need to understand what decreasing marginal returns of labor is). 160 120 180 195 140

180

The following figure shows the demand and supply in a market, and the supply when there government decides to impose a specific tax and collect it from the producers. What ad-valorem tax (% collected from the producers revenue) would generate the same revenue for the government? 20% 2% 10% 8.25% 16%

20%

Consider a firm whose production function is f(L,K)=5L1/2K1/2. Denote by APL(L,K)=f(L,K)/L the average product of labor (here f is the production function of the firm). If K is equal to 1, for what level of labor is the Average Product of Labor equal to 1? 15 For no level of labor APL is equal to 1. 5 1 25

25

The following figure shows the supply function of a firm. What is the quantity that maximizes the firm's profits when price is 12? 0 300 more than 300 200 less than 200

300

A call center has a production function: f(L,K)=40L+200K. The maximal number of calls that the call center may receive given that L=1 and K=2 is? 480 440 300 280 400

440

There are three firms in the market. The supply of firm two is twice the supply of firm one (i.e., for each possible price, firm two produces twice what firm one produces). The supply of firm three is three times the supply of firm one. What is the amount produced by firm one if the aggregate supply at some given price is 300 units? 50 units. 79 units. 100 units. Impossible to know with the information provided. 25 units.

50 units

A firm has supply function S(p)=200p. If consumers pay a price p=50 and the government is collecting an ad-valorem tax of 8.25% from the producers' revenue, then the amount supplied by the firm is? 9175 units 10000 units 8350 units 8000 units 8250 units

9175 units

The following figure shows the supply function of a firm. What is the producer surplus if the firm sells q3units at price 40. D+H+L A+B+C+D+F+G+H+K+L-E-I-M. A+B+C+D+F+G+H+K+L-E-I-J-M-N-O. B+C+D+G+H+L A+B+C+D+F+G+H+K+L.

A+B+C+D+F+G+H+K+L.

Consider the following figure (The following is a description of the figure: it shows a two-axis graph; the horizontal axis measures labor and the vertical axis measures output; for a level of K fixed, the graph shows that maximal production that the firm can achieve with different levels of labor; the graph starts at cero production for zero labor; then it is increasing in all of its range; five units of labor is shown as reference in the horizontal axis; the corresponding production for this level of labor is 200; the graphs slope is initially increasing, then there is an inflexion point to the left of five levels of labor; after this inflexion point, the slope of the graph is decreasing; a line that passes through zero and is tangent to the graph is also shown; this line is tangent to the graph for a level of labor that is to the left of 5.) Denote by APL(L,K)=f(L,K)/L the average product of labor (here f is the production function of the firm). From the graph we learn that for the corresponding K: APL(5,K)=52 APL(5,K)=100 APL(L,K) is decreasing in all the range of L shown in the figure. APL(5,K)=205 APL(5,K)=40

APL(5,K)=40

The following figure shows the supply function of a firm. Suppose that the market price is $40 and the government imposes a $10 specific tax. What is the producer surplus if the firm sells all the output that maximizes its economic profit? B+C+D+G+H+L A+B+C+D+F+G+K+L A+B+C+D+F+G+H+K+L+P B+C+D+G+H+L-Q A+B+C++D+F+G+H+K+L+P-Q

B+C+D+G+H+L

The following figure shows the supply function of a firm. Suppose that the market price is $40 and the government imposes a 25% ad valorem tax. What is the producer surplus if the firm sells all the output that maximizes its economic profit? B+C+D+G+H+L-Q A+B+C+D+F+G+H+K+L+P A+B+C+D+F+G+K+L B+C+D+G+H+L A+B+C++D+F+G+H+K+L+P-Q

B+C+D+G+H+L

The following figure shows the supply function of a firm.What is the producer surplus if the firm sells q4units at price 20. C+D+H+K+L+P C+D+H-M-R-Q. C+D+H-M-R-Q-I-N-S. D+H+L C+D+H-M-R-Q-I-N-S-E-J-O-T.

C+D+H-M-R-Q.

The following figure shows the supply function of a firm.What is the producer surplus if the firm sells q2units at price 10. D-E-J-I D+I C+D+H-E-I-J C+D+H D-I

D-I

The following figure shows the supply function of a firm.What is the producer surplus if the firm sells q1units at price 10. A+B+C+D C+D-E C+D D D-E

D

Suppose that the marginal rate of technical substitution of L for K is constant and equal to x>1. Then? If the firm substitutes one unit of labor for x units of capital, then production remains constant. The partial derivative of the marginal revenue with respect to capital is x. If the firm substitutes x units of labor for 1 unit of capital, then production remains constant. If the firm substitutes x units of capital for 1 unit of labor, then production decreases. If the firm substitutes one unit of capital for x units of labor, then production remains constant.

