Midterm 2 Econ

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A firm has a production function f(x, y) = 1.80(x0.80 + y0.80)3 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

increasing returns to scale

A firm has the production function f(x1, x2) = (xb1 + xb2)c, where b > 0 and c > 0. This firm will have

increasing returns to scale if and only if bc > 1.

A firm has a production function f(x, y) = 1.40(x0.60 + y0.60)2 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

increasing returns to scale.

A firm has a production function f(x, y) = 1.80(x0.80 + y0.80)2 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

increasing returns to scale.

If the production function is given by f (x1,x2, x3, x4) = min{x1, x2} + min{x3, x4} and the prices of inputs (x1,x2, x3, x4) are (2, 1, 5, 3), the minimum cost of producing 1 unit of output is closest to

Colette and Boris both consume the same goods in a pure exchange economy. Colette is originally endowed with 9 units of good 1 and 6 units of good 2. Boris is originally endowed with 18 units of good 1 and 3 units of good 2. They both have the utility function U(x1, x2) = x1/31x2/32. If we let good 1 be the numeraire, so that p1 = $1, then what will be the equilibrium price of good 2?

A competitive firm's production function is f(x1, x2) = 12x1/21 + 4x1/22. The price of factor 1 is $1 and the price of factor 2 is $2. The price of output is $4. What is the profit-maximizing quantity of output?

304

A firm with the production function f (x1, x2, x3, x4) = min{x1, x2, x3, x4} faces input prices w1 = $1, w2 = $2,w3 = $2, w4 = $5 for factors 1, 2, 3, and 4. The firm must use at least 17 units of factor 2. The lowest cost at which it can produce 100 units of output is

317

A competitive firm has the short-run cost function c(y)= 2y3 − 16y2 + 64y + 50. The firm will produce a positive amount in the short run if and only if the price is greater than

A firm has the long-run cost function C(Q) = 4Q2 + 64.In the long run, it will supply a positive amount of output, so long as the price is greater than

A monopolist faces the demand curve q = 90 −p/2, where q is the number of units sold and p is the price in dollars. He has quasi-fixed costs, C, and constant marginal costs of $20 per unit of output. Therefore his total costs are C + 20q if q > 0 and 0 if q = 0. What is the largest value of C for which he would be willing to produce positive output?

3200$

Teresa and Jean-Pierre both consume the same goods in a pure exchange economy. Teresa is originally endowed with 9 units of good 1 and 6 units of good 2. Jean-Pierre is originally endowed with 91 units of good 1 and 14 units of good 2. They both have the utility function U(x1, x2) = x1/31x2/32. If we let good 1 be the numeraire, so that p1 = $1, then what will be the equilibrium price of good 2?

$10

Two firms, Wickedly Efficient Widgets (WEW) and Wildly Nepotistic Widgets (WNW), both produce widgets, using the same production function y = K1/2L1/2, where K is the amount of labor used and L is the amount of capital used. Each company can hire labor at $1 per unit of labor and capital at $9 per unit. Each company produces 90 widgets per week. WEW chooses its input combinations to produce in the cheapest way possible. Although it produces the same output per week as WEW, WNW is required by its dotty CEO to use twice as much labor as WEW. How much higher are WNW's total costs per week than WEW's?

$135

Colette and Hans both consume the same goods in a pure exchange economy. Colette is originally endowed with 15 units of good 1 and 12 units of good 2. Hans is originally endowed with 97 units of good 1 and 4 units of good 2. They both have the utility function U(x1, x2) = x1/31x2/32. If we let good 1 be the numeraire, so that p1 = $1, then what will be the equilibrium price of good 2?

$14

The production function for drangles is f (x1, x2) = (min{x1, 3x2})1/2, where x1 is the amount of sugar and x2 is the amount of dough used. At the factor prices, w1= w2 = $1, the minimum cost of producing ydrangles is

(4/3)y^2

The demand for a monopolist's output is 3,000/(p + 2)2, where p is the price it charges. At a price of $3, the elasticity of demand for the monopolist's output is

-1.10

The demand for a monopolist's output is 6,000/(p + 2)2, where p is the price it charges. At a price of $3, the elasticity of demand for the monopolist's output is

-1.20

Philip owns and operates a gas station. Philip works 40 hours a week managing the station but doesn't draw a salary. He could earn $600 a week doing the same work for Terrance. The station owes the bank $100,000 and Philip has invested $100,000 of his own money. If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $500 per week, the business's economic profits are

-100$ per week

Philip owns and operates a gas station. Philip works 40 hours a week managing the station but doesn't draw a salary. He could earn $700 a week doing the same work for Terrance. The station owes the bank $100,000 and Philip has invested $100,000 of his own money. If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $400 per week, the business's economic profits are

-100$ per week

Philip owns and operates a gas station. Philip works 40 hours a week managing the station but doesn't draw a salary. He could earn $800 a week doing the same work for Terrance. The station owes the bank $100,000 and Philip has invested $100,000 of his own money. If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $300 per week, the business's economic profits are

-100$ per week

A firm has the production function f(x, y) = 20x3/5y2/5. The slope of the firm's isoquant at the point (x, y) = (50, 70) is (pick the closest one)

-2.10

A firm has the production function f(x, y) = 20x3/5y2/5. The slope of the firm's isoquant at the point (x, y) = (20, 40) is (pick the closest one)

-3

A firm has the production function f(x, y) = 60x4/5y1/5. The slope of the firm's isoquant at the point (x, y) = (40, 80) is (pick the closest one)

-8

A competitive firm uses a single input x to produce its output y. The firm's production function is given by y = x3/2 for quantities of x between 0 and 4. For quantities of a greater than 4, the firm's output is y = 4 + x. If the price of the output y is $1 and the price of the input x is $3, how much x should the firm use to maximize its profit?

Ben runs a cookie factory. His cookies are made with sugar, peanut oil, and soybean oil. The number of boxes of cookies that he produces is f (su, po, so) = min{su, po + 2so}, where su is the number of bags of sugar, po the number of canisters of peanut oil, and so the number of canisters of soybean oil that he uses. The price of a bag of sugar is $12. The price of a canister of peanut oil is $6. The price of a canister of soybean oil is $19. If Ben makes 254 boxes of cookies in the cheapest way possible, how many canisters of soybean oil will he use?

Lars runs a cookie factory. His cookies are made with sugar, peanut oil, and soybean oil. The number of boxes of cookies that he produces is f (su, po, so) = min{su, po + 2so}, where su is the number of bags of sugar, po the number of canisters of peanut oil, and so the number of canisters of soybean oil that he uses. The price of a bag of sugar is $5. The price of a canister of peanut oil is $9. The price of a canister of soybean oil is $19. If Lars makes 254 boxes of cookies in the

In a market with the inverse demand curve P = 10 −Q, Brand X is a monopolist with no fixed costs and with a marginal cost of $2. If marginal cost rises to $4, by how much will the price of Brand X rise?

A goatherd has the cost function c(y) = 2y2, where y is the number of tubs of goat cheese she makes per month. She faces a competitive market for goat cheese,with a price of $40 a tub. How many tubs should she produce per month?

A monopolist faces the inverse demand curve p = 120 − 6q. At what level of output is his total revenue maximized?

A major software developer has estimated the demand for its new personal finance software package to be Q = 1,000,000P−2 while the total cost of the package is C = 100,000 + 25Q. If this firm wishes to maximize profit, what percentage markup should it place on this product?

100%

The demand for copies of the software package Macrosoft Doors is given by Q = 10,000P−2. The cost to produce Doors is C = 100,000 + 5Q. If Macrosoft practices cost plus pricing, what would be the profit-maximizing markup?

100%

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the process Q = min{(1/4)L, R}, where L is the number of spotted red lizards and R is gallons of rice wine. PL = PR = $1. Demand for Red Lizzard Wine in the United States is Q = 900P−2A1/2. If the advertising budget is $144, the quantity of wine which should be imported into the United States is

108 gallons

The production function is f (L, M) = 5L1/2M1/2, where L is the number of units of labor and M is the number of machines. If the amounts of both factors can be varied and if the cost of labor is $9 per unit and the cost of using machines is $64 per machine, then the total cost of producing 12 units of output is

115.20$

A firm has production function f (x1, x2, x3, x4) = min{x1, x2} + min{x3, x4}. This firm faces competitive factor markets where the prices for the four factors arew1 = $7, w2 = $8, w3 = $6, and w4 = $5. The firm must use at least 20 units of factor 2. The cost of producing 100 units in the cheapest possible way is

1180$

Miron Floren, of Lawrence Welk Show fame, now tours the country performing at accordion concerts. A careful analysis of demand for tickets to Mr. Floren's concerts reveals a strange segmentation in the market. Demand for tickets by senior citizens is described by Q0 = 500P−3/2 while demand by those under 65 years old is Qy = 50P−4. If the marginal cost of a ticket is $4, how should tickets to Mr. Floren's concerts be priced to maximize profits?

12 for senior citizens and 5.33 for those younger

A new metal alloy is discovered that uses copper and zinc in fixed proportions where each unit of the alloy requires 2 units of zinc and 2 units of copper. If no other inputs are required, if the price of zinc is $3 per unit, and the price of copper is $3 per unit and if total output is 5,000 units, what is the average cost per unit of output?

12$

Mary Magnolia from your workbook has variable costs equal to y2/F, where y is the number of bouquets she sells per month and where F is the number of square feet of space in her shop. If Mary has signed a lease for a shop with 600 square feet, if she is not able to get out of the lease or to expand her store in the short run, and if the price of a bouquet is $4 per unit, how many bouquets per month should she sell in the short run?

1200

A small economy has only two consumers, Charlie and Doreen. Charlie's utility function is U(x, y) = x + 154y1/2. Doreen's utility function is U(x, y) = x + 7y. At a Pareto optimal allocation in which both individuals consume some of each good, how much y does Charlie consume?

121

A small economy has only two consumers, Nick and Minnie. Nick's utility function is U(x, y) = x+ 154y1/2. Minnie's utility function is U(x, y) = x + 7y. At a Pareto optimal allocation in which both individuals consume some of each good, how much y does Nick consume?

