Question 1

The shape of a firm's expansion path depends upon

Accepted Answer

A)  the cost of labor input. 
B)  the cost of capital input. 
C)  the shape of the firm's production function. 
D)  all of these factors. 
A)  the cost of labor input. 
B)  the cost of capital input. 
C)  the shape of the firm's production function. 
D)  all of these factors.

Question 2

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 average cost is

Accepted Answer

A)  SAC =   
B)  SC =   + 10q2 
C)  SC = 2000/q 
D)  SC = q2 
A)  SAC =   
B)  SC =   + 10q2 
C)  SC = 2000/q 
D)  SC = q2

Question 3

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 $6,what is the cost minimizing combination of producing P = 200?

Accepted Answer

A)  C = 100 
B)  S = 40 
C)  C = 50, S = 20 
D)  All points on the isoquant would cost the same, Q = 200. 
A)  C = 100 
B)  S = 40 
C)  C = 50, S = 20 
D)  All points on the isoquant would cost the same, Q = 200.

Question 4

For any given output level,a firm's long-run costs

Accepted Answer

A)  are always greater than or equal to its short-run costs. 
B)  are usually greater than or equal to its short-run costs except in the case of diminishing returns to scale. 
C)  are always less than or equal to its short-run costs. 
D)  are usually less than or equal to its short-run costs except in the case of diminishing returns to scale. 
A)  are always greater than or equal to its short-run costs. 
B)  are usually greater than or equal to its short-run costs except in the case of diminishing returns to scale. 
C)  are always less than or equal to its short-run costs. 
D)  are usually less than or equal to its short-run costs except in the case of diminishing returns to scale.

Question 5

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the total fixed 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 6

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Accepted Answer

A)  B = 10W 
B)  B = .1W 
C)  B = W 
D)  -10 = B + W 
A)  B = 10W 
B)  B = .1W 
C)  B = W 
D)  -10 = B + W

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 short run marginal cost is

Accepted Answer

A)  1000 + q3 
B)    
C)  q3 
D)  2q3 
A)  1000 + q3 
B)    
C)  q3 
D)  2q3

Question 8

A firm's economic profits are given by

Accepted Answer

A)  total revenue minus total accounting cost. 
B)  the owner's opportunity cost. 
C)  total revenue minus total economic cost. 
D)  total revenue minus the cost of capital. 
A)  total revenue minus total accounting cost. 
B)  the owner's opportunity cost. 
C)  total revenue minus total economic cost. 
D)  total revenue minus the cost of capital.

Question 9

A linear total cost curve which passes through the origin implies that

Accepted Answer

A)  average cost is constant and marginal cost is variable. 
B)  average cost is variable and marginal cost is constant. 
C)  average and marginal costs are constant and equal. 
D)  need more information to answer question. 
A)  average cost is constant and marginal cost is variable. 
B)  average cost is variable and marginal cost is constant. 
C)  average and marginal costs are constant and equal. 
D)  need more information to answer question.

Question 10

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 corn feed is on the horizontal axis,and the price of soybean feed is $5 and soybean feed lies on the vertical axis,what is expansion path?

Accepted Answer

A)  C =   S 
B)  S =   C 
C)  the horizontal axis 
D)  the vertical axis 
A)  C =   S 
B)  S =   C 
C)  the horizontal axis 
D)  the vertical axis

Question 11

Short-run total cost is the sum of

Accepted Answer

A)  short-run fixed cost plus short-run variable cost, and short-run marginal costs. 
B)  short-run fixed cost and short-run marginal costs. 
C)  short-run variable cost and short-run costs. 
D)  short-run fixed cost and short-run variable cost. 
A)  short-run fixed cost plus short-run variable cost, and short-run marginal costs. 
B)  short-run fixed cost and short-run marginal costs. 
C)  short-run variable cost and short-run costs. 
D)  short-run fixed cost and short-run variable cost.

Question 12

An increase in the wage rate will have a greater effect on average costs

Accepted Answer

A)  the larger the proportion labor costs are of total costs and the easier it is to substitute capital for labor. 
B)  the larger the proportion labor costs are of total costs and the harder it is to substitute capital for labor. 
C)  the greater is the diminishing marginal product of labor. 
D)  the greater are returns to scale. 
A)  the larger the proportion labor costs are of total costs and the easier it is to substitute capital for labor. 
B)  the larger the proportion labor costs are of total costs and the harder it is to substitute capital for labor. 
C)  the greater is the diminishing marginal product of labor. 
D)  the greater are returns to scale.