If the firm substitutes one unit of labor for x units of capital, then production remains constant.

Suppose that a firm that operates a vaccine production line has a production function f(L,K)=5L1/3K2/3. Suppose that at some given situation this firm is producing 100 million units of output. What happens with production if the amount of each input is doubled? It increases by 200%. It decreases by 20%. It increases by 20%. It triples. It doubles.

It doubles

Suppose that a farm has a production function f(L,K)=5LK. Suppose that at some given situation the farm is producing 100 units of output. What happens with production if the amount of each input is tripled? It increases by 30%. It decreases by 30%. It triples. It doubles. It increases by 800%.

It increases by 800%.

The MRTSLK(L,K) for a certain firm is constant and equal to 2. Then, if the firm substitutes 2 units of labor for one unit of capital? Production increases The Marginal product of labor decreases Production decreases Production remains constant The Marginal product of labor increases

Production increases

Consider the following graph of a production function when capital is constant. (The following is a description of the figure: it shows a two-axis graph; the horizontal axis measures labor and the vertical axis measures output; for a K fixed, the graph shows that maximal production that the firm can achieve with different levels of labor; the graph starts at cero production for zero labor; then it is increasing in all of its range; three levels of labor are shown as reference; there are L1, L2, and L3; they are related as follows L1<L2<L3; the graph is convex from 0 to L1, that is, its slope is increasing; the graph is concave from L1 on, that is, its slope is decreasing; the line that is tangent to the curve at L2, passes through the origin of the graph.) From the graph we know that for the corresponding K: MPL(L3,K)>MPL(L2,K) MPL(L1,K)>MPL(L2,K) MPL(L1,K)<MPL(L2,K) MPL(L1,K)=MPL(L2,K) MPL(L2,K)=MPL(L3,K)

MPL(L1,K)>MPL(L2,K)

The following figure shows the cost function of a firm. It is a two-axis graph in which the horizontal axis measures production output and the vertical axis measures cost in $. The graph shows and increasing function. The slope of the curve is increasing too. Could this be a cost function for a firm participating in a market in which there is free-entry? No Yes

No

The following figure shows the marginal and average cost functions of a firm. It is a two-axis graph in which the horizontal axis measures production output and the vertical axis measures marginal and average costs in $. The graph shows two increasing curves labeled MC and AC. The two curves have the same vertical intercept. For positive values of output MC is always greater than AC. Could this be a marginal cost function for a firm participating in a market in which there is free-entry? Yes No

No

Consider the following production function when K is fixed. Can we say that the production function satisfies the law of decreasing marginal returns of labor? No, the production function does not satisfy the law of decreasing marginal returns of labor. Yes, the production function satisfies the law of decreasing marginal returns of labor.

No, the production function does not satisfy the law of decreasing marginal returns of labor.

The MRTSLK(L,K) for a certain firm is constant and equal to 2. Then, if the firm substitutes 2 units of labor FOR one unit of capital? Production increases Production remains constant The Marginal product of labor decreases Production decreases The Marginal product of labor increases

Production increases

The Economic Profit is: Revenue - Economic Cost Revenue + Accounting Cost Revenue - Accounting Cost Revenue Revenue + Economic Cost

Revenue - Economic Cost

Suppose that two firms have supply functions S1(p)=3p and S2(p)=3p. Then, the aggregate supply in this market (if these are the only firms that participate in it) is? S(p)=3p. S(p)=12p. S(p)=6p. S(p)=12p. S(p)=9p.

S(p)=6p.

The marginal rate of technical substitution of L for K at (L,K) is equal to? The partial derivative of the marginal revenue with respect to capital. The maximal amount of labor that can be substituted with an additional unit of capital so production remains constant. The ratio between MPK(L,K)/MPL(L,K). The absolute value of the slope of the tangent to the iso-quant through (L,K) at (L,K) The negative of the slope of the tangent to the indifference curve through (L,K) at (L,K)

The absolute value of the slope of the tangent to the iso-quant through (L,K) at (L,K)

The following figure shows the graph of the production function of a firm when capital is fixed at some level K. Is the law of diminishing marginal returns of labor satisfied for this production function (if the graph of all production functions when capital is fixed looks like this, i.e., concave)? No Yes

Yes

The following figure shows the marginal and average cost functions of a firm. It is a two-axis graph in which the horizontal axis measures production output and the vertical axis measures marginal and average costs in $. The graph shows a single flat line at level c that is labeled MC=AC. Could this be a marginal cost function for a firm participating in a market in which there is free-entry? Yes No