121

If Green Acres Turf Farm's total cost of producing acres of sod is TC = 5Q2 + 25Q + 40, the marginal cost of producing the 10th acre of sod is

125$

When Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of fertilizer is 1 −N/200 bushels of corn. If the price of corn is $4 per bushel and the price of fertilizer is $1.20 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to maximize his profits?

140

Jiffy-Pol Consultants is paid $1,000,000 for each percentage of the vote that Senator Sleaze receives in the upcoming election. Sleaze's share of the vote is determined by the number of slanderous campaign ads run by Jiffy-Pol according to the function S = 100N/(N + 1), where N is the number of ads. If each ad costs $4,900 approximately how many ads should Jiffy-Pol buy in order to maximize its profits?

1428

A profit-maximizing competitive firm uses just one input, x. Its production function is q = 8x1/2. The price of output is $24 and the factor price is $8. The amount of the factor that the firm demands is

144

An obscure inventor in Strasburg, North Dakota, has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min{R/2, W}, where R is pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = PW = $1. Demand for Bubbles is Q = 576P−2A0.5. If the advertising budget for Bubbles is $81, the profit-maximizing quantity of Bubbles is

144

The production function is given by f(x) = 4x1/2. If the price of the commodity produced is $60 per unit and the cost of the input is $10 per unit, how much profit will the firm make if it maximizes profits?

1440

A competitive firm produces output using three fixed factors and one variable factor. The firm's short-run production function is q = 154x− 5x2, where x is the amount of variable factor used. The price of the output is $2 per unit and the price of the variable factor is $8 per unit. In the short run, how many units of xshould the firm use?

The demand for a monopolist's output is 6,000/(p + 3)2, where p is its price. It has constant marginal costs equal to $6 per unit. What price will it charge to maximize its profits?

15$

Xavier and Yvette are the only two persons on a desert island. There are only two goods, nuts and berries. Xavier's utility function is U(Nx, Bx) = NxBx. Yvette's utility function is U(Ny, By) = 2Ny + By. Xavier is endowed with 5 units of berries and 13 units of nuts. Yvette is endowed with 6 units of berries and 8 units of nuts. In a competitive equilibrium for this economy, how many units of berries does Xavier consume?

15.50

A monopolist faces the inverse demand curve p = 64 − 2q. At what level of output is his total revenue maximized?

A small economy has only two consumers, Boris and Vanessa. Boris's utility function is U(x, y) = x + 16y1/2. Vanessa's utility function is U(x, y) = x + 2y. Boris is endowed with 160 units of x and 60 units of y. They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts. How much y does Boris consume?

16 units

An obscure inventor in Strasburg, North Dakota, has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min{R/3, W}, where R is pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = PW = $1. Demand for Bubbles is Q = 1,024P−2A0.5. If the advertising budget for Bubbles is $100, the profit-maximizing quantity of Bubbles is

160

When Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of fertilizer is 1 −N/100 bushels of corn. If the price of corn is $2 per bushel and the price of fertilizer is $.40 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to maximize his profits?

160

When Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of fertilizer is 1 −N/200 bushels of corn. If the price of corn is $1 per bushel and the price of fertilizer is $.20 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to maximize his profits?

160

An airline has exclusive landing rights at the local airport. The airline flies one flight per day to New York with a plane that has a seating capacity of 100. The cost of flying the plane per day is $4,000 + 10q, where q is the number of passengers. The number of flights to New York demanded is q = 165 − .5p. If the airline maximizes its monopoly profits, the difference between the marginal cost of flying an extra passenger and the amount the marginal passenger is willing to pay to fly to New York is

160$

In the short run, a firm which has production function f(L, M) = 4L1/2M1/2 must use 4 machines. If the cost of labor is $4 per unit and the cost of machines is $4 per unit, the short-run total cost of producing 48 units of output is

160$

Jiffy-Pol Consultants is paid $1,000,000 for each percentage of the vote that Senator Sleaze receives in the upcoming election. Sleaze's share of the vote is determined by the number of slanderous campaign ads run by Jiffy-Pol according to the function S = 100N/(N + 1), where N is the number of ads. If each ad costs $3,600 approximately how many ads should Jiffy-pol buy in order to maximize its profits?

1666

Touchie McFeelie from your workbook has a production function (0.1)J1/2J3/4, where J is the number of old jokes used and L is the number of hours of cartoonists' labor. Touchie is stuck with 400 old jokes for which he paid 4 dollars each. If the hourly wage rate for cartoonists is 5 dollars, then the total cost of producing 16 comics books is

1680

he demand for a monopolist's output is 6,000/(p + 7)2, where p is its price. It has constant marginal costs equal to $5 per unit. What price will it charge to maximize its profits?

17$

A profit-maximizing monopolist faces a downward-sloping demand curve that has a constant elasticity of −4. The firm finds it optimal to charge a price of $24 for its output. What is its marginal cost at this level of output?

Charlie can work as many hours as he wishes at a local fast-food restaurant for a wage of $4 per hour. Charlie also does standup comedy. Since Charlie lives in a quiet, rather solemn Midwestern town, he is the town's only comedian and has a local monopoly for standup comedy. The demand for comedy is Q = 40 −P, where Q is the number of hours of comedy performed per week and P is the price charged per hour of comedy. When Charlie maximizes his utility, he spends at least 1 hour per week working at the restaurant and he gets at least 1 hour of leisure time. His utility depends only on income and leisure. How many hours per week does he perform standup comedy?

A new metal alloy is discovered that uses copper and zinc in fixed proportions where each unit of the alloy requires 4 units of zinc and 2 units of copper. If no other inputs are required, if the price of zinc is $2 per unit, and the price of copper is $5 per unit and if total output is 4,000 units, what is the average cost per unit of output?

18$

If Green Acres Turf Farm's total cost of producing acres of sod is TC = 4Q2 + 25Q + 30, the marginal cost of producing the 20th acre of sod is

185$

Which of the following production functions exhibit constant returns to scale? In each case y is output and K and L are inputs. (1) y = K1/2L1/3. (2) y = 3K1/2L1/2. (3) y = K1/2 + L1/2. (4) y = 2K + 3L.

2 and 4

The demand for a monopolist's output is 7,000 divided by the square of the price in dollars that it charges per unit. The firm has constant marginal costs equal to 1 dollar per unit. To maximize its profits, it should charge a price of

2 dollars

A firm has fixed costs of $2,000. Its short-run production function is y = 4x1/2, where x is the amount of variable factor it uses. The price of the variable factor is $3,000 per unit. Where y is the amount of output, the short-run total cost function is

2,000 + 187.50y2.

Wobble's Weebles is the only producer of weebles. It makes weebles at constant marginal cost c(where c > 0) and sells them at a price of p1 per weeble in market 1 and at a price of p2 per weeble in market 2. The demand curve for weebles in market 1 has a constant price elasticity of demand equal to −2. The demand curve for weebles in market 2 has a constant price elasticity equal to −3/2. The ratio of the profit-maximizing price in market 1 to the profit-maximizing price in market 2 is

2/3

A monopolist has constant marginal costs of $1 per unit. The demand for her output is 1,000/p if pis less than or equal to 50. The demand is 0 if p > 50. What is her profit maximizing level of output?

The demand for a monopolist's output is 10,000 divided by the square of the price it charges. The monopolist produces at a constant marginal cost of $5. If the government imposes a sales tax of $10 per unit on the monopolist's output, the monopolist price will rise by

20$

Using existing plant and equipment, Priceless Moments Figurines can be manufactured using plastic, clay, or any combination of these materials. A figurine can be manufactured by F = 4P + 2C, where P is pounds of plastic and C is pounds of clay. Plastic costs $2 per pound and clay costs $5 per pound. What would be the lowest cost of producing 40,000 figurines?

20,000$

A politician facing reelection can win votes according to the following process: V = 500S0.20M0.60, where S is hours of making campaign speeches and M is the number of flyers mailed. Making speeches costs $10 per hour, mailing flyers costs $.50 per flyer, and $8,000 are available to spend on the campaign. Assuming the politician wants to maximize votes, how should the budget be allocated between speeches and mailing flyers?

200 hours of speeches should be given; 12,000 flyers should be mailed out

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC= 8,000 +5Q. If Florence charges $9 per meal, what is its break even level of output?

2000 meals

An orange grower has discovered a process for producing oranges that requires two inputs. The production function is Q = min{2x1, x2}, where x1 and x2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w1 = $5 and w2 = $10, respectively. The minimum cost of producing 160 units is therefore

2000$

A competitive firm's production function is f(x1, x2) = 6x1/21 + 8x1/22. The price of factor 1 is $1 and the price of factor 2 is $4. The price of output is $8. What is the profit-maximizing quantity of output?

208

Peter Morgan sells pigeon pies from his pushcart in Central Park. Due to the abundant supplies of raw materials, his costs are zero. The demand schedule for his pigeon pies is p(y) = 150 −y/3. What level of output will maximize Peter's profits?

225

A monopolist faces the inverse demand function described by p = 23 − 5q, where q is output. The monopolist has no fixed cost and his marginal cost is $6 at all levels of output. Which of the following expresses the monopolist's profits as a function of his output?

23-10q

Rocco's Pasta Bar makes manicotti according to an old family recipe which states M = min{3/2C, 3P}, where M, C, and P are pounds of manicotti, cheese, and pasta respectively. If cheese costs $3 per pound and pasta costs $1 per pound, how much would it cost to produce 10 pounds of manicotti in the cheapest way possible?

23.33

A careful analysis of demand for Bubbles in Strasburg, North Dakota, reveals a strange segmentation in the market. (Recall Bubbles is the beverage which produces an unexplained craving for Lawrence Welk's music. It is produced by the process Q = min{R/4, W}, where R is the number of pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = $1, PW = $4.) If demand for Bubbles by senior citizens is described by Q0 = 500P−3/2 while demand by those under 65 years old is Qy = 50P−4, how should Bubbles be priced to maximize profits?

24$ for senior citizens and 10.67$ for those younger

A careful analysis of demand for Bubbles in Strasburg, North Dakota, reveals a strange segmentation in the market. (Recall Bubbles is the beverage which produces an unexplained craving for Lawrence Welk's music. It is produced by the process Q = min{R/3, W}, where R is the number of pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = $1, PW = $5.) If demand for Bubbles by senior citizens is described by Q0 = 500P−3/2while demand by those under 65 years old is Qy = 50P−5, how should Bubbles be priced to maximize profits?

