Managerial Economics Chapter 5

Given a cost function C(Q) = 200 + 14Q + 8Q2, what is the marginal cost function? a. 14 + 16Q b. 14Q + 8Q^2 c. 200 + 8Q^2 d. 14 + 16Q^2

a. 14 + 16Q

The demand for an input is a. sloping upward b. the VMP of the input c. determined by MPL = W. d. derived from input owner's profit-maximizing condition.

b. the VMP of the input

Inputs a manager may adjust in order to alter production are a. all factors b. variable factors c. all short run factors d. fixed factors

b. variable factors

For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3, what is the marginal cost of producing the fourth unit of output? a. $42 b. $295 c. $230 d. $116

c. $230

For the cost function C(Q) = 100 + 4Q + 19Q^2 + 2Q^3, what is the marginal cost of producing the fourth unit of output? a. $42 b. $295 c. $252 d. $116

c. $252

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

c. 11

For a cost function C = 100 + 10Q + Q2, the average variable cost of producing 20 units of output is a. 10 b. 20 c. 30 d. 40

c. 30

The average product of labor depends on how many units of a. labor are used b. capital are used c. labor and capital are used. d. machinery are used.

c. labor and capital are used

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

c. marginal product

The manager institutes an incentive structure to ensure a. workers are in fact working at the expected potential b. workers are in fact working at their utility-maximizing effort level c. the firm produces on the production function d. the firm produces above the production function.

c. the firm produces on the production function

What is the value marginal product of labor if P = $10, MPL = $25, and APL = 40? a. $10,000 b. $1,000 c. $400 d. $250

d. $250

It is profitable to hire labor so long as the a. MPL is greater than wage b. MPL is less than wage c. VMPL is less than wage. d. VMPL is greater than or equal to wage.

d. VMPL is greater than or equal to wage

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. 1/4 b. 1/10 c. 15 d. 1

D. 1

Which of the following cost functions exhibits economies of scope over the specified output range? a. C(Q1, Q2) = 10 + 0.5Q1Q2 + (Q1)2 + (Q2)^2, for all Q1 < 3 and Q2 < 3. b. C(Q1, Q2) = 10 + 3Q1Q2 + (Q1)^2 + (Q2)^2, for all Q1 > 0 and Q2 > 0. c. C(Q1, Q2) = 10 + 0.5Q1Q2 + (Q1)^2 + (Q2)^2, for all Q1 > 2 and Q2 > 2. d. C(Q1, Q2) = 10 + 3Q1Q2 +(Q1)^2 + (Q2)^2, for all Q1 > 4 and Q2 > 4.

a. C(Q1, Q2) = 10 + 0.5Q1Q2 + (Q1)2 + (Q2)^2, for all Q1 < 3 and Q2 < 3.

Which of the following cost functions exhibits economies of scope over the specified output range? a. C(Q1, Q2) = 10 + 0.5Q1Q2 + (Q1)^2 + (Q2)2, for all Q1 < 3 and Q2 < 3. b. C(Q1, Q2) = 10 + 3Q1Q2 + (Q1)^2 + (Q2)^2, for all Q1 > 0 and Q2 > 0. c. C(Q1, Q2) = 10 + 0.5Q1Q2 + (Q1)^2 + (Q2)^2, for all Q1 > 2 and Q2 > 2. d. C(Q1, Q2) = 10 + 3Q1Q2 +(Q1)^2 + (Q2)^2, for all Q1 > 4 and Q2 > 4.

a. C(Q1, Q2) = 10 + 0.5Q1Q2 + (Q1)^2 + (Q2)2, for all Q1 < 3 and Q2 < 3.

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 a. less capital and more labor. b. less labor and more capital c. less labor and less capital d. more labor and more capital.

a. less capital and more labor.

