econ 323 exam 2

An ice cream shop has the following supply curve. What is the shop's profit maximization output level when market price is $2?

100

The MRTS LK(L,K) for a certain firm is constant and equal to 3. Then, if the firm replaces 1 unit of capital with 1 unit of labor. Then

Production increases

Suppose that a firm's cost function is given by: C(q)=2+3q 2. Then, the expression for this firm's profit function is?

Profit(q)=pq-2-3q 2.

Suppose that the production function is f(L,K)= 2L 0.6K 0.4. What is the value of MRTS when L=4 and K=5?

1.874

The following production function satisfies constant returns to scale: f(L,K)= 100L 2/3K 1/3.

true

The following production function satisfies constant returns to scale: f(L,K)= L+100K.

true

A leather goods company makes handbags with the following production function: f(L,K)= L 1/7K 6/7. Does this production function satisfy the law of decreasing marginal returns of capital?

yes

Suppose the amount of capital is fixed, but labor is a variable input. Based on the production technology, the following cost function is derived. Does the production technology satisfy the law of diminishing marginal return to labor?

yes

A firm has a production function that exhibits decreasing returns to scale. The cost of producing 100 units of their product is $100. From the following options, which can be the cost of producing 200 units?

$250

Evan is considering pursuing graduate study in actuarial science. His tuition for a year of graduate study is $30000. If he works as an accountant instead, his annual salary is $40000. The economic cost for Evan to go for graduate study is?

$70000

A leather goods company makes handbags with the following production function: f(L,K)=LK. From the following combination of labor and capital (L,K), which one belongs to the same iso-quant as (3,3)?

(4.5,2)

Suppose that the production function is f(L,K)=1L 0.9K 0.1. What is the value of the Marginal Product of Capital when L=9 and K=4?

0.83

Consider a competitive market whose demand and supply are shown in the following figure. This is a description of the figure. It is a two axis graph. The horizontal axis measures quantity and the vertical axis measures dollars. Demand and supply curves are shown in the figure. Demand is a downward sloping line that intersects both axes. Supply is a lie with positive slope. Demand and supply intersect at (75,25). The price at which demand is 50 is also $50. The price at which Supply is 50 is 50/3. Suppose that the government requires the firm to produce 50 units and consumers buy them at price $50. What is the consumer surplus for this outcome in the economy?

1250

In a competitive market, the demand and supply curves are Q(p) = 12 - p and S(p) = p respectively. What is the consumer surplus in a competitive equilibrium in this economy?

18

A Tex-Mex restaurant hires labor and capital to make tacos. Suppose the restaurant has the following cost function when capital is fixed: C(q)=128+2q 2. The minimum pri

32

A leather goods company makes handbags with the following production function: f(L,K)= L 1/2K 1/2. The maximal number of handbags that the company can make given that L=8 and K=2 is?

4

A firm uses labor and capital to produce orange juice. If the firm uses L units of labor and K units of capital, it can produce a maximum of 2L+2K liters of orange juice (that is, its production function is f(L,K)= 2L+2K). If capital is fixed at 5 units and the price of labor is 10, what is the firm's marginal cost when they produce 208 units, i.e., C'(208)?

5

Suppose that the cost function of a firm is C(q)=6q. Suppose that this is the only firm in the market, and demand is Q(p)=10-p. What is the price in a competitive equilibrium in this economy?

6

A firm uses labor (L) and capital (K) to produce outputs. The following graph shows the iso-quant curves and iso-cost curves facing this firm. The iso-quant curves are the L-shaped curves. Suppose the wage rate of labor is $200 per day and the rental rate of capital is $100 per day. What is the cost of producing 20 units of output when both labor and capital are variable inputs?

800

A firm uses labor and capital to produce orange juice. If the firm uses L units of labor and K units of capital, it can produce a maximum of 43L+32K liters of orange juice (that is, its production function is f(L,K)= 43L+32K). If capital is fixed at 2 units, what is the labor necessary to produce 3762 liters of orange juice?

86

Consider a competitive market whose demand and supply are shown in the following figure. This is a description of the figure. It is a two axis graph. The horizontal axis measures quantity and the vertical axis measures dollars. Demand and supply curves are shown in the figure. Demand is a downward sloping line that intersects both axes. Supply is a lie with positive slope. Demand and supply intersect at (75,25). The price at which demand is 50 is also $50. The price at which Supply is 50 is 50/3. What is the producer surplus at the competitive outcome of this economy?