24$ for senior citizens, and 10$ for those younger

Using existing plant and equipment, Priceless Moments Figurines can be manufactured using plastic, clay, or any combination of these materials. A figurine can be manufactured by F = 2P + 5C, where P is pounds of plastic and C is pounds of clay. Plastic costs $5 per pound and clay costs $2 per pound. What would be the lowest cost of producing 60,000 figurines?

24,000

Touchie McFeelie from your workbook has a production function (0.1)J1/2J3/4, where J is the number of old jokes used and L is the number of hours of cartoonists' labor. Touchie is stuck with 400 old jokes for which he paid 6 dollars each. If the hourly wage rate for cartoonists is 4 dollars, then the total cost of producing 16 comics books is

2464

Al's production function for deer is f(x1, x2) = (2x1 + x2)1/2, where x1 is the amount of plastic and x2 is the amount of wood used. If the cost of plastic is $6 per unit and the cost of wood is $1 per unit, then the cost of producing 5 deer is

Vincent Smudge, an avant-garde New York artist,creates "living sculpture" by smearing paint slowly all over himself. S hours of "living sculpture" can be created by S = min{L, T/5}, where L is hours of labor by Mr. Smudge and T is tubes of water-soluble paint.Since Mr. Smudge is a highly renowned artist, his labor costs $200 per hour, while paint costs $40 per tube.Using a $10,000 grant from the National Endowment for the Arts, how many hours of "living sculpture" can Mr. Smudge create?

A small economy has only two consumers, Harold and Irene. Harold's utility function is U(x, y) = x + 50y1/2. Irene's utility function is U(x, y) = x + 5y. Harold is endowed with 500 units of x and 60 units of y. They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts. How much y does Harold consume?

25 units

A computer software firm has developed a new and better spreadsheet program. The program is protected by copyrights, so the firm can act as a monopolist for this product. The demand function for the spreadsheet is q = 50,000 − 100p. Any single consumer will want only one copy. The marginal cost of producing and distributing another copy and its documentation is just $10 per copy. If the company sells this software at the profit-maximizing monopoly price, the number of consumers who would not buy the software at the monopoly price but would be willing to pay at least the marginal cost is

25,000

A major software developer has estimated the demand for its new personal finance software package to be Q = 1,000,000P−1.40 while the total cost of the package is C = 100,000 + 20Q. If this firm wishes to maximize profit, what percentage markup should it place on this product?

250%

A competitive firm's production function is f(x1, x2) = 8x1/21 + 8x1/22. The price of factor 1 is $1 and the price of factor 2 is $3. The price of output is $6. What is the profit-maximizing quantity of output?

256

An industry has two firms, a leader and a follower. The demand curve for the industry's output is given by p = 208 − 4q, where q is total industry output. Each firm has zero marginal cost. The leader chooses his quantity first, knowing that the follower will observe the leader's choice and choose his quantity to maximize profits, given the quantity produced by the leader. The leader will choose an output of

The production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor is $16 and the price of output is $12. How many units of labor will the firm hire?

Douffelberry juice is a mild intoxicant, prized for facilitating conversation among university administrators but not otherwise valued. The berry does not travel well,so it must be squeezed on the farm where it is grown.Baskets of berries, B, are produced using ounces of seeds, S, and hours of labor, L, according to a production function B = S1/2L1/2. Gallons of juice, J, are made from baskets of berries and hours of labor according to the production function J = min{B, L}. If seeds cost $9 per ounce and labor costs $9 per hour, what is the cost of producing each gallon of douffelberry juice?

27$

A careful analysis of demand for Bubbles in Strasburg, North Dakota, reveals a strange segmentation in the market. (Recall Bubbles is the beverage which produces an unexplained craving for Lawrence Welk's music. It is produced by the process Q = min{R/5, W}, where R is the number of pulverized Lawrence Welk records and W is gallons of North Dakota well water. PR = $1, PW = $4.) If demand for Bubbles by senior citizens is described by Q0 = 500P−3/2 while demand by those under 65 years old is Qy = 50P−5, how should Bubbles be priced to maximize profits?

27$ for senior citizens and 11.25$ for those younger

Nadine has a production function 2x1 + x2. If the factor prices are $8 for factor 1 and $5 for factor 2, how much will it cost her to produce 70 units of output?

280$

A firm has a short-run cost function c(y) = 3y + 11 for y > 0 and c(0) = 8. The firm's quasi-fixed costs are

If it costs $20 to set up and later clean a bagel press and bagels cost $1 per week per bagel to store, how many times should the bagel press be run each week to produce 360 bagels a week to be sold continuously?

3 times

The marginal cost curve of a firm is MC = 6y. Total variable costs to produce 10 units of output are

300$

A monopolist faces the demand curve q = 90 −p/2, where q is the number of units sold and p is the price in dollars. She has quasi-fixed costs, C, and constant marginal costs of $20 per unit of output. Therefore her total costs are C + 20q if q > 0 and 0 if q = 0. What is the largest value of C for which she would be willing to produce positive output?

3200$

Xavier and Yvette are the only two persons on a desert island. There are only two goods, nuts and berries. Xavier's utility function is U(Nx, Bx) = NxBx. Yvette's utility function is U(Ny, By) = 5Ny + By. Xavier is endowed with 4 units of berries and 13 units of nuts. Yvette is endowed with 6 units of berries and 8 units of nuts. In a competitive equilibrium for this economy, how many units of berries does Xavier consume?

34.50

A small economy has only two consumers, Zeke and Maude. Zeke's utility function is U(x, y) = x+ 48y1/2. Maude's utility function is U(x, y) = x + 4y. At a Pareto optimal allocation in which both individuals consume some of each good, how much y does Zeke consume?

The production function is f (L, M) = 4L1/2M1/2, where L is the number of units of labor and M is the number of machines used. If the cost of labor is $36 per unit and the cost of machines is $4 per unit, then the total cost of producing 6 units of output will be

36$

In the short run, a firm which has production function f(L, M) = 4L1/2M1/2 must use 4 machines. If the cost of labor is $4 per unit and the cost of machines is $10 per unit, the short-run total cost of producing 72 units of output is

364$

Vincent Smudge, an avant-garde New York artist,creates "living sculpture" by smearing paint slowly all over himself. S hours of "living sculpture" can be created by S = min{L, T/3}, where L is hours of labor by Mr. Smudge and T is tubes of water-soluble paint.Since Mr. Smudge is a highly renowned artist, his labor costs $50 per hour, while paint costs $10 per tube.Using a $3,000 grant from the National endowment for the Arts, how many hours of "living sculpture" can Mr. Smudge create?

37.50

An industry has two firms, a leader and a follower. The demand curve for the industry's output is given by p = 456 − 6q, where q is total industry output. Each firm has zero marginal cost. The leader chooses his quantity first, knowing that the follower will observe the leader's choice and choose his quantity to maximize profits, given the quantity produced by the leader. The leader will choose an output of

A firm has a short-run cost function c(y) = 3y + 14 for y > 0 and c(0) = 10. The firm's quasi-fixed costs are

A firm has the short-run total cost function c(y) = 9y2 + 144. At what quantity of output is short-run average cost minimized?

A firm uses 3 factors to produce its output. Its production function is f(x, y, z) = min{x3/y, y2, (z4−x4)/y2}. If the amount of each input is multiplied by 2, its output will be multiplied by

Touchie McFeelie's production function for comic books is (0.1)J1/2J3/4, where J is the number of jokes and L is the number of hours of cartoonists labor that he uses. If Touchie can vary both jokes and cartoonists' labor and if old jokes cost $3 each and cartoonists' labor costs $18 per hour, then the cheapest way to produce comics books requires using jokes and labor in the ratio J/L =

A firm has fixed costs of $4,000. Its short-run production function is y = 4x1/2, where x is the amount of variable factor it uses. The price of the variable factor is $4,000 per unit. Where y is the amount of output, the short-run total cost function is

4,000 + 250y2.

Astrids utility function is U(H A, C A) = H A C A. Birgers utility function is min{H B, C B}. If Astrids initial endowment is no cheese and 11 units of herring and if Birgers initial endowments are 4 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market. This implies that

4/(p+1) + 6 = 12

A competitive firm has the short-run cost function c(y) = 2y3 − 16y2 + 128y + 10. The firm will produce a positive amount in the short run if and only if the price is greater than

A firm with the production function f (x1, x2, x3, x4) = min{x1, x2, x3, x4} faces input prices w1 = $1, w2 = $5,w3 = $5, w4 = $3 for factors 1, 2, 3, and 4. The firm must use at least 10 units of factor 2. The lowest cost at which it can produce 100 units of output is

440$

A monopolist faces the inverse demand function described by p = 50 − 4q, where q is output. The monopolist has no fixed cost and his marginal cost is $5 at all levels of output. Which of the following expresses the monopolist's profits as a function of his output?

45q-4q^2

As assistant vice president in charge of production for a computer firm, you are asked to calculate the cost of producing 170 computers. The production function is q = min{x, y} where x and y are the amounts of two factors used. The price of x is $18 and the price of y is $10. What is your answer?

4760

The marginal cost curve of a firm is MC = 8y. Total variable costs to produce 11 units of output are

484$

A firm has the short-run total cost function c(y) = 4y2 + 100. At what quantity of output is short-run average cost minimized?

A goatherd has the cost function c(y) = 4y2, where y is the number of tubs of goat cheese she makes per month. She faces a competitive market for goat cheese,with a price of $40 a tub. How many tubs should she produce per month?

The demand curve facing a monopolist is D(p) = 100/p if p is 20 or smaller and D(p) = 0 if p > 20. The monopolist has a constant marginal cost of $1 per unit produced. What is the profit-maximizing quantity of output for this monopolist?

The law firm of Dewey, Cheatham, and Howe specializes in accident injury claims. The firm charges its clients 25% of any damage award given. The only cost to the firm of producing an accident injury claim is the time spent by a junior partner working on the case. Junior partners are paid $100 per hour for this drudgery. If the firm is suing for damages of $250,000 and if its chances of winning a case are 1/25h, where h is the number of hours spent working on the case, then to maximize its profits, how many hours should it have the junior partner spend working on the case?

