Question 1

The shape of a firm's long-run average cost curve is determined by

Accepted Answer

A)  the degree to which each input encounters diminishing marginal productivity. 
B)  the underlying nature of the firm's production function when all inputs are able to be varied. 
C)  how much the firm decides to produce. 
D)  the way in which the firm's expansion path reacts to changes in the rental rate on capital. 
A)  the degree to which each input encounters diminishing marginal productivity. 
B)  the underlying nature of the firm's production function when all inputs are able to be varied. 
C)  how much the firm decides to produce. 
D)  the way in which the firm's expansion path reacts to changes in the rental rate on capital. B

Question 2

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)1/2 where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

Accepted Answer

A)  the wage rate only. 
B)  the rental rate only. 
C)  both the wage and rental rates. 
D)  neither the wage nor rental rates. 
A)  the wage rate only. 
B)  the rental rate only. 
C)  both the wage and rental rates. 
D)  neither the wage nor rental rates. C

Question 3

A firm's short-run average cost is defined as

Accepted Answer

A)  the ratio of total output to short-run total cost. 
B)  the ratio of short-run total cost to total output. 
C)  the additional cost of producing one more unit of output while some input is fixed. 
D)  the additional cost of producing one more unit of output while all inputs are fixed. 
A)  the ratio of total output to short-run total cost. 
B)  the ratio of short-run total cost to total output. 
C)  the additional cost of producing one more unit of output while some input is fixed. 
D)  the additional cost of producing one more unit of output while all inputs are fixed. B

Question 4

The accountant's cost of producing a bicycle refers to

Accepted Answer

A)  the out-of-pocket payments made to produce the bicycle. 
B)  the value of the goods that were given up to produce the bicycle. 
C)  the bicycle's retail price. 
D)  the marginal cost of the last bicycle produced. 
A)  the out-of-pocket payments made to produce the bicycle. 
B)  the value of the goods that were given up to produce the bicycle. 
C)  the bicycle's retail price. 
D)  the marginal cost of the last bicycle produced.

Question 5

As long as marginal cost is below average cost,average cost will be

Accepted Answer

A)  falling 
B)  rising. 
C)  constant. 
D)  changing in a direction that cannot be determined without more information. 
A)  falling 
B)  rising. 
C)  constant. 
D)  changing in a direction that cannot be determined without more information.

Question 6

A firm's marginal cost curve

Accepted Answer

A)  is always U-shaped. 
B)  always has a positive slope. 
C)  is always below its average cost curve. 
D)  always intersects its average cost curve at its minimum point. 
A)  is always U-shaped. 
B)  always has a positive slope. 
C)  is always below its average cost curve. 
D)  always intersects its average cost curve at its minimum point.

Question 7

Suppose a production function is q = K1/2L1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Accepted Answer

A)  $2,000 
B)  $200 
C)  $20,000 
D)  $0 
A)  $2,000 
B)  $200 
C)  $20,000 
D)  $0

Question 8

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the average total cost is

Accepted Answer

A)  Aq2 + bq + cq +d/q  
B)  Aq2 + bq + c 
C)  Aq3 + bq2 + cq 
D)  d 
A)  Aq2 + bq + cq +d/q  
B)  Aq2 + bq + c 
C)  Aq3 + bq2 + cq 
D)  d

Question 9

The opportunity cost of producing a bicycle refers to

Accepted Answer

A)  the out-of-pocket payments made to produce the bicycle. 
B)  the value of the goods that were given up to produce the bicycle. 
C)  the bicycle's retail price. 
D)  the marginal cost of the last bicycle produced. 
A)  the out-of-pocket payments made to produce the bicycle. 
B)  the value of the goods that were given up to produce the bicycle. 
C)  the bicycle's retail price. 
D)  the marginal cost of the last bicycle produced.

Question 10

Suppose MPL = 40 and MPK = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Accepted Answer

A)  $10 
B)  $5 
C)  $20 
D)  $40 
A)  $10 
B)  $5 
C)  $20 
D)  $40

Question 11

In the long run

Accepted Answer

A)  all inputs are fixed. 
B)  all inputs are variable. 
C)  some inputs are fixed. 
D)  production levels never change. 
A)  all inputs are fixed. 
B)  all inputs are variable. 
C)  some inputs are fixed. 
D)  production levels never change.

Question 12

In the short run

Accepted Answer

A)  all inputs are fixed. 
B)  all inputs are variable. 
C)  some inputs are fixed. 
D)  no production occurs. 
A)  all inputs are fixed. 
B)  all inputs are variable. 
C)  some inputs are fixed. 
D)  no production occurs.

