ECON310 HW 1

Refer to the MPK calculated in question 18 above. Suppose that the wage rate is $10 and the cost of capital is $20. What must the MPL be in order for the firm to be minimizing costs? A. 13.35 B. 12.2 C. 53.4 D. There is not sufficient information to answer this question

A. 13.35

Suppose the MPL is 20 and the APL is 15, then the firm should: A. Add additional units of labor. B. Add additional units of capital. C. Leave the inputs unchanged. D. There is not sufficient information to answer this question.

A. Add additional units of labor.

Which of the following sets of economic data is minimizing the cost of producing a given level of output? A. MPL = 20, MPK = 40, w = $16, r = $32. B. MPL = 40, MPK = 20, w = $16, r = $32. C. MPL = 20, MPK = 40, w = $32, r = $16. D. MPL = 40, MPK = 40, w = $16, r = $32.

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

Suppose the cost of labor increases, assuming labor is on the x-axis and capital is on the y axis how do you expect the isocost line to move? A. Rotate inward on the x-axis. B. Rotate outward on the x-axis. C. Rotate inward on the y-axis. D. Rotate outward on the y-axis.

A. Rotate inward on the x-axis.

As the usage of an input increases, marginal product A. initially increases then begins to decline. B. initially decreases then begins to increase. C. consistently decreases. D. consistently increases

A. initially increases then begins to decline.

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 = 4, and MPK = 10 the firm: A. is cost minimizing. B. should use less K and more L to cost minimize. C. should use more K and less L to cost minimize. D. is profit maximizing but not cost minimizing.

A. is cost minimizing.

Suppose the marginal product of labor is 2 and the marginal product of capital is 6. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use A. more capital and less labor. B. more labor and less capital. C.three times more capital than labor. D.none of the statements associated with this question are correct.

A. more capital and less labor.

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 A. 1/3 B. 1/6 C. 6 D. none of the statements associated with this question are correct.

B. 1/6

Refer to Table 2. What is the APK at the point B in the table? A. 18.3 B. 21.9 C. 20.6 D. 19.1

B. 21.9

Refer to Table 2. What is the MPK at the point A in the table? A. 30.2 B. 26.7 C.28.5 D. 32.4

B. 26.7

In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when: A. Its price rises B. Its price falls C. Its price remains the same D. The price of other inputs fall

B. Its price falls

Changes in the cost of an input causes: A. Isoquants to become steeper B. Slope changes in the isocost line C. Parallel shifts of the isocost lines D. Changes in both the isoquants and isocosts of equal magnitude

B. Slope changes in the isocost line

Suppose the wage rate is initially $5 and then due to the introduction of a minimum wage law, it increases to $7. Assuming the cost of capital remains unchanged, how should the firm respond to this? A. Use more labor and less capital. B. Use more capital and less labor. C. Leave amounts of capital and labor unchanged. D. There is not sufficient information to answer this question.

B. Use more capital and less labor.

What is the value marginal product of labor if: P = $10, MPL = 5, and APL = 40? A. $5. B. $40. C. $50 D. $400

C. 50

Refer to Table 2 below. The production function for good X in the above table exhibits decreasing marginal product of capital over what output range? A. Between 0 and 1,524. B. Between 0 and 2,991 C. Between 2,391 and 3,048 D. Between 2,016 and 2,945

C. Between 2,391 and 3,048

What of the following refers to the MRTS? A. The amount of additional capital we would have to use if we reduced labor by 1 unit in order to keep output constant. B. Change in K/Change in L C. MPL/MPK D. All of the above

D. All of the above

Which of the following represents the condition under which the firm is minimizing its costs? A. Tangency of the isoquant and isocost lines B.MPL/w = MPK/r C. MRTS=w/r D. All of the above

D. All of the above

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output? A. The MRTS is equal to the ratio of input prices. B. The marginal product per dollar spent on all inputs is equal. C. The marginal products of all inputs are equal. D. The MRTS is equal to the ratio of input prices and the marginal product per dollar spent on all inputs is equal.

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

It is profitable to hire units of labor as long as the value of marginal product A. is less than wage. B. exceeds average product C. equals price D. exceeds wage

D. exceeds wage

If the price of labor decreases, in order to minimize the costs of producing a given level of output, the firm manager should use A. less of labor and more of capital. B. less of labor and less of capital. C. more of labor and more of capital. D. more of labor and less of capital.

D. more of labor and less of capital.