937.5

When capital is fixed and labor is the only variable input, which of the following statement is correct about the supply curve?

A firm's supply curve always includes the portion of marginal cost curve that is weakly above the average variable cost curve.

The following cost curve is derived when labor is the only variable input and when capital is fixed. Which of the following statement is correct?

Average cost at q2 is lower than marginal cost at q2.

Suppose capital is fixed and labor is the only variable input. When the output level is q=10, we know that MC(10)=4 and AVC(10)=7. It must be true that ____.

Average variable cost decreases at q=10

Which of the following statement is correct about a competitive market?

Each consumer/firm has no control of the market price.

In a competitive market with a downward sloping demand curve and an upward sloping supply curve, what happens after the government imposes a specific tax on a firm?

Equilibrium output level decreases compared to competitive equilibrium level.

When capital is fixed, suppose a firm's production function is given in Figure 1. Which of remaining graph may describe the number of labors needed to produce q unit of output?

Figure 2

Consider a firm with production function f(L,K)=5L 1/2K 1/2 (cost minimization for this firm is characterized by the tangency rule). Assume also that the price of capital r=5 and the price of labor w=5. If L* and K* are the amounts used by the firm to produce q units of output when both L and K are variable, then:

K*/L*=1.

Assume that the iso-quant lines are smooth curves. Which of the following condition characterizes the cost minimizing input bundle that is interior?

MRTS is equal to the ratio of the prices of labor and capital.

An ice cream shop has the following cost function C(q) = 15+0.1q 2. What is the supply function of this shop?

S(p)=5p

The following cost curve is derived when labor is the only variable input and when capital is fixed. Which of the following statement is correct?

The average variable cost is increasing as output level increases.

If a competitive firm's marginal profit is negative at an output of 2000 units, which of the following statement must be correct?

The firm is not profit maximizing to produce 2000 units

A local Tex-Mex restaurant has the following total cost function of producing tacos. The restaurant's marginal cost of producing tacos, MC(q), is ___.

a constant function

A firm uses labor (L) and capital (K) to produce outputs. The following graph shows the iso-quant curves. The firm's production function is most likely to exhibit ___.

constant return to scales.

The following figure shows demand and supply in a certain market.

d

Which of the following production function may satisfy the following two conditions? First, the cost function when labor is the only variable input is consistent with the graph on the left-hand side. Second, the cost function when both labor and capital are variable inputs is consistent with the graph on the right-hand side.

f(l,k)=l1/3k2/3

The following graph shows the marginal cost curve (MC), the average cost curve (AC), and the average variable cost curves (AVC) of a firm. This is a detailed description of this graph. It is a two axis graph. The horizontal axis measures quantity and the vertical axis dollars. The marginal cost curve is a line that starts at the origin and has positive one. The average cost curve is a line with positive slope that is lower than that of the marginal cost curve. The average cost is a curve that increases as quantity approaches zero. It decreases up to a point in which it intersects the marginal cost curve and then increases back staying in between the average variable cost and the marginal cost. There are three quantities that are marked in the graph: q1<q2<q3. The value of the marginal cost at q1 is p1, that of q2 is p2, and that of q3 is p3. Suppose that this firm maximizes profits and is a price taker. Then, for each market price above p1, this firm makes a positive profit

false

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 following figure shows the graph of the production function of a firm when capital is fixed at some level K. This is a description of the graph. This is a two axis graph in which the horizontal axis measures L and the vertical axis measures output units. A concave increasing curve is shown. It passes through the points (100,23) and (200,42). Is this the graph of a production function f(L,K)=Amin{L,K} for some constant A>0, when capital is fixed?

no

The following graph shows the marginal cost curve (MC), the average cost curve (AC), and the average variable cost curves (AVC) of a firm. This is a detailed description of this graph. It is a two axis graph. The horizontal axis measures quantity and the vertical axis dollars. The marginal cost curve is a line that starts at the origin and has positive one. The average cost curve is a line with positive slope that is lower than that of the marginal cost curve. The average cost is a curve that increases as quantity approaches zero. It decreases up to a point in which it intersects the marginal cost curve and then increases back staying in between the average variable cost and the marginal cost. There are three quantities that are marked in the graph: q1<q2<q3. The value of the marginal cost at q1 is p1, that of q2 is p2, and that of q3 is p3. Suppose that this firm maximizes profits and is a price taker. What is this firm's production if the market price is p2?

q2.