If it costs $20 to set up and later clean a bagel press and bagels cost $1 per week per bagel to store, how many times should the bagel press be run each week to produce 1,000 bagels a week to be sold continuously?

5 times

Two firms, Wickedly Efficient Widgets (WEW) and Wildly Nepotistic Widgets (WNW), both produce widgets, using the same production function y = K1/2L1/2, where K is the amount of labor used and L is the amount of capital used. Each company can hire labor at $1 per unit of labor and capital at $1 per unit. Each company produces 10 widgets per week. WEW chooses its input combinations to produce in the cheapest way possible. Although it produces the same output per week as WEW, WNW is required by its dotty CEO to use twice as much labor as WEW. How much higher are WNW's total costs per week than WEW's?

Abduls utility is U(X A, Y A) = min{X A, Y A}, where X A and Y A are his consumptions of goods X and Y respectively. Babettes utility function is U(X B, Y B) = X B Y B, where X B and Y B are her consumptions of goods X and Y. Abduls initial endowment is no units of Y and 5 units of X. Babettes initial endowment is no units of X and 11 units of Y. If X is the numeraire good and p is the price of good Y, then supply will equal demand in the market for Y if

5/(p + 1) + 5.50 = 11

A politician facing reelection can win votes according to the following process: V = 500S0.20M0.60, where S is hours of making campaign speeches and M is the number of flyers mailed. Making speeches costs $10 per hour, mailing flyers costs $.50 per flyer, and $2,000 are available to spend on the campaign. Assuming the politician wants to maximize votes, how should the budget be allocated between speeches and mailing flyers?

50 hours of speeches should be given; 3,000 flyers should be mailed out.

A lobbyist in our nation's capitol must buy 250 votes in the House of Representatives and Senate to win passage of a bill to add Millard Fillmore's face to Mount Rushmore. Votes in Congress can be purchased according to the following process: V = CM/100,000, where C is the number of dollars contributed to campaign funds and M is the number of three-martini lunches. If three-martini lunches cost $25 each, what is the smallest expenditure the lobbyist could make to ensure Mr. Fillmore's proper place in history?

50,000$

A competitive firm uses two inputs, x and y. Total output is the square root of x times the square root of y. The price of x is $17 and the price of y is $11. The company minimizes its costs per unit of output and spends $517 on x. How much does it spend on y?

517$

A firm has the long-run cost function C(Q) = 4Q2 + 196. In the long run, it will supply a positive amount of output, so long as the price is greater than

The snow removal business in East Icicle, Minnesota,is a competitive industry. All snowplow operators have the cost function C = Q2 + 4, where Q is the number of driveways cleared. Demand for snow removal in the town is given by Qd = 120 −P. The long-run equilibrium number of firms in this industry is

Touchie McFeelie's production function for comic books is (0.1)J1/2J3/4, where J is the number of jokes and L is the number of hours of cartoonists labor that he uses. If Touchie can vary both jokes and cartoonists' labor and if old jokes cost $2 each and cartoonists' labor costs $18 per hour, then the cheapest way to produce comics books requires using jokes and labor in the ratio J/L =

Astrids utility function is U(HA, CA) = HACA. Birgers utility function is min{HB, CB}. If Astrids initial endowment is no cheese and 5 units of herring and if Birgers initial endowments are 6 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market. This implies that

6/ (p+1) + 2.50 = 5

Abduls utility is U(X A, Y A) = min{X A, Y A}, where X A, and Y A are his consumptions of goods X and Y respectively. Babettes utility function is U(X B, Y B) = X B Y B, where X B and Y B are her consumptions of goods X and Y. Abduls initial endowment is no units of Y and 6 units of X. Babettes initial endowment is no units of X and 10 units of Y. If X is the numeraire good and p is the price of good Y, then supply will equal demand in the market for Y if

6/(p + 1) + 5 = 10

Mr. Dent Carr's total costs are 2s2 + 40s + 40. If he repairs 10 cars, his average variable costs will be

Nadine has a production function 4x1 + x2. If the factor prices are $12 for factor 1 and $2 for factor 2, how much will it cost her to produce 30 units of output?

60$

Mary Magnolia from your workbook has variable costs equal to y2/F, where y is the number of bouquets she sells per month and where F is the number of square feet of space in her shop. If Mary has signed a lease for a shop with 200 square feet, if she is not able to get out of the lease or to expand her store in the short run, and if the price of a bouquet is $6 per unit, how many bouquets per month should she sell in the short run?

600

An orange grower has discovered a process for producing oranges that requires two inputs. The production function is Q = min{2x1, x2}, where x1 andx2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w1 = $5 and w2 = $2,respectively. The minimum cost of producing 140 units is therefore

630$

A profit-maximizing competitive firm uses just one input, x. Its production function is q = 4x1/2. The price of output is $12 and the factor price is $3. The amount of the factor that the firm demands is

A profit-maximizing competitive firm uses just one input, x. Its production function is q = 4x1/2. The price of output is $28 and the factor price is $7. The amount of the factor that the firm demands is

The production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor is $16 and the price of output is $16. How many units of labor will the firm hire?

Rocco's Pasta Bar makes manicotti according to an old family recipe which states M = min{5/4C, 5P}, where M, C, and P are pounds of manicotti, cheese, and pasta respectively. If cheese costs $3 per pound and pasta costs $4 per pound, how much would it cost to produce 20 pounds of manicotti in the cheapest way possible?

64$

The production function is given by f(x) = 4x1/2. If the price of the commodity produced is $80 per unit and the cost of the input is $40 per unit, how much profits will the firm make if it maximizes profits?

640

A competitive firm produces output using three fixed factors and one variable factor. The firm's short-run production function is q = 524x− 4x2, where x is the amount of variable factor used. The price of the output is $3 per unit and the price of the variable factor is $12 per unit. In the short run, how many units of xshould the firm use?

Diesel Dan is a contract truck driver. While his revenue is $1.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket. The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) = eS −(60/4). To maximize his profit, Dan should drive

67.17 miles per hour

Abduls utility is U(X A, Y A) = min{X A, Y A}, where X A and Y A are his consumptions of goods X and Y respectively. Babettes utility function is U(X B, Y B) = X B Y B, where X B and Y B are her consumptions of goods X and Y. Abduls initial endowment is no units of Y and 7 units of X. Babettes initial endowment is no units of X and 6 units of Y. If X is the numeraire good and p is the price of good Y, then supply will equal demand in the market for Y if

7/(p+1)+3=6

The production function is f (L, M) = 4L1/2M1/2, where L is the number of units of labor and M is the number of machines used. If the cost of labor is $49 per unit and the cost of machines is $16 per unit, then the total cost of producing 5 units of output will be

70$

Diesel Dan is a contract truck driver. While his revenue is $2 per mile driven, the faster he drives, the greater the risk of a speeding ticket. The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) = eS −(60/5). To maximize his profit, Dan should drive

70.38 miles per hour

Diesel Dan is a contract truck driver. While his revenue is $2.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket. The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) = eS −(60/5). To maximize his profit, Dan should drive

72.63 miles per hour

The production function is given by f(x) = 4x1/2. If the price of the commodity produced is $60 per unit and the cost of the input is $20 per unit, how much profit will the firm make if it maximizes profits?

720

A company can rent one of two copying machines. The first costs $34 a month to rent and costs an additional 2 cents per copy to use. The second costs $107 a month to rent and an additional 1 cent per copy to use. How many copies would the company need to make per month in order for it to be worthwhile to rent the second machine?

7300

A competitive firm produces output using three fixed factors and one variable factor. The firm's short-run production function is q = 305x− 2x2, where x is the amount of variable factor used. The price of the output is $2 per unit and the price of the variable factor is $10 per unit. In the short run, how many units of xshould the firm use?

Mr. Dent Carr's total costs are 2s2 + 45s + 30. If he repairs 15 cars, his average variable costs will be

A firm has two factories. One factory has the cost function c1(y1) = 2y21 + 90 and the other has the cost function c2(y2) = 6y22 + 40. If the firm wishes to produce a total of 32 units as cheaply as possible, how many units will be produced in the second factory?

A profit-maximizing monopolist faces a downward-sloping demand curve that has a constant elasticity of −3. The firm finds it optimal to charge a price of $12 for its output. What is its marginal cost at this level of output?

The law firm of Dewey, Cheatham, and Howe specializes in accident injury claims. The firm charges its clients 25% of any damage award given. The only cost to the firm of producing an accident injury claim is the time spent by a junior partner working on the case. Junior partners are paid $100 per hour for this drudgery. If the firm is suing for damages of $640,000 and if its chances of winning a case are 1/25h, where h is the number of hours spent working on the case, then to maximize its profits, how many hours should it have the junior partner spend working on the case?

The production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor is $16 and the price of output is $8. How many units of labor will the firm hire?

Astrid's utility function is U(HA, CA) = HACA. Birger's utility function is min{HB, CB}. If Astrid's initial endowment is no cheese and 13 units of herring and if Birger's initial endowments are 8 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market. This implies that

8/ (p+1) +6.50 =13

The production function is f (L, M) = 4L1/2M1/2, where L is the number of units of labor and M is the number of machines. If the amounts of both factors can be varied and if the cost of labor is $64 per unit and the cost of using machines is $1 per machine, then the total cost of producing 20 units of output is

80$

A lobbyist in our nation's capitol must buy 250 votes in the House of Representatives and Senate to win passage of a bill to add Millard Fillmore's face to Mount Rushmore. Votes in Congress can be purchased according to the following process: V = CM/100,000, where C is the number of dollars contributed to campaign funds and M is the number of three-martini lunches. If three-martini lunches cost $64 each, what is the smallest expenditure the lobbyist could make to ensure Mr. Fillmore's proper place in history?

80,000$

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC= 8,000 + 6Q. If Florence charges $7 per meal, what is its break even level of output?

