Managerial Econ CH5

6. Suppose the production function is given by Q = min {K, L}. How much output is produced when 4 units of labor and 9 units of capital are employed? A. 0. B. 4. C. 9. D. 13.

4

25. The production function for a competitive firm is Q = K5L5 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 maximum profits are A.5. B. 10. C. 15. D. none of the statements associated with this question are correct.

5

11. For the cost function C(Q) = 100 + 2Q + 3Q 2 , the total variable cost of producing 2 units of output is A.16. B. 12. C. 4. D. none of the statements associated with this question are correct.

16

59. What is the average total cost of producing 160 units of output? A. 12.98. B. 16.31. C. 22.04. D. 19.38.

19.38

Difficulty: Medium 35. What is the value marginal product of labor if: P = $10, MP L= $25, and AP L= 40? A. $10,000. B. $1,000. C. $400. D.$250.

250

10. For the cost function C(Q) = 100 + 2Q + 3Q 2 , the average fixed cost of producing 2 units of output is A. 100. B.50. C. 3. D. 2.

50

60. What is the marginal cost of producing 90 units of output? A. 5.32. B.8.75. C. 11.67. D. 21.00.

8.75

36. 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.

exceeds wage

16. The production function for a competitive firm is Q = K.5L.5 . The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at 25 units. The profit-maximizing quantity of labor is A. 1. B. 2. C. 10. D.none of the statements associated with this question are correct.

none of the statements associated with this question are correct

33. If the last unit of input increases total product we know that the marginal product is: A.positive. B. negative. C. zero. D. indeterminate.

positive

69. Which of the following cost functions exhibits economies of scope when three (3) units of good one and two (2) units of good two are produced? A.C = 50 - 5Q1Q2 + 0.5Q12 + Q22. B. C = 10 + 4Q1Q2+ Q12+ Q22 C. C = 15 + 5Q1Q2+ 2Q1 + 4Q2 D. C = 5 + Q1Q2 + Q12Q22

C = 50 - 5Q1Q2+0.5Q12+ Q22

28. The creation of a new product is referred to as: A. Process innovation. B. Independent research and development. C.Product innovation. D. Patent disclosure.

product innovation

27. 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: A. Production function. B. Technological constraint. C. Research and development schedule. D. Total product.

production function

67. Which of the following cost functions exhibits cost complementarity? A. -4Q1Q2 + 8Q1 B. -4Q2 + 8Q1. C. 6Q1Q2 - Q1 D. 4Q2Q1 + 8Q1

-4Q1Q2 + 8Q1

52. 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.

its price falls

70. The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production is defined by the: A. Long run average total cost curve. B. Short run average fixed cost curve. C. Short run marginal cost curve. D. Long run marginal cost curve

long run average total cost curve

7. Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 5 units of capital and 10 units of labor are employed? A.3. B. 4. C. 11. D. 45.

3

24. 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 A. 2/5. B.1 C. 10. D. none of the statements associated with this question are correct.

1

18. If the production function is Q = K^5L^5 and capital is fixed at 1 unit, then the average product of labor when L = 25 is A. 2/5. B.1/5. C. 10. D. none of the statements associated with this question are correct.

1/5

39. Given the linear production function Q = 10K + 5L, if Q = 10,000 and K = 500, how much labor is utilized? A. 600 units. B. 800 units. C. 500 units. D. 1000 units.

1000 units

8. Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 5 units of capital and 10 units of labor are employed? A. 3. B. 4. C.11. D. 45.

11

58. What is the average variable cost of producing 50 units of output? A. 21. B. 34. C.14. D. 20.

14

9. For the cost function C(Q) = 100 + 2Q + 3Q 2 , the marginal cost of producing 2 units of output is A. 2. B. 3. C. 12. D.14.

14

Given the following table, how many workers should be hired to maximize profits? Labor 12345 Marginal Product labor 8 32 16 -1 -12 vmpl 32 128 64 -4 -48 wage 100 100 100 100 100 A. 1. B.2. C. 3. D. 4.

