Question 1

Which of the following statements is incorrect?

Accepted Answer

A) Fixed costs do not vary with output. 
B) Sunk costs are those costs that are forever lost after they have been paid. 
C) Fixed costs are always greater than sunk costs. 
D) Fixed costs could be positive when sunk costs are zero. 
A) Fixed costs do not vary with output. 
B) Sunk costs are those costs that are forever lost after they have been paid. 
C) Fixed costs are always greater than sunk costs. 
D) Fixed costs could be positive when sunk costs are zero.

Question 2

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

Accepted Answer

A) The MRTS is equal to the ratio of input prices. 
B) The marginal product per dollar spent on all inputs is equal. 
C) The marginal products of all inputs are equal. 
D) The MRTS is equal to the ratio of input prices and the marginal product per dollar spent on all inputs is equal. 
A) The MRTS is equal to the ratio of input prices. 
B) The marginal product per dollar spent on all inputs is equal. 
C) The marginal products of all inputs are equal. 
D) The MRTS is equal to the ratio of input prices and the marginal product per dollar spent on all inputs is equal.

Question 3

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of

Accepted Answer

A) fixed factors of production. 
B) variable factors of production. 
C) all factors of production. 
D) sunk cost factors of production. 
A) fixed factors of production. 
B) variable factors of production. 
C) all factors of production. 
D) sunk cost factors of production.

Question 4

For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MPK is:

Accepted Answer

A) 16. 
B) 5.2. 
C) 3.8. 
D) 12. 
A) 16. 
B) 5.2. 
C) 3.8. 
D) 12.

Question 5

The production function for a competitive firm is Q = K.5L.5.The firm sells its output at a price of $10, and can hire labor at a wage of $5.Capital is fixed at 25 units.The profit-maximizing quantity of labor is

Accepted Answer

A) 1. 
B) 2. 
C) 10. 
D) none of the statements associated with this question are correct. 
A) 1. 
B) 2. 
C) 10. 
D) none of the statements associated with this question are correct.

Question 6

Total product begins to fall when:

Accepted Answer

A) Marginal product is maximized. 
B) Average product is below zero. 
C) Average product is negative. 
D) Marginal product is zero. 
A) Marginal product is maximized. 
B) Average product is below zero. 
C) Average product is negative. 
D) Marginal product is zero.

Question 7

If a firm's production function is Leontief and the wage rate goes up the

Accepted Answer

A) firm must use more labor in order to minimize the cost of producing a given level of output. 
B) firm must use more capital in order to minimize the cost of producing a given level of output. 
C) firm must use less labor in order to minimize the cost of producing a given level of output. 
D) cost minimizing combination of capital and labor does not change. 
A) firm must use more labor in order to minimize the cost of producing a given level of output. 
B) firm must use more capital in order to minimize the cost of producing a given level of output. 
C) firm must use less labor in order to minimize the cost of producing a given level of output. 
D) cost minimizing combination of capital and labor does not change.

Question 8

An isocost line

Accepted Answer

A) represents the combinations of w and K that cost the firm the same amount of money. 
B) represents the combinations of K and L that cost the firm the same amount of money. 
C) represents the combinations of r and w that cost the firm the same amount of money. 
D) has a convex shape. 
A) represents the combinations of w and K that cost the firm the same amount of money. 
B) represents the combinations of K and L that cost the firm the same amount of money. 
C) represents the combinations of r and w that cost the firm the same amount of money. 
D) has a convex shape.

Question 9

The point where diminishing marginal returns has begun to affect production, is best characterized by the point where the

Accepted Answer

A) total product curve flattens out. 
B) average product curve begins to be negatively sloped. 
C) marginal product curve begins to be negatively sloped. 
D) marginal product curve equals the average product curve. 
A) total product curve flattens out. 
B) average product curve begins to be negatively sloped. 
C) marginal product curve begins to be negatively sloped. 
D) marginal product curve equals the average product curve.

Question 10

Firm managers should use inputs at levels where the:

Accepted Answer

A) Marginal benefit equals marginal cost. 
B) Price equals marginal product. 
C) Value marginal product of labor equals wage. 
D) Marginal benefit equals marginal cost and value marginal product of labor equals wage. 
A) Marginal benefit equals marginal cost. 
B) Price equals marginal product. 
C) Value marginal product of labor equals wage. 
D) Marginal benefit equals marginal cost and value marginal product of labor equals wage.

Question 11

For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3, what is the marginal cost of producing the fourth unit of output?

Accepted Answer

A) $42. 
B) $295. 
C) $230. 
D) $116. 
A) $42. 
B) $295. 
C) $230. 
D) $116.

Question 12

Which of the following is the most common source of technology?

Accepted Answer

A) Independent R&D. 
B) Licensing technology. 
C) Publications or technical meetings. 
D) Reverse engineering. 
A) Independent R&D. 
B) Licensing technology. 
C) Publications or technical meetings. 
D) Reverse engineering.

Question 13

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

Accepted Answer

A) Land. 
B) Production. 
C) Capital. 
D) Technology. 
A) Land. 
B) Production. 
C) Capital. 
D) Technology.

Question 14

Which of the following profit functions exhibits a linear production function?