8000 meals

A firm has production function f (x1, x2, x3, x4) = min{x1, x2} + min{x3, x4}. This firm faces competitive factor markets where the prices for the four factors are w1 = $4, w2 = $8, w3 = $5, and w4 = $3. The firm must use at least 20 units of factor 2. The cost of producing 100 units in the cheapest possible way is

880$

A firm uses 3 factors to produce its output. Its production function is f(x, y, z) = min{x3/y, y2, (z4− x4)/y2}. If the amount of each input is multiplied by 3, its output will be multiplied by

A firm uses 3 factors to produce its output. Its production function is f(x, y, z) = min{x3/y, y2, (z4−x4)/y2}. If the amount of each input is multiplied by 3, its output will be multiplied by

Miron Floren, of Lawrence Welk Show fame, now tours the country performing at accordion concerts. A careful analysis of demand for tickets to Mr. Floren's concerts reveals a strange segmentation in the market. Demand for tickets by senior citizens is described by Q0 = 500P−3/2 while demand by those under 65 years old is Qy = 50P−5. If the marginal cost of a ticket is $3, how should tickets to Mr. Floren's concerts be priced to maximize profits?

9 for senior citizens and 3.75 for those younger

A small economy has only two consumers, Ivan and Marilyn. Ivan's utility function is U(x, y) = x+ 18y1/2. Marilyn's utility function is U(x, y) = x + 3y. Ivan is endowed with 135 units of x and 60 units of y. They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts. How much y does Ivan consume?

9 units

Douffelberry juice is a mild intoxicant, prized for facilitating conversation among university administrators but not otherwise valued. The berry does not travel well,so it must be squeezed on the farm where it is grown.Baskets of berries, B, are produced using ounces of seeds, S, and hours of labor, L, according to a production function B = S1/2L1/2. Gallons of juice, J, are made from baskets of berries and hours of labor according to the production function J = min{B, L}. If seeds cost $16 per ounce and labor costs $1 per hour, what is the cost of producing each gallon of douffelberry juice?

Miron Floren, of Lawrence Welk Show fame, now tours the country performing at accordion concerts. A careful analysis of demand for tickets to Mr. Floren's concerts reveals a strange segmentation in the market. Demand for tickets by senior citizens is described by Q0 = 500P−3/2 while demand by those under 65 years old is Qy = 50P−4. If the marginal cost of a ticket is $3, how should tickets to Mr. Floren's concerts be priced to maximize profits?

9$ for senior citizens and 4$ for those younger

Xavier and Yvette are the only two persons on a desert island. There are only two goods, nuts and berries. Xavier's utility function is U(Nx, Bx) = NxBx. Yvette's utility function is U(Ny, By) = 2Ny + By. Xavier is endowed with 3 units of berries and 8 units of nuts. Yvette is endowed with 6 units of berries and 8 units of nuts. In a competitive equilibrium for this economy, how many units of berries does Xavier consume?

9.50

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the process Q = min{(1/3)L, R}, where L is the number of spotted red lizards and R is gallons of rice wine. PL = PR = $1. Demand for Red Lizzard Wine in the United States is Q = 576P−2A1/2. If the advertising budget is $121, the quantity of wine which should be imported into the United States is

99 gallons

Jiffy-Pol Consultants is paid $1,000,000 for each percentage of the vote that Senator Sleaze receives in the upcoming election. Sleaze's share of the vote is determined by the number of slanderous campaign ads run by Jiffy-Pol according to the function S = 100N/(N + 1), where N is the number of ads. If each ad costs $10,000 approximately how many ads should Jiffy-Pol buy in order to maximize its profits?

999

Arturo and Belen consume only two goods, X and Y. They have strictly convex preferences and no kinks in their indifference curves. At the initial allocation, the ratio of Arturo's marginal utility of X to his marginal utility of Y is A and the ratio of Belen's marginal utility of X to his marginal utility of Y is B, where A< B. The competitive equilibrium price ratio is px/py = C.

A < C < B

A firm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this effect, so the demand for Slops is given by the equation q = 10 −p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the firm must undertake a fixed cost of $30. Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

A Pareto improvement could be achieved by having the government pay the firm a subsidy of $35 and insisting that the firm offer Slops at zero price.

A firm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this effect, so the demand for Slops is given by the equation q = 14 −p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the firm must undertake a fixed cost of $54. Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

A Pareto improvement could be achieved by having the government pay the firm a subsidy of $59 and insisting that the firm offer Slops at zero price.

If a firm moves from one point on a production isoquant to another point on the same isoquant, which of the following will certainly not happen?

A change in the level of output

Suppose that the production function is f (x1, x2) = (min{x1, 2x2}).5.

A cost-minimizing firm producing 5 units of output will use 25 units of x1 and some x2.

Morris has the utility function U(b, w) = 3b + 3w and Philip has the utility function U(b, w) = bw, where b is the number of books consumed per month and w is bottles of wine consumed per month. If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box, then the contract curve contains

A straight line with slope 1/1 passing through the upper right corner of the box

Morris has the utility function U(b, w) = 4b + 4w and Philip has the utility function U(b, w) = bw, where b is the number of books consumed per month and w is bottles of wine consumed per month. If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box, then the contract curve contains

A straight line with slope 1/1 passing through the upper right corner of the box

Morris has the utility function U(b, w) = 4b + 16w and Philip has the utility function U(b, w) = bw, where b is the number of books consumed per month and w is bottles of wine consumed per month. If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box, then the contract curve contains

A straight line with slope 1/4 passing through the upper right corner of the box

Pete and Dud live in a two-commodity world. Pete's utility function is U P(x P1, x P2) = x P1x P2. Dud's utility function is U D(x D1, x D2) = min{x D1, x D2}. Pete is initially endowed with 3 units of commodity 1 and 4 units of commodity 2. Dud is initially endowed with 7 units of commodity 1 and 6 units of commodity 2.

At a competitive equilibrium, Dud must consume equal amounts of both goods, so the price of good 1 must equal the price of good 2.

A firm uses only two inputs to produce its output. These inputs are perfect substitutes. This firm

Could have increasing returns to scale, constant returns to scale, or decreasing returns to scale

An economy has two people, Charlie and Doris. There are two goods, apples and bananas. Charlie has an initial endowment of 6 apples and 6 bananas. Doris has an initial endowment of 12 apples and 3 bananas. Charlie's utility function is U(A C, B C) = A C B C, where A C is his apple consumption and B C is his banana consumption. Doris's utility function is U(A D, B D) = A D B D, where A D and B D are her apple and banana consumptions. At every Pareto optimal allocation,

Charlie consumes 18 apples for every 9 bananas that he consumes

An economy has two people, Charlie and Doris. There are two goods, apples and bananas. Charlie has an initial endowment of 3 apples and 10 bananas. Doris has an initial endowment of 6 apples and 5 bananas. Charlie's utility function is U(A C, B C) = A C B C, where A C is his apple consumption and B C is his banana consumption. Doris's utility function is U(A D, B D) = A D B D, where A D and B D are her apple and banana consumptions. At every Pareto optimal allocation,

Charlie consumes 9 apples for every 15 bananas that he consumes

As head of the planning commission of Eastern Motors, your job is to determine where to locate a new plant. The only inputs used in your cars are steel and labor and the production function is Cobb-Douglas where f (S, L) = S.5L.5, where S is tons of steel and L is units of labor. You can locate your plant either in country A or country B. In country A, steel costs $7 a ton and labor costs $7 per unit. In country B, steel costs $8 per ton and labor costs $6 per unit. In which country should the company locate its new plant so as to minimize costs per unit of output?

Country B

The VCR manufacturing business is perfectly competitive. Suppose that currently, firms that manufacture VCRs utilize either technology 1 or technology 2, whose cost functions areTC1(Q) = 1,120 − 60Q + Q2TC2(Q) = 300 − 20Q + Q2

Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business.

The VCR manufacturing business is perfectly competitive.Suppose that currently, firms that manufacture VCRs utilize either technology 1 or technology 2,whose cost functions areTC1(Q) = 340 − 20Q + Q2TC2(Q) = 405 − 30Q + Q2In the long run, assuming no new manufacturing technologies,what will happen in this industry?

Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down.

The following relationship must hold between the average total cost (ATC) curve and the marginal cost curve (MC):

If ATC rising, MC must be greater than ATC

A firm has the production function f(x, y) = x0.90y0.80. This firm has

Increasing returns to sale, decreasing marginal product of factor x

Professor Nightsoils utility function is U N (B N, P N) = BN + 4P1/2N and Dean Interfaces utility function is U I (B I, P I) = BI + 2P1/2I, where B N and B I are the number of bromides and P N and P I are the number of platitudes consumed by Nightsoil and Interface respectively. If Nightsoils initial endowment is 4 bromides and 10 platitudes and if Interfaces initial endowment is 3 bromides and 15 platitudes, then at any Pareto efficient allocation in which both consume positive amounts of both goods,

Interface consumes 5 platitudes

Professor Nightsoils utility function is U N (B N, P N) = BN + 4P1/2N and Dean Interfaces utility function is U I (B I, P I) = BI + 2P1/2I, where B N and B I are the number of bromides and P N and P I are the number of platitudes consumed by Nightsoil and Interface respectively. If Nightsoils initial endowment is 5 bromides and 20 platitudes and if Interfaces initial endowment is 3 bromides and 20 platitudes, then at any Pareto efficient allocation in which both consume positive amounts of both goods,

Interface consumes 8 platitudes

Professor Nightsoils utility function is U N (B N, P N) = BN + 4P1/2N and Dean Interfaces utility function is U I (B I, P I) = BI + 2P1/2I where B N and B I are the number of bromides and P N and P I are the number of platitudes consumed by Nightsoil and Interface respectively. If Nightsoils initial endowment is 4 bromides and 25 platitudes and if Interfaces initial endowment is 2 bromides and 20 platitudes, then at any Pareto efficient allocation in which both consume positive amounts of both goods,

Interface consumes 9 platitudes

Irene and Orville live in an isolated valley and trade with no one but each other. They consume only cantaloupes and grapefruits. Irene has an initial endowment of 5 cantaloupes and 12 grapefruits. Orville has an initial endowment of 19 cantaloupes and 25 grapefruits. For Irene, the two goods are perfect substitutes, one for one. For Orville, they are perfect complements, one for one. At all Pareto efficient allocations,

