ECON 510 Exam 2

If the last unit of input increases total product, we know that the marginal product is:

positive

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

should use more L and less K to cost minimize.

Changes in the price of an input cause:

slope changes in the isocost line.

Which of the following profit functions exhibits a linear production function

π = P x (3K + 4L) - 20L - 35K

Supposed the cost function is C(Q) = 50 +Q - 10Q^2 + 2Q^3. what is the variable cost of producing 10 units?

$1,010

Supposed the cost function is C(Q) = 50 +Q - 10Q^2 + 2Q^3. what is the total cost of producing 10 units?

$1,060

If quantity for sneakers falls by 6 percent when price increases 20 percent, we know that the absolute value of the own price elasticity of sneakers is:

.03

For the cost function C(Q) = 100 + 2Q + 3Q2, the average fixed cost of producing 2 units of output is:

100

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

14

Which curve does the marginal cost curve intersect at the minimum point?

Average total cost curve and average variable cost curve

Which curve(s) does the marginal cost curve intersect at the (their) minimum point

Average total cost curve and average variable cost curve

Suppose you are the manager of a factory. You purchase five (5) new machines at one million dollars each. if you can resell two of the machines for $500,000 and three of the machines for $200,000, what are the sunk costs of purchasing the machines?

$3.4 Million

The production function for a competitive firm is Q = K.5L5. The firm sells its output at a price of $10,and can hire labor at a wage of $5. Capital is fixed at one unit. The profit-maximizing quantity of labor is

1

The production function is Q = K.4 L.6. The marginal rate of technical substitution is:

3/2 K L-1

For the cost function C(Q) = 100 + 2Q + 3Q2, the total variable cost of producing 2 units of output is:

16

The production function is Q = K.6 L.4. The marginal rate of technical substitution is:

2/3 K L-1

Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the average total cost of using 81 units of capital and 9 units of labor is equal to what?

2025

According to the table below, what is the total cost of producing 125 units of output?

2400

What is the value marginal product of labor if: P = $10, MPL= $25, and AP L= 40?

250

The marginal product of capital of producing 2,991 units of output (find point A) in the table below is:

26.7

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

3

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

7

Suppose the production function is Q = min{K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed?

8

According to the table below, what is the marginal cost of producing 90 units of output?

8.75

Suppose the demand for good x is ln Qxd = 21 − 0.8 ln Px − 1.6 ln Py + 6.2 ln M + 0.4 ln Ax. Then we know good x is:

A Normal Good

The costs of production include:

Account costs and opportunity costs.

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

An Inferior good

The production function for good X in the above table exhibits decreasing marginal returns to capital over what output range?

Between 2391 and 3048

Economies of Scope exist when:

C(Q1) + C(Q2) > C(Q1,Q2)

The production function Q = L.5K.5 is called:

Cobb Douglas.

Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are

Convex to the origin

If a firm's production function is Leontief and the wage rate goes up the

Cost minimizing combination of capital and labor does not change

When marginal cost is below an average cost curve, average cost is:

Declining with output

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

Diseconomies of scale

What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately?

Economies of scope

If apples have an own-price elasticity of -1.2 we know the demand is:

Elastic

as the usage of an input increases, marginal product

Initially increases then begins to decline

Isoquants are normally drawn with a convex shape because inputs are:

Inputs are not perfectly substitutable

Suppose the w = $20 and r = $30. The isocost line for a firm in this industry is:

K = 0.033C − 0.66L.

Which of the following sets of economic data is minimizing the cost of producing agiven level of output?

MPL = 20, MPK = 40, w = $16, r = $32

The change in total output attributable to the last unit of an input is the:

Marginal Product

Firm managers should use inputs at levels where the:

Marginal benefit equals marginal cost and value of the marginal product of the labor equal wage.

Isoquants are normally drawn with a convex shape because inputs are

Not perfectly substitutable

Cost that are forever lost after they have been paid are:

Sunk Costs

In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when:

That input's price falls

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal

An isoquant defines the combination of inputs that yield the producer:

The same level of output

The demand for labor by a profit-maximizing firm is determined by:

VMPL = W

It is profitable to hire units of labor as long as the

VMPL is greater than wage

The elasticity which shows the responsiveness of the demand for a good due to changes in the price of a related good is the:

cross-price elasticity

average fixed cost

declines continually as output is expanded

When marginal cost curve is below an average cost curve, average cost is

declining with output

Suppose the cost function is C(Q) = 50 + Q − 10Q2 + 2Q3. At 10 units of output, the average cost curve is

in the increasing stage.

The elasticity that measures how responsiveness of consumer demand to changes to changes in income

income elasticity

The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is:

inelastic

The combination of inputs that produce a given level of output are depicted by:

isoquants

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use:

less capital and more labor.

Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use:

more labor and less capital.

When there are economies of scope between products, selling off an unprofitable subsidiary could lead to

only a minor reduction in costs

a production function

represents the technology available for turning inputs into output

The long run is defined as

the horizon in which the manager can adjust all factors of production

The marginal product of an input is defined as the change in:

total output attributable to the last unit of an input

Costs that change as output changes are:

variable costs

Fixed cost exist only in:

The short run

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

Larger firms can produce a product at lower average cost than small firms when:

economies of scale exist

Total product begins to fall when:

marginal product is zero

Which of the following profit functions exhibits a Leontief production function

π = P x min x (2L, 5K) - 20L - 35K

Which of the following profit functions exhibits a Cobb-Douglas production function?

π = P × K0.75L0.50 - 20L - 35K