If the last unit of input increases total product, we know that the marginal product is a. positive b. negative c. zero d. indeterminate

a. positive

Which of the following cost functions exhibits cost complementarity? a. −4Q1Q2 + 8Q1 b.−4Q2 + 8Q c. 6Q1Q2 − Q1 d. 4Q2Q1 + 8Q1

a. −4Q1Q2 + 8Q1

For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MPK is a. 16 b. 5.2. c. 3.8 d. 12.

b. 5.2

For the cost function C(Q) = 100 + 2Q + 3Q2, the average fixed cost of producing 2 units of output is a. 100 b. 50 c. 3 d. 2

b. 50

According to the table below, what is the marginal cost of producing 90 units of output? Q=50 FC= 1000 VC= 700 Q= 90 FC= 1,000 VC= 1050 Q= 125 FC= 1000 VC= 1400 a. 5.32 b. 8.75 c. 11.67 d. 21.00

b. 8.75

Suppose the w = $20 and r = $30. The isocost line for a firm in this industry is a. C = 20K + 30L. b. K = 0.033C − 0.66L c. 1.5L + K = 0.5C d. dependent entirely on the functional form of the production function.

b. K = 0.033C − 0.66L

For the multiproduct cost function C(Q1, Q2) = 100 + 2Q1Q2 + 4Q1^2, what is the marginal cost function for good one? a. MC1 = 2Q2 + 4Q1 − Q2^2 b. MC1 = 2Q2 + 8Q1 c. MC1 = 100 + 2Q1Q2 + 4Q1^2 d. MC1 = 4Q2 + 6Q1.

b. MC1 = 2Q2 + 8Q1

You are the manager of a large but privately held online retailer that currently uses 17 unskilled workers and 6 semiskilled workers at its warehouse to box and ship the products it sells online. Your company pays its unskilled workers the minimum wage but pays the semiskilled workers $12.75 per hour. Thanks to government legislation, the minimum wage in your state will increase from $10.25 per hour to $10.75 per hour on July 24, 2021. Discuss the short-run implications of this legislation on your company's optimal mix of inputs. a. You will not change your mix of semiskilled and unskilled workers. b. You will increase your hiring of semiskilled workers and decrease your hiring of unskilled workers. c. You will increase your hiring of unskilled workers and decrease your hiring of semiskilled workers.

b. You will increase your hiring of semiskilled workers and decrease your hiring of unskilled workers.

When marginal cost curve is below an average cost curve, average cost is a. increasing with output b. declining with output. c. not varying with output d. goes to zero with output.

b. declining with output.

The marginal rate of technical substitution a. determines the rate at which a producer can substitute between two inputs in order to increase one additional unit of output b. is the absolute value of the slope of the isoquant. c. is the absolute value of marginal revenue d. is constant along the isoquant curve.

b. is the absolute value of the slope of the isoquant

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 a. more capital and less labor b. more labor and less capital. c. three times more capital than labor d. one half as much labor as capital

b. more labor and less capital

When there are economies of scope between products, selling off an unprofitable subsidiary could lead to a. a major reduction in costs b. only a minor reduction in costs c. only a minor reduction in sales d. a major reduction in sales.

b. only a minor reduction in costs

In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when a. that input's price rises b. that input's price falls. c. that input's price remains the same. d. the prices of other inputs fall.

b. that input's price falls

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? a. economies of scale b. diminishing average fixed costs c. cost complementarity d. economies of scope

d. economies of scope

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

Cost complementarity exists in a multiproduct cost function when a. the average cost of producing one output is reduced when the output of another product is increased. b. the average cost of producing one output is increased when the output of another product is increased c. the marginal cost of producing one output is increased when the output of another produce is increased. d. the marginal cost of producing one output is reduced when the output of another product is increased.

d. the marginal cost of producing one output is reduced when the output of another product is increased.

Cost complementarity exists in a multiproduct cost function when a. the average cost of producing one output is reduced when the output of another product is increased. b. the average cost of producing one output is increased when the output of another product is increased. c. the marginal cost of producing one output is increased when the output of another produce is increased d. the marginal cost of producing one output is reduced when the output of another product is increased.

d. the marginal cost of producing one output is reduced when the output of another product is increased.