Irene must consume at least 13 grapefruits

A firm has the production function f(X, Y) = X3/4Y1/4, where X is the amount of factor x used and Yis the amount of factor y used. On a diagram we put X on the horizontal axis and Y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that wherever this line meets an isoquant, the isoquant has a slope of −9. The straight line we drew

Is a ray through the origin with slope 3

A firm produces one output using one input. When the cost of the input was $3 and the price of the output was $3, the firm used 6 units of input to produce 18 units of output. Later, when the cost of the input was $7 and the price of the output was $4, the firm used 5 units of input to produce 20 units of output. This behavior

Is not consistent with WAPM

Kens utility function is U(Q K, W K) = Q K W K and Barbies utility function is U(Q B, W B) = Q B W B. If Kens initial endowment were 5 units of quiche and 7 units of wine and Barbies endowment were 10 units of quiche and 7 units of wine and Barbie's endowment were 10 units of quiche and 7 units of wine, then at any Pareto optimal allocation where both persons consumed some of each good,

Ken would consume 15 units of quiche for every 14 units of wine he consumed

Kens utility function is U(Q K, W K) = Q K W K and Barbies utility function is U(Q B, W B) = Q B W B. If Kens initial endowment were 5 units of quiche and 9 units of wine and Barbies endowment were 10 units of quiche and 9 units of wine, then at any Pareto optimal allocation where both persons consumed some of each good,

Ken would consume 15 units of quiche for every 18 units of wine that he consumed

Kens utility function is U(Q K, W K) = Q K W K and Barbies utility function is U(Q B, W B) = Q B W B. If Kens initial endowment were 3 units of quiche and 11 units of wine and Barbies endowment were 6 units of quiche and 11 units of wine, then at any Pareto optimal allocation where both persons consumed some of each good,

Ken would consume 9 units of quiche for every 22 units of wine he consumes

If output is produced according to Q = 4L + 6K, the price of K is $12, and the price of L is $20, then the cost-minimizing combination of K and L capable of producing 96 units of output is

L = 0 K = 16

If output is produced according to Q = 4L + 6K, the price of K is $24, and the price of L is $20, then the cost-minimizing combination of K and L capable of producing 72 units of output is

L = 0 and K = 12.

If output is produced according to Q = 4LK, the price of K is $10, and the price of L is $5, then the cost minimizing combination of K and L capable of producing 2 units of output is

L=1 K=.50

If output is produced according to Q = 4LK, the price of K is $10, and the price of L is $40, then the cost minimizing cost minimizing combination of K and L capable of producing 64 units of output is

L=2 K=8

A firm has the production function Q = X1/21X2. In the short run it must use exactly 15 units of factor 2. The price of factor 1 is $75 per unit and the price of factor 2 is $2 per unit. The firm's short-run marginal cost function is

MC(Q) = 10Q/15.

A firm has the production function Q = X1/21X2. In the short run it must use exactly 35 units of factor 2. The price of factor 1 is $105 per unit and the price of factor 2 is $3 per unit. The firm's short-run marginal cost function is

MC(Q) = 6Q/35.

Dan and Marilyn consume two goods, x and y. They have identical Cobb-Douglas utility functions. Initially Dan owns 10 units of x and 10 units of y. Initially Marilyn owns 40 units of x and 20 units of y. They make exchanges to reach a Pareto optimal allocation which is better for both than the no-trade allocation. Which of the following is not necessarily true about the allocation they trade to?

Marilyn consumes at least 40 units of x

Marilyn and Chen live in an isolated valley and trade with no one but each other. They consume only bananas and tomatoes. Marilyn has an initial endowment of 4 bananas and 11 tomatoes. Chen has an initial endowment of 20 bananas and 27 tomatoes. For Marilyn, the two goods are perfect substitutes, one for one. For Chen, they are perfect complements, one for one. At all Pareto efficient allocations,

Marilyn must consume at least 14 tomatoes

A firm has the production function f(x, y) = x1.40y0.90. This firm has

None of the above

If there is perfect certainty, a competitive firm will necessarily

None of the above

A firm has the production function f(x, y) = x1.40y1. This firm has

None of the above`

A competitive firm with output y has a production function y = (2x1 + x2)1/2, where x1 and x2 are inputs used in production. The firm produces the output minimizing cost. With input prices w1 and w2, which of the following is true?

The firm must use only input x1 if w1 < 2w2.

The editors at Snoozeweek, a news magazine, constantly alter the proportion of celebrity photographs and mundane news stories so as to maximize the number of copies sold. A statistical consultant has estimated sales to be S = 1,000C0.60N 0.50, where C is the number of celebrity photographs and N is column inches of news stories. If the editors only have $11,000 to spend on each edition with celebrity photos costing $400 each and news stories costing $10 per column inch, what should the editors do?

Purchase 15 celebrity photos and 500 column inches of news stories.

The editors at Snoozeweek, a news magazine, constantly alter the proportion of celebrity photographs and mundane news stories so as to maximize the number of copies sold. A statistical consultant has estimated sales to be S = 1,000C 0.60N 0.60, where C is the number of celebrity photographs and N is column inches of news stories. If the editors only have $8,000 to spend on each edition with celebrity photos costing $200 each and news stories costing $10 per column inch, what should the editors do

Purchase 20 celebrity photos and 400 column inches of news stories.

The Fabulous 50s Decor Company is the only producer of pink flamingo lawn statues. While business is not as good as it used to be, in recent times the annual demand has been Q = 400 − 6P. Flamingo lawn statues are handcrafted by artisans using the process Q = min{L, P/2} where L is hours of labor and P is pounds of pink plastic. PL = 15 and PP = 3. What would be the profit-maximizing output and price?

Q = 101 and P = 49.83

The Fabulous 50s Decor Company is the only producer of pink flamingo lawn statues. While business is not as good as it used to be, in recent times the annual demand has been Q = 700 − 5P. Flamingo lawn statues are handcrafted by artisans using the process Q = min{L, P/7} where L is hours of labor and P is pounds of pink plastic. PL = 20 and PP = 2. What would be the profit-maximizing output and price?

Q = 265 and P = 87.

The UJava espresso stand needs two inputs, labor and coffee beans, to produce its only output, espresso. Producing an espresso always requires the same amount of coffee beans and the same amount of time. Which of the following production functions would appropriately describe the production process at UJava, where B represents ounces of coffee beans, and L represents hours of labor?

Q = min(2B, 60L).

Sheila and Ivan live in an isolated valley and trade with no one but each other. They consume only apples and oranges. Sheila has an initial endowment of 6 apples and 19 oranges. Ivan has an initial endowment of 18 apples and 20 oranges. For Sheila, the two goods are perfect substitutes, one for one. For Ivan, they are perfect complements, one for one. At all Pareto efficient allocations,

Sheila must consume at least 15 oranges

Roberta runs a dress factory. She produces 50 dresses per day, using labor and electricity. She uses a combination of labor and electricity that produces 50 dresses per day in the cheapest possible way. She can hire as much labor as she wants at a cost of 20 cents per minute. She can use as much electricity as she wants at a cost of 10 cents per minute. Her production isoquants are smooth curves without kinks and she uses positive amounts of both inputs.

The marginal product of a minute of labor is twice the marginal product of a kilowatt-hour of electricity.

Bayerische Motoren Werk (BMW) charges a considerably higher price for its automobiles in the North American market than it does in its home market of Europe. Assuming that the goal of BMW's pricing policy is profit maximization, which of the following would be a plausible explanation for BMW's pricing policy?

The price elasticity of demand is greater than 1 in both North America and Europe, making BMWs price elastic, but it must be higher in Europe

Amaranda and Bartolo consume only two goods, X and Y. They can trade only with each other and there is no production. The total endowment of good X equals the total endowment of good Y. Amaranda's utility function is U(xA, yA) = min{xA, yA} and Bartolo's utility function is U(xB, yB) = max{xB, yB}. In an Edgeworth box for Amaranda and Bartolo, the set of Pareto optimal allocations is

The whole edgeworth box

A firm has the production function f(x, y) = x.5 + y, where x is the amount of factor x it uses and yis the amount of factor y. On a diagram we put x on the horizontal axis and y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that the slopes of all the isoquants that it meets have the same slope at the point where they meet this line. The straight line we drew was

Vertical

In a two-person, two-good, exchange economy, both consumers have quasilinear utility functions, linear in good 2. If quantities of good 1 are measured horizontally and quantities of good 2 are measured vertically in the Edgeworth box, the set of Pareto optimal allocations includes

a vertical line

Rex Carr could pay $10 for a shovel that lasts one year and pay $5 a car to his brother Scoop to bury the cars, or he could buy a low-quality car smasher that costs $200 a year to own and that smashes cars at a marginal cost of $1 per car. If it were also possible for Rex to buy a high-quality hydraulic car smasher that cost $550 per year to own and if with this smasher he could dispose of cars at a cost of $.67 per car, it would be worthwhile for him to buy this high-quality smasher if he needed to dispose of

at least 1050 cars per year

Rex Carr could pay $10 for a shovel that lasts one year and pay $5 a car to his brother Scoop to bury the cars, or he could buy a low-quality car smasher that costs $200 a year to own and that smashes cars at a marginal cost of $1 per car. If it were also possible for Rex to buy a high-quality hydraulic car smasher that cost $650 per year to own and if with this smasher he could dispose of cars at a cost of $.67 per car, it would be worthwhile for him to buy this high-quality smasher if he needed to dispose of

at least 1350 cars a year

A monopolist faces a downward-sloping demand curve and has fixed costs so large that when she maximizes profits with a positive amount of output, she earns exactly zero profits. At this positive, profit-maximizing output,

average total cost is greater than marginal total cost

A monopolist has a constant marginal cost of $2 per unit and no fixed costs. He faces separate markets in the United States and England. He can set one price p1 for the U.S. market and another price p2 for the English market. If demand in the United States is given by Q1 = 6,000 − 600p1 and demand in England is given by Q2 = 2,400 − 400p2, then the price in the United States will

be large than the price in England by 2$

A monopolist has a constant marginal cost of $2 per unit and no fixed costs. He faces separate markets in the United States and England. He can set one price p1 for the U.S. market and another price p2 for the English market. If demand in the United States is given by Q1 = 7,000 − 700p1 and demand in England is given by Q2 = 1,200 − 200p2, then the price in the United States will