2

57. What is the total cost of producing 125 units of output? Q 0 20 50 90 125 145 160 FC 1000 VC 0 350 700 1050 1400 1750 2100 A. 1000. B. 2050. C. 1400. D.2400.

2400

4. 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? A. 3. B. 4. C. 11. D. 45.

3

56. 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? A. $5 million. B. $500,000. C.$3.4 million. D. $1.6 million.

3.4 million

20. For a cost function C = 100 + 10Q + Q 2, the average variable cost of producing 20 units of output is A. 10. B. 20. C.30. D. none of the statements associated with this question are correct.

30

5. Suppose the production function is given by Q = min{K, L}. How much output is produced when 10 units of labor and 9 units of capital are employed? A. 0. B. 4. C.9. D. 13.

9

13. Which of the following statements is incorrect? A. Fixed costs do not vary with output. B. Sunk costs are those costs that are forever lost after they have been paid. C.Fixed costs are always greater than sunk costs. D. Fixed costs could be positive when sunk costs are zero.

Fixed costs are always greater than sunk costs.

68. For the multiproduct cost function C(Q 1,Q2) = 100 + 2Q1Q2 + 4Q12, what is the marginal cost function for good one? A. MC1 = 2Q2 + 4Q1 - Q22 B.MC1 = 2Q2 + 8Q1 C. MC1= 100 + 2Q1Q2+ 4Q12 D. MC1= 4Q12- 2 Q22

MC1 = 2Q2 + 8Q1

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

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

38. Firm managers should use inputs at levels where the: A. Marginal benefit equals marginal cost. B. Price equals marginal product. C. Value marginal product of labor equals wage. D.Marginal benefit equals marginal cost and value marginal product of labor equals wage.

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

22. 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.

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

15. The production function Q = L^5 K^5 is called A.Cobb Douglas. B. Leontief. C. Linear. D. none of the statements associated with this question are correct.

cobb douglas

12. If a firm's production function is Leontief and the wage rate goes up the A. firm must use more labor in order to minimize the cost of producing a given level of output. B. firm must use more capital in order to minimize the cost of producing a given level of output. C. firm must use less labor in order to minimize the cost of producing a given level of output. D.cost minimizing combination of capital and labor does not change.

cost minimizing combination of capital and labor does not change.

29 The change in total output attributable to the last unit of an input is the: A. Total product. B. Average product. C.Marginal product. D. Marginal return.

marginal product

34. Total product begins to fall when: A. Marginal product is maximized. B. Average product is below zero. C. Average product is negative. D.Marginal product is zero.

marginal product is zero

19. For a cost function C = 100 + 10Q + Q 2 , the marginal cost of producing 10 units of output is A. 10. B. 200. C. 210. D.none of the statements associated with this question are correct.

none of the statements associated with this question are correct

23. If the production function is Q = KL and capital is fixed at 1 unit, then the marginal product of labor when L = 25 is A. ¼. B. 1/10. C. 15. D.none of the statements associated with this question are correct.

none of the statements associated with this question are correct

17. 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, MP L= 4, and MP K = 40 the firm: A. is cost minimizing. B. should use less L and more K to cost minimize. C. should use more K and less L to cost minimize. D. is profit maximizing but not cost minimizing.

should use more K and less L to cost minimize.

14. 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, MP L = 20, and MPK= 40 the firm: A. is cost minimizing. B. should use less L and more K to cost minimize. C. should use more L and less K to cost minimize. D. is profit maximizing but not cost minimizing.

should use more L and less K to cost minimize.

55. Costs that are forever lost after they have been paid are: A. Production costs. B. Fixed costs. C.Sunk costs. D. Variable costs.

sunk cost

26. The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by: A. Land. B. Production. C. Capital. D.Technology.

technology

53. Fixed costs exist only in: A. The long run. B. Capital intensive markets. C.The short run. D. Labor intensive markets.

the short run

54. Costs that change as output changes are: A.Variable costs. B. Fixed costs. C. Sunk costs. D. None of the statements associated with this question are correct.

variable costs