Accepted Answer

A) $\pi$  = P x K0.75L0.50 - 20L - 35K. 
B) $\pi$  = P x min(2L, 5K) - 20L - 35K. 
C) $\pi$  = P x (3K + 4L) - 20L - 35K. 
D) $\pi$  = P x (3K0.5 + 4L0.5)1/0.2 - 20L - 35K. 
A) $\pi$  = P x K0.75L0.50 - 20L - 35K. 
B) $\pi$  = P x min(2L, 5K) - 20L - 35K. 
C) $\pi$  = P x (3K + 4L) - 20L - 35K. 
D) $\pi$  = P x (3K0.5 + 4L0.5)1/0.2 - 20L - 35K.

Question 15

The manager of a national retailing outlet recently hired an economist to estimate the firm's production function.Based on the economist's report, the manager now knows that the firm's production function is given by

Accepted Answer

@#IMG-DLM& and that capital is fixed at 1 unit.
a.

Question 16

The derivative, dAC(Q) / dQ = (1/Q2) {Q(dC / dQ) - C(Q)}, illustrates that when

Accepted Answer

A) MC(Q)  AC(Q), average costs decrease as output increases. 
D) none of the statements associated with this question are correct. 
A) MC(Q)  AC(Q), average costs decrease as output increases. 
D) none of the statements associated with this question are correct.

Question 17

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3.What is the variable cost of producing 10 units?

Accepted Answer

A) $401. 
B) $1,060. 
C) $560. 
D) $1,010. 
A) $401. 
B) $1,060. 
C) $560. 
D) $1,010.

Question 18

The average product of labor depends on how many units of

Accepted Answer

A) labor are used. 
B) capital are used. 
C) labor and capital are used. 
D) none of the statements associated with this question are correct. 
A) labor are used. 
B) capital are used. 
C) labor and capital are used. 
D) none of the statements associated with this question are correct.

Question 19

Which curve(s) does the marginal cost curve intersect at the (their) minimum point?

Accepted Answer

A) Average total cost curve. 
B) Average fixed cost curve. 
C) Average variable cost curve. 
D) Average total cost curve and average variable cost curve. 
A) Average total cost curve. 
B) Average fixed cost curve. 
C) Average variable cost curve. 
D) Average total cost curve and average variable cost curve.

Question 20

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

Accepted Answer

A) 100. 
B) 50. 
C) 3. 
D) 2. 
A) 100. 
B) 50. 
C) 3. 
D) 2.

Which of the following statements is incorrect?

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of

For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MP_K is:

The production function for a competitive firm is Q = K.⁵L.⁵.The firm sells its output at a price of $10, and can hire labor at a wage of $5.Capital is fixed at 25 units.The profit-maximizing quantity of labor is

Total product begins to fall when:

If a firm's production function is Leontief and the wage rate goes up the

An isocost line

The point where diminishing marginal returns has begun to affect production, is best characterized by the point where the

Firm managers should use inputs at levels where the:

For the cost function C(Q) = 1000 + 14Q + 9Q² + 3Q³, what is the marginal cost of producing the fourth unit of output?

Which of the following is the most common source of technology?

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

Which of the following profit functions exhibits a linear production function?

The manager of a national retailing outlet recently hired an economist to estimate the firm's production function.Based on the economist's report, the manager now knows that the firm's production function is given by

The derivative, dAC(Q) / dQ = (1/Q₂) {Q(dC / dQ) - C(Q)}, illustrates that when

Suppose the cost function is C(Q) = 50 + Q - 10Q² + 2Q³.What is the variable cost of producing 10 units?

The average product of labor depends on how many units of

Which curve(s) does the marginal cost curve intersect at the (their) minimum point?

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

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 5: The Production Process and Costs

Which of the following statements is incorrect?

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of

For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MPK is:

The production function for a competitive firm is Q = K.5L.5.The firm sells its output at a price of $10, and can hire labor at a wage of $5.Capital is fixed at 25 units.The profit-maximizing quantity of labor is

Total product begins to fall when:

If a firm's production function is Leontief and the wage rate goes up the

An isocost line

The point where diminishing marginal returns has begun to affect production, is best characterized by the point where the

Firm managers should use inputs at levels where the:

For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3, what is the marginal cost of producing the fourth unit of output?

Which of the following is the most common source of technology?

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

Which of the following profit functions exhibits a linear production function?

The manager of a national retailing outlet recently hired an economist to estimate the firm's production function.Based on the economist's report, the manager now knows that the firm's production function is given by

The derivative, dAC(Q) / dQ = (1/Q2) {Q(dC / dQ) - C(Q)}, illustrates that when

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3.What is the variable cost of producing 10 units?

The average product of labor depends on how many units of

Which curve(s) does the marginal cost curve intersect at the (their) minimum point?

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

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MP_K is:

The production function for a competitive firm is Q = K.⁵L.⁵.The firm sells its output at a price of $10, and can hire labor at a wage of $5.Capital is fixed at 25 units.The profit-maximizing quantity of labor is

For the cost function C(Q) = 1000 + 14Q + 9Q² + 3Q³, what is the marginal cost of producing the fourth unit of output?

The derivative, dAC(Q) / dQ = (1/Q₂) {Q(dC / dQ) - C(Q)}, illustrates that when

Suppose the cost function is C(Q) = 50 + Q - 10Q² + 2Q³.What is the variable cost of producing 10 units?

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