Question 13

Suppose MPL = 20 and MPK = 40 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 14

The firm's expansion path records

Accepted Answer

A)  profit-maximizing output choices for every possible price. 
B)  cost-minimizing input choices for all possible output levels for when input rental rates expand along with production. 
C)  cost-minimizing input choices for all possible output levels for a fixed set of input prices. 
D)  cost-minimizing input choices for profit-maximizing output levels. 
A)  profit-maximizing output choices for every possible price. 
B)  cost-minimizing input choices for all possible output levels for when input rental rates expand along with production. 
C)  cost-minimizing input choices for all possible output levels for a fixed set of input prices. 
D)  cost-minimizing input choices for profit-maximizing output levels.

Question 15

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.the cost minimizing combination of beans and water for C = 200 is

Accepted Answer

A)  B = 200, W = 2000 
B)  B = 2000, W = 200 
C)  B = 100, W = 100 
D)  B = 200, W = 200 
A)  B = 200, W = 2000 
B)  B = 2000, W = 200 
C)  B = 100, W = 100 
D)  B = 200, W = 200

Question 16

Technical progress will

Accepted Answer

A)  shift a firm's production function and its related cost curves. 
B)  not affect the production function, but may shift cost curves. 
C)  shift a firm's production function and alter its marginal revenue curve. 
D)  shift a firm's production function and cause more capital (and less labor) to be hired. 
A)  shift a firm's production function and its related cost curves. 
B)  not affect the production function, but may shift cost curves. 
C)  shift a firm's production function and alter its marginal revenue curve. 
D)  shift a firm's production function and cause more capital (and less labor) to be hired.

Question 17

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

Accepted Answer

A)  depends on the price of beans only. 
B)  depends on the price of water only 
C)  depends on the price of neither beans nor water. 
D)  depends of the costs of both beans and water. 
A)  depends on the price of beans only. 
B)  depends on the price of water only 
C)  depends on the price of neither beans nor water. 
D)  depends of the costs of both beans and water.

Question 18

A firm's marginal cost is defined as

Accepted Answer

A)  the ratio of total cost to total output. 
B)  the ratio of total output to total cost. 
C)  the additional cost of producing one more unit of output. 
D)  the reciprocal of total average cost. 
A)  the ratio of total cost to total output. 
B)  the ratio of total output to total cost. 
C)  the additional cost of producing one more unit of output. 
D)  the reciprocal of total average cost.

Question 19

A firm whose production function displays increasing returns to scale will have a total cost curve that is

Accepted Answer

A)  a straight line through the origin. 
B)  a curve with a positive and continually decreasing slope. 
C)  a curve with a positive and continually increasing slope. 
D)  a curve with a negative and continually decreasing slope. 
A)  a straight line through the origin. 
B)  a curve with a positive and continually decreasing slope. 
C)  a curve with a positive and continually increasing slope. 
D)  a curve with a negative and continually decreasing slope.

The shape of a firm's expansion path depends upon

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 average cost is

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 $6,what is the cost minimizing combination of producing P = 200?

For any given output level,a firm's long-run costs

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

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

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 marginal cost is

A firm's economic profits are given by

A linear total cost curve which passes through the origin implies that

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 corn feed is on the horizontal axis,and the price of soybean feed is $5 and soybean feed lies on the vertical axis,what is expansion path?

Short-run total cost is the sum of

An increase in the wage rate will have a greater effect on average costs

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

The firm's expansion path records

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.the cost minimizing combination of beans and water for C = 200 is

Technical progress will

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

A firm's marginal cost is defined as

A firm whose production function displays increasing returns to scale will have a total cost curve that is

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 expansion path depends upon

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 average cost is

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 $6,what is the cost minimizing combination of producing P = 200?

For any given output level,a firm's long-run costs

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

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

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 marginal cost is

A firm's economic profits are given by

A linear total cost curve which passes through the origin implies that

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 corn feed is on the horizontal axis,and the price of soybean feed is $5 and soybean feed lies on the vertical axis,what is expansion path?

Short-run total cost is the sum of

An increase in the wage rate will have a greater effect on average costs

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

The firm's expansion path records

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.the cost minimizing combination of beans and water for C = 200 is

Technical progress will

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

A firm's marginal cost is defined as

A firm whose production function displays increasing returns to scale will have a total cost curve that is

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 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 average cost is

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

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 marginal cost is

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