be larger in the price than England by 2$

A monopolist has a constant marginal cost of $2 per unit and no fixed costs. He faces separate markets in the United States and England. He can set one price p1 for the U.S. market and another price p2 for the English market. If demand in the United States is given by Q1 = 7,000 − 700p1 and demand in England is given by Q2 = 3,200 − 400p2, then the price in the United States will

be larger than the price in England by 1$

Mutt's utility function is U(m, j) = max{3m, j} and Jeff's utility function is U(m, j) = 2m + j. Mutt is initially endowed with 3 units of milk and 2 units of juice and Jeff is initially endowed with 5 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

bottom edge of the edgeworth box but no other edges

A monopolist is able to practice third-degree price discrimination between two markets. The demand function in the first market is q = 500 − 2p and the demand function in the second market is q = 1,500 −6p. To maximize his profits, he should

charge the same price in both markets

A firm has the production function f(x, y) = x + min{x, y}. The isoquants for the firm

consist of two line segments, one vertical and the other with the slope -1

The production function of a competitive firm is described by the equation y = 8x1/2 1x1/2 2. The factor prices are p1 = $1 and p2 = $4 and the firm can hire as much of either factor it wants at these prices. The firm's marginal cost is

constant and equal to .50

The production function of a competitive firm is described by the equation y = 4x1/2 1x1/2 2. The factor prices are p1 = $1 and p2 = $36 and the firm can hire as much of either factor it wants at these prices. The firm's marginal cost is

constant and equal to 3

The production function Q = 50K0.25L0.75 exhibits

constant returns to scale

A profit-maximizing monopolist has the cost schedule c(y) = 20y. The demand for her product is given by y = 600/p4, where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of $15 for every unit that she sells. Giving her the subsidy would make her

decrease her price by 20$

A profit-maximizing monopolist has the cost schedule c(y) = 40y. The demand for her product is given by y = 600/p4, where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of $21 for every unit that she sells. Giving her the subsidy would make her

decrease her price by 28$

A profit-maximizing monopolist faces a demand function given by q = 1000 − 20p, where p is the price of her output in dollars. She has a constant marginal cost of 20 dollars per unit of output. In an effort to induce her to increase her output, the government agrees to pay her a subsidy of $10 for every unit that she produces. She will

decrease her price by 5$ per unit

A competitive firm uses three factors of production. Its production function is f (x, y, z) = (x + y)1/2z1/2. Originally the factor prices were wx = $1, wy = $2, and wz = $3. The prices of factors x and z decreased to half of their previous levels, but the price of factor y stayed constant. The cost of production

decreased by exactly 1/2

A monopolist produces at a point where the price elasticity of demand is −0.7 and the marginal cost is $2. If you were hired to advise this monopolist on how to increase his profits, you would find that the way to increase his profits is to

decreases his output

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.80. Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

decreases prices

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20. Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

decreases prices

The production function Q = 50K0.25L0.25 exhibits

decreasing returns to scale

A natural monopolist has the total cost function c(q) = 350 + 20q, where q is its output. The inverse demand function for the monopolist's product is p = 100 − 2q. Government regulations require this firm to produce a positive amount and to set price equal to average costs. To comply with these requirements

firm could produce either 5 units or 35 units

Suppose that the production function is f(x1, x2) = (xa1 + xa2)b, where a and b are positive constants. For what values of a and b is there a diminishing technical rate of substitution?

for any value of b if a<1

Eduardo and Francisca participate in an economy that is in competitive equilibrium. Although they are unacquainted with each other, both purchase strawberries and champagne. Edouardo's utility function is U(s, c) = 2s + c, where s is the number of boxes of strawberries he consumes per month and c is the number of bottles of champagne. Francisca's utility function is U(s, c) = sc.

francisca consumes twice as many bottles of champagne as boxes of strawberries

The Hard Times Concrete Company is a monopolist in the concrete market. It uses two inputs, cement and gravel, which it buys in competitive markets. The company's production function is q = c1/2g1/2q, where q is its output, c is the amount of cement it uses, and g is the amount of gravel it uses. If the price of cement goes up, the firm's demand for cement

goes down and its demand for gravel may go up, down, or remain the same, depending on the demand function for concrete

The demand for Professor Bongmore's new book is given by the function Q = 5,000 − 100p. If the cost of having the book typeset is $9,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits by

having it typeset and selling 2300 copies

A monopolist receives a subsidy from the government for every unit of output that is consumed. He has constant marginal costs and the subsidy that he gets per unit of output is greater than his marginal cost of production. But to get the subsidy on a unit of output, somebody has to consume it.

if he sells at a positive price, demand must be inelastic at that price

The demand curve for the output of a certain industry is linear; q = A−Bp. There are constant marginal costs of C. For all values of A, B, and C such that A > 0, B > 0, and 0 < C < A/B,

if the industry is competitive, output will be exactly twice as great as it would be if the industry were monopolized

Tamara and Julio consume only bread and wine. They trade only with each other and there is no production. They both have strictly convex preferences. Tamara's initial endowment of bread and wine is the same as Julio's.

if they have identical utility functions, then the initial allocation is pareto optimal

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 30 −y and its total costs are c(y) = 5y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 2 dollars per unit of output. After the tax, the monopoly will

increase its price by 1$

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 40 −y and its total costs are c(y) = 7y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 6 dollars per unit of output. After the tax, the monopoly will

increase its price by 3$

A firm has the production function f(X, Y) = X1/2Y1/2, where X is the amount of factor x used and Yis the amount of factor y used. On a diagram we put X on the horizontal axis and Y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that wherever this line meets an isoquant, the isoquant has a slope of 23. The straight line we drew

is a ray through the origin with slope 3

A competitive, profit-maximizing firm uses two inputs a and b. Its production function is F(a, b) = a1/2 + a1/2. Its output sells for $5 per unit. The price of input a is $1 per unit. If the price of output rises to $6 per unit but factor prices do not change.

it will increase its purchases of factor a by 11/4 units.

Joe's Bar and Grill uses two inputs, beer and pretzels. When the price of beer was $10 a case and the price of pretzels was $20 a case, Joe used 1 case of beer and 2 cases of pretzels a day. When the price of beer was $20 a case and the price of pretzels was $10 a case, Joe used 2 cases of beer and 1 case of pretzels a day. Joe produced the same output in each of these circumstances.

joe is not minimizing costs

Mutt's utility function is U(m, j) = max{3m, j} and Jeff's utility function is U(m, j) = 3m + j. Mutt is initially endowed with 6 units of milk and 2 units of juice and Jeff is initially endowed with 2 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

left edge and bottom of edgeworth box

Mutt's utility function is U(m, j) = max{3m, j} and Jeff's utility function is U(m, j) = 4m + j. Mutt is initially endowed with 4 units of milk and 2 units of juice and Jeff is initially endowed with 4 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

left edge of the edgeworth box but no other edges

A monopolist faces the demand function Q = 7,000/(p + 3)−2. If she charges a price of p, her marginal revenue will be

p/2-3/2

A monopolist faces the demand function Q = 4,000/(p + 6)−2. If she charges a price of p, her marginal revenue will be

p/2-6/2

A profit-maximizing monopolist sets

marginal revenue = to marginal cost

A monopolist enjoys a monopoly over the right to sell automobiles on a certain island. He imports automobiles from abroad at a cost of $10,000 each and sells them at the price that maximizes profits. One day, the island's government annexes a neighboring island and extends the monopolist's monopoly rights to this island. People on the annexed island have the same tastes and incomes and there are just as many people as on the first.

monopolist keeps his price constant and sales double

In a pure exchange economy with two persons and two goods, one person always prefers more to less of both goods and one person likes one of the goods and hates the other so much that she would have to be paid to consume it. Both are initially endowed with positive amounts of both goods. The competitive equilibrium price of the good that one person hates

must be positive

According to the first theorem of welfare economics:

none of the above

Peter Morgan sells pigeon pies from his pushcart in Central Park. Due to the abundant supplies of raw materials, his costs are zero. The demand schedule for his pigeon pies is p(y) = 80 −y/4. What level of output will maximize Peter's profits?

none of the above

A monopoly has the demand curve q = 10,000 − 100p. Its total cost function is c(q) = 1,000 + 10q. The government plans to tax the monopoly's profits at a rate of 50%. If it does so, the monopoly will

not change its price or the quantity it sells

The demand for Professor Bongmore's new book is given by the function Q = 2,000 − 100p. If the cost of having the book typeset is $7,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits by

not having it typeset and not selling any copies

A monopolist finds that a person's demand for its product depends on the person's age. The inverse demand function of someone of age y can be written p = A(y) −q, where A(y) is an increasing function of y. The product cannot be resold from one buyer to another and the monopolist knows the ages of its consumers. If the monopolist maximizes its profits,

older people will pay higher prices and order more of this product

If output is produced with two factors of production and with increasing returns to scale,

on a graph of production isoquants, moving along a ray from the origin, output more than doubles as the distance from the origin doubles.

A monopolist has discovered that the inverse demand function of a person with income M for the monopolist's product is p = .002M−q. The monopolist is able to observe the incomes of its consumers and to practice price discrimination according to income (second-degree price discrimination). The monopolist has a total cost function, c(q) = 100q. The price it will charge a consumer depends on the consumer's income, M, according to the formula

p=.001M+50

If the short-run marginal costs of producing a good are $40 for the first 200 units and $50 for each additional unit beyond 200, then in the short run, if the market price of output is $46, a profit-maximizing firm will

produce exactly 200 units.