Question 13

Suppose a production function is q = K1/2L1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Accepted Answer

A)  q = 10L1/3 
B)  q = 100L1/3 
C)  q =   L1/3 
D)  q = 100 
A)  q = 10L1/3 
B)  q = 100L1/3 
C)  q =   L1/3 
D)  q = 100

Question 14

The expansion path for a constant returns to scale production function

Accepted Answer

A) is a straight line through the origin with a slope greater than one if w > v. B) is a straight line through the origin with a slope less than one if w < v. C) is a straight line through the origin though its slope cannot be determined by w and v alone. D) has a positive slope but is not necessarily a straight line. A) is a straight line through the origin with a slope greater than one if w > v. B) is a straight line through the origin with a slope less than one if w < v. C) is a straight line through the origin though its slope cannot be determined by w and v alone. D) has a positive slope but is not necessarily a straight line.

Question 15

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $4 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 200?

Accepted Answer

A)  C = 100 
B)  S = 40 
C)  C = 50, S = 20 
D)  C = 20, S = 50 
A)  C = 100 
B)  S = 40 
C)  C = 50, S = 20 
D)  C = 20, S = 50

Question 16

For a constant returns to scale production function

Accepted Answer

A)  marginal costs are constant but the average cost curve has a U-shape. 
B)  both average and marginal costs are constant. 
C)  marginal cost has a U-shape; average costs are constant. 
D)  both average and marginal cost curves are U-shaped. 
A)  marginal costs are constant but the average cost curve has a U-shape. 
B)  both average and marginal costs are constant. 
C)  marginal cost has a U-shape; average costs are constant. 
D)  both average and marginal cost curves are U-shaped.

Question 17

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.The expansion path depends

Accepted Answer

A)  on the price of corn based feed only. 
B)  on the price of soybean based feed only. 
C)  on neither the price of corn based or soybean based feed. 
D)  on whether the price of corn based feed is greater than or less than 2/5 the price of soybean based feed. 
A)  on the price of corn based feed only. 
B)  on the price of soybean based feed only. 
C)  on neither the price of corn based or soybean based feed. 
D)  on whether the price of corn based feed is greater than or less than 2/5 the price of soybean based feed.

Question 18

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?

Accepted Answer

A)  C = 50 
B)  S = 20 
C)  C = 25, S = 10 
D)  All points on the P = 100 isoquant, including those listed in a-c would cost the same. 
A)  C = 50 
B)  S = 20 
C)  C = 25, S = 10 
D)  All points on the P = 100 isoquant, including those listed in a-c would cost the same.

Question 19

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the average variable cost is

Accepted Answer

A)  Aq2 + bq + cq +d/q  
B)  Aq2 + bq + c 
C)  Aq3 + bq2 + cq 
D)  d 
A)  Aq2 + bq + cq +d/q  
B)  Aq2 + bq + c 
C)  Aq3 + bq2 + cq 
D)  d

Question 20

In order to minimize the cost of a particular level of output,a firm should produce where

Accepted Answer

A)  labor input equals capital input. 
B)  the RTS (of L for K) =   
C)  the RTS (of L for K)   
D)  the MRS =   
A)  labor input equals capital input. 
B)  the RTS (of L for K) =   
C)  the RTS (of L for K)   
D)  the MRS =

The shape of a firm's long-run average cost curve is determined by

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)^1/2 where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

A firm's short-run average cost is defined as

The accountant's cost of producing a bicycle refers to

As long as marginal cost is below average cost,average cost will be

A firm's marginal cost curve

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average total cost is

The opportunity cost of producing a bicycle refers to

Suppose MP_L = 40 and MP_K = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

In the long run

In the short run

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

The expansion path for a constant returns to scale production function

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $4 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 200?

For a constant returns to scale production function

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.The expansion path depends

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average variable cost is

In order to minimize the cost of a particular level of output,a firm should produce where

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 7: Costs

The shape of a firm's long-run average cost curve is determined by

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)1/2 where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

A firm's short-run average cost is defined as

The accountant's cost of producing a bicycle refers to

As long as marginal cost is below average cost,average cost will be

A firm's marginal cost curve

Suppose a production function is q = K1/2L1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the average total cost is

The opportunity cost of producing a bicycle refers to

Suppose MPL = 40 and MPK = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

In the long run

In the short run

Suppose a production function is q = K1/2L1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

The expansion path for a constant returns to scale production function

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $4 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 200?

For a constant returns to scale production function

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.The expansion path depends

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the average variable cost is

In order to minimize the cost of a particular level of output,a firm should produce where

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)^1/2 where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average total cost is

Suppose MP_L = 40 and MP_K = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average variable cost is