G300 midterm

supply falls

scarce- price u[p

MPL

%changeQ/%changeL

value before divs

1+i/i-g

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

2/3 K L-1.

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

14

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 one unit and costs $2. The maximum profits are:

3

For a cost function C = 100 + 10Q + Q2, the average variable cost of producing 20 units of output is

30

Given the benefit function B(Y) = 400Y - 2Y2, the marginal benefit is:

400-4Y

1. When dealing with present value, a higher interest rate:

decreases the present value of a future amount.

price of one goes up, complement

demand also goes down

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If price is set as 30, what is the market condition?

excess supply

inverse

in terms of other var ex- inverse of dem funct: orig- Qd=7400-1/2px inverse- px= 148--2Qxd

price one goes up, substitue

is used in place of it- demand goes up

econ profits

total rev(P*Q) - explicit cost - implicit costs

acct profits

total rev(P*Q) - explicit costs

to find prod surplus

use function given, graph with supply curve, find area of triangle

value after divs

1+g/i-g

net ben

ben-cost

prod surplus

area above supply curve and below price level

supply decreases

supply curve= LEFT

Given the cost function C(Y) = 6Y2, what is the marginal cost?

12Y

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y2 and C(Y) = 10Y2. What level of Y will yield the maximum net benefits?

75/18. 50/18.

The opportunity cost of an action is the

D. The costs associated with the action as well as the best alternative's value given up.

level that mins total cost

DERIVATIVE

"can lease building for 120,000 yr for 3 yrs. account profits? econ profits?

FV(acct prof orecon prof) FV __________________________ + _____ (1+ i)1 (1+i)2

MNB

MB-MC

"what level of Q max net bens?"

MB=MC

level of max net bens

MB=MC

at value of Q that maxs net ben, what is value of marg net bens

MNB= MC-MC subtract, get Q to 0

APL

Q/L

2. What is the main role of economic profits?

To signal where resources are most highly valued

3. Which of the following statements is incorrect? a. If a firm decreases the price of its product, its total revenue will decrease. b. The own price elasticity of demand is constant at all points along a linear demand curve. c. As the price of X falls and we move down an individual's demand curve for X, the money income of the individual also changes.

all

complement for good

coeff is neg= inverse relation= complement

substitute for good

coeff is pos=direct relation= sub

The elasticity which shows the responsiveness of the demand for a good due to changes in the

cross price last

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

5. Suppose that supply increases and demand decreases. What effect will this have on price and quantity? A. Price will increase and quantity may rise or fall. B. Price will decrease and quantity will increase. C. Price will decrease and quantity will decrease.

none

what price charge to max revs

price that makes den a unit elastic

. For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:

shift right input cost go down, more production

as inputs become more expensive

supply decreases