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $21, a profit-maximizing firm will

produce exactly 400 units

A certain monopolist has a positive marginal cost of production. Despite this fact, the monopolist decides to produce a quantity of output that maximizes total revenues. Assume that the marginal revenue curve for this monopolist always has a negative slope. Then the monopolist

produce more output than it would if it was maximizing profits

A monopolist has decreasing average costs as output increases. If the monopolist sets price equal to average cost, it will

produce too little output from the standpoint of efficiency

A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = $2 in one market and p2 = $8 in the other market. At these prices, the price elasticity in the first market is −2.20 and the price elasticity in the second market is −0.10.Which of the following actions is sure to raise the monopolist's profits?

raise p2

A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = $4 in one market and p2 = $8 in the other market. At these prices, the price elasticity in the first market is −1.90 and the price elasticity in the second market is 20.30. Which of the following actions is sure to raise the monopolist's profits?

raise p2

A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = $5 in one market and p2 = $10 in the other market. At these prices, the price elasticity in the first market is −1.40 and the price elasticity in the second market is −0.10.Which of the following actions is sure to raise the monopolist's profits?

raise p2

The Cleveland Visitors Bureau is the exclusive national marketer of weekend getaway vacations in Cleveland, Ohio. At current market prices, the price elasticity of demand is −.50. To maximize profits, the bureau should

raise prices

The Cleveland Visitors Bureau is the exclusive national marketer of weekend getaway vacations in Cleveland, Ohio. At current market prices, the price elasticity of demand is −1. To maximize profits, the bureau should

raise prices

A profit-maximizing monopolist faces the demand curve q = 100 − 3p. It produces at a constant marginal cost of $20 per unit. A quantity tax of $10 per unit is imposed on the monopolist's product. The price of the monopolist's product

rises by 5$

Roach Motors has a monopoly on used cars in Enigma, Ohio. By installing secret microphones in the showroom, the friendly salespersons at Roach are able to learn each customer's willingness to pay and can therefore practice first-degree price discrimination, extracting from each customer his entire consumer's surplus. The inverse demand function for cars in Enigma is P = 2,000 − 10Q. Roach Motors purchases its stock of used cars at an auction in Cleveland for $500 each. Roach motors will

sell 150 cars for a total profit of $112,500

A firm has the production function Q = KL, where K is the amount of capital and L is the amount of labor it uses as inputs. The cost per unit of capital is a rental fee r and the cost per unit of labor is a wage w. The conditional labor demand function L(Q, w, r) is

the square root of Qr/w

A competitive firm has the three-factor production function f (x, y, z) = (x + y)1/2z1/2. The factor prices used to be wx = $1, wy = $2, and wz = $3. Suppose that the price of factor y doubled while the other two prices stayed the same. Then the cost of production

stayed the same

A firm's production function is given by q = min{M, L1/2}, where M is the number of machines and L is the amount of labor that it uses. The price of labor is $1and the price of machines is $2 per unit. The firm's long-run marginal cost curve is

straight line with slope 2

A firm's production function is given by q = min{M, L1/2}, where M is the number of machines and L is the amount of labor that it uses. The price of labor is $1and the price of machines is $4 per unit. The firm's long-run marginal cost curve is

straight line with slope 2

In any production process, the marginal product of labor equals

the change in output per unit change in labor input for "small" changes in the amount of input.

Adelino and Benito consume only two goods, X and Y. They trade only with each other and there is no production. Adelino's utility function is given by U(xA, yA) = 2xA + 5yA and Benito's utility function is given by U(xB, yB) = 2(6xB + 15yB)1/2. In the Edgeworth box constructed for Adelino and Benito, the set of Pareto optimal allocations is

the entire contents of the edgeworth box

A monopolist has the total cost function c(q) = 750 + 5q. The inverse demand function is 140 −7q, where prices and costs are measured in dollars. If the firm is required by law to meet demand at a price equal to its marginal costs,

the firm will lose 750$

A monopolist has the total cost function c(q) = 800 + 8q. The inverse demand function is 80 − 6q, where prices and costs are measured in dollars. If the firm is required by law to meet demand at a price equal to its marginal costs,

the firm will lose 800$

A firm has discovered a new kind of nonfattening, non-habit-forming dessert called zwiffle. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwiffle could be produced, the firm would have to spend a fixed cost of $F. Demand for zwiffle is given by the equation q = 20 −p. The firm has a patent on zwiffle, so it can have a monopoly in this market.

the firm will produce zwiffle only if F is less than or equal to 100

A firm has discovered a new kind of nonfattening, non-habit-forming dessert called zwiffle. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwiffle could be produced, the firm would have to spend a fixed cost of $F. Demand for zwiffle is given by the equation q = 12 −p. The firm has a patent on zwiffle, so it can have a monopoly in this market.

the firm will produce zwiffle only if F is less than or equal to 36

A monopolist faces a constant marginal cost of $1 per unit. If at the price he is charging, the price elasticity of demand for the monopolist's output is −0.5, then

the monopolist cant be maximizing profits

A competitive firm produces a single output using several inputs. The price of output rises by $4 per unit. The price of one of the inputs increases by $4 and the quantity of this input that the firm uses increases by 16 units. The prices of all other inputs stay unchanged. From the weak axiom of profit maximization we can tell that

the output of the good must have increased by at least 16 units.

A competitive firm produces a single output using several inputs. The price of output rises by $3 per unit. The price of one of the inputs increases by $6 and the quantity of this input that the firm uses increases by 12 units. The prices of all other inputs stay unchanged. From the weak axiom of profit maximization we can tell that

the output of the good must have increased by at least 24 units.

A competitive firm produces a single output using several inputs. The price of output rises by $4 per unit. The price of one of the inputs increases by $2 and the quantity of this input that the firm uses increases by 8 units. The prices of all other inputs stay unchanged. From the weak axiom of profit maximization we can tell that

the output of the good must have increased by at least 4 units.

The town council of Frostbite, Ontario, is trying to decide whether to build an outdoor skating rink which would cost $1 million and last for only one season. Operating costs would be zero. Yearly passes would be sold to anyone who wanted to use the rink. If p is the price of the pass in dollars, the number demanded would be q = 1200 − .6p. The council has asked you to advise them on building the rink. You should tell them that

there is no price at which ticket revenues still cover costs but total consumer surplus from the rink exceeds cost

A situation is Pareto efficient if

there is no way to make someone better off with out making someone worse off

A monopolist faces a constant marginal cost of $1 per unit and has no fixed costs. If the price elasticity of demand for this product is constant and equal to −4, then

to maximize profits he should charge a price of 1.33$

A monopolist faces a constant marginal cost of $1 per unit and has no fixed costs. If the price elasticity of demand for this product is constant and equal to −3, then

to maximize profits he should charge a price of 1.50$

The Chrysler Belvedere Truck Plant is attempting to minimize production costs. Over one month, 1,600 fenders are needed on the production line, which runs continuously. If it costs $200 to set up the stamping press to produce fenders and $1 per month to store produced fenders, how many times should the stamping press be run per month?

twice

The Chrysler Belvedere Truck Plant is attempting to minimize production costs. Over one month, 3,200 fenders are needed on the production line, which runs continuously. If it costs $400 to set up the stamping press to produce fenders and $1 per month to store produced fenders, how many times should the stamping press be run per month?

twice

If an allocation is Pareto optimal and if indifference curves between the two goods have no kinks, then

two consumers who consume both goods must have the same MRS between them, but consumers may consume the goods in different ratios

I29. In the reclining chair industry (which is perfectly competitive), two different technologies of production exist. These technologies exhibit the following total cost functions:C1(Q) = 500 + 560Q− 40Q2 + Q3C2(Q) = 600 + 280Q− 20Q2 + Q3Due to foreign competition, the market price of reclining chairs has fallen to $170. In the short run, firms using technology 1

will remain in business and firms using technology 2 will shut down

will sell 140 cars for a total profit of 98,000$

In the reclining chair industry (which is perfectly competitive), two different technologies of production exist. These technologies exhibit the following total cost functions:C1(Q) = 1,000 + 600Q− 40Q2 + Q3C2(Q) = 200 + 145Q− 10Q2 + Q3Due to foreign competition, the market price of reclining chairs has fallen to $190. In the short run, firms using technology 1

will shut down and firms using technology 2 will remain in business

A firm's production function is q = 26x0.33y0.67, where x and y are the amounts of factors x and y that the firm uses as inputs. If the firm is minimizing unit costs and if the price of factor x is 6 times the price of factor y,the ratio in which the firm will use factors x and y is closest to

x/y = 0.08

A firm's production function is q = 12x0.50y0.50, where x and y are the amounts of factors x and y that the firm uses as inputs. If the firm is minimizing unit costs and if the price of factor x is 5 times the price of factor y, the ratio in which the firm will use factors x and y is closest to

x/y = 0.20

The production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $10 and the price of factor 2 is $15, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

x1 = 1.50x2.

A monopolist sells in two markets. The demand curve for her product is given by p1 = 122 − 2x1 in the first market and p2 = 306 − 5x2 in the second market, where xi is the quantity sold in market i and pi is the price charged in market i. She has a constant marginal cost of production, c = 6, and no fixed costs. She can charge different prices in the two markets. What is the profit-maximizing combination of quantities for this monopolist?

x1 = 29 and x2 = 30.

The production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $12 and the price of factor 2 is $24, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

x1 = 2x2.

The production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $6 and the price of factor 2 is $12, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

x1 = 2x2.

A monopolist sells in two markets. The demand curve for her product is given by p1 = 165 − 3x1 in the first market and p2 = 233 − 4x2 in the second market, where xi is the quantity sold in market i and pi is the price charged in market i. She has a constant marginal cost of production, c = 9, and no fixed costs. She can charge different prices in the two markets. What is the profit-maximizing combination of quantities for this monopolist?

x1= 26 x2=28

A monopolist sells in two markets. The demand curve for her product is given by p1 = 141 − 3x1 in the first market and p2 = 115 − 2x2 in the second market, where xi is the quantity sold in market i and pi is the price charged in market i. She has a constant marginal cost of production, c = 3, and no fixed costs. She can charge different prices in the two markets. What is the profit-maximizing combination of quantities for this monopolist?

x1=23 x2=28

A firm has the production function f(x1, x2) = x11x0.502. The isoquant on which output is 305/10 has the equation

x2 = 30x^-0.21

A firm has the production function f(x1, x2) = x0.801x0.202. The isoquant on which output is 702/10 has the equation

x2 = 70x^-4 1

A firm has the production function f(x1, x2) = x0.601x0.302. The isoquant on which output is 803/10 has the equation

x2 = 80x^−2 1

A firm produces Ping-Pong balls using two inputs. When input prices are ($15, $7) the firm uses the input bundle (17, 71). When the input prices are ($12, $24) the firm uses the bundle (77, 4). The amount of output is the same in both cases. Is this behavior consistent with WACM?

Midterm 2 Econ

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