Managerial Economics - Ch 4

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

Cobb Douglas

Suppose the production function is given by Q = K1/2L1/2, and that Q = 30 and K = 25. How much labor is employed by the firm?

36

Suppose you are a 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

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

14

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

Average total cost curve and average variable cost curve

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

It is profitable to hire units of labor as long as the value of marginal product:

exceeds wage.

The value of marginal product of an input is the value of the:

output produced by the last unit of an input.

The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the:

production function.

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.