Yes

Consider a Cobb-Douglas production function f(L, K)= ALaKb, where A, a and b are positive constants. Then, f has increasing returns to scale if: a+b ≤1 a+b>1 a+b =0 a+b <1 a+b =1

a+b>1

Consider a Cobb-Douglas production function f(L, K)= AL2/3Kb, where A and b are positive constants. Then, f has constant returns to scale if and only if: A=2 Ab+2=1 A+b>1 A+b<1 b=1/3

b=1/3

A firm has a production function f. If for each pair (L,K), f(2L, 2K)= 2f(L, K), we say the firm has: increasing returns to scale constant returns to scale decreasing returns to scale none of above non-constant returns to scale

constant returns to scale

A call center has a production function: f(L,K)=40L+200K. If capital is fixed at K=2, what is the expression for the maximal production as a function of labor? f(L,2)=40L+40 f(L,2)=80L+800 f(L,2)=40L+400 f(L,2)=20L+200 f(L,2)=80L+400

f(L,2)=40L+400

The following figure shows the production function of a restaurant for a fixed level of capital. From the following options, which one can be the production function of this restaurant? f(L,K)=50L f(L,K)=300L1/2+K f(L,K)=7LK f(L,K)=9L1/2K1/2 f(L,K)=50(L+K)

f(L,K)=50(L+K)

Does the following figure show the market supply for a firm and the market supply that would be induced by an ad-valorem sales tax of t percent? true false

false

Consider a firm whose cost function when both L and K are variable is shown in the figure below.Then, the Marginal cost function associated with this production is: Increasing Decreasing Flat Vertical First decreasing and then increasing

flat

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph.If the output price is equal to $21, then the firm maximizes profits by producing? more than 50 but less than 100 units more than 120 units 0 units more than 0 but less than 50 units more than 100 but less than 120 units

more than 100 but less than 120 units

If profit maximizing firm's marginal profit is positive at an output of 1000 units, at 1000 units, Marginal revenue = MC at 1000 units, marginal price derivative is equal to the Marginal Giffen good. at 1000 units, Marginal revenue < MC it will not produce 1000 units it should produce 1000 units

it will not produce 1000 units

The following figure shows the supply function of a firm.If the government imposes an ad valorem tax of 20% (collected from the producer), what is the firm's supply if the agent pays 12 dollars for each unit? Group of answer choices 300 less than 200 0 more than 300 200

less than 200

Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. If the output price is equal to $34, then the firm maximizes profits by producing? 0 units more than 120 units 50 units 100 units more than 0 but less than 50 units

more than 120 units

Consider the following production function when K is fixed. Can we say that the production function satisfies the law of decreasing marginal returns of labor? True False

true

The aggregate supply is obtained by adding horizontally the individual supply functions of the individual firms. True.False.

true

The aggregate supply of a market is never flatter than the individual supply functions of the firms in the market (when we plot q in the horizontal axis and p in the vertical axis). True False

true

The aggregate supply of a market is never steeper than the individual supply functions of the firms in the market (when we plot q in the horizontal axis and p in the vertical axis) True .False.

true

Consider the following graph of a production function when capital is constant. (The following is a description of the figure: it shows a two-axis graph; the horizontal axis measures labor and the vertical axis measures output; for a K fixed, the graph shows that maximal production that the firm can achieve with different levels of labor; the graph starts at cero production for zero labor; then it is increasing in all of its range; three levels of labor are shown as reference; there are L1, L2, and L3; they are related as follows L1<L2<L3; the graph is convex from 0 to L1, that is, its slope is increasing; the graph is concave from L1 on, that is, its slope is decreasing; the line that is tangent to the curve at L2, passes through the origin of the graph.) Denote by APL(L,K)=f(L,K)/L the average product of labor (here f is the production function of the firm). From the graph we know that for the corresponding K: APL(L1,K)<MPL(L1,K) APL(L2,K)<MPL(L2,K) APL(L1,K)>MPL(L1,K) APL(L2,K)>MPL(L2,K) APL(L1,K)=MPL(L1,K)

· APL(L1,K)<MPL(L1,K)

A firm's production function associates with each combination of inputs (L,K): The maximal amount of output that the firm is able to produce with (L,K). The minimal amount of capital that the firm needs to produce with (L,K). The minimal amount of labor that the firm needs to produce with (L,K). The maximal amount of capital that the firm is able to produce with (L,K). The maximal amount of labor that the firm is able to produce with (L,K).

· The maximal amount of output that the firm is able to produce with (L,K).

Consider a call center with production function f(L,K)=30L+300K, where L is units of labor and K is units of capital. Denote by APL(L,K)=f(L,K)/L the average product of labor (here f is the production function of the firm). Suppose that K=2. For which amounts of labor is the Average Product of Labor equal to 10? There is no level of labor for which APL is equal to 10. Between 11 and 20 Between 1 and 10 Between 31 and 40 Between 21 and 30

· There is no level of labor for which APL is equal to 10.