Question 1

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

Accepted Answer

A)  $120. 
B)  $112. 
C)  $56. 
D)  $28. 
E)  $61. 
A)  $120. 
B)  $112. 
C)  $56. 
D)  $28. 
E)  $61.

Question 2

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

Accepted Answer

A)  $125. 
B)  $40. 
C)  $25. 
D)  $75. 
E)  $275. 
A)  $125. 
B)  $40. 
C)  $25. 
D)  $75. 
E)  $275.

Question 3

The production function of a competitive firm is described by the equation y =   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

Accepted Answer

A)  decreasing. 
B)  constant and equal to 19. 
C)  constant and equal to 3. 
D)  increasing. 
E)  None of the above. 
A)  decreasing. 
B)  constant and equal to 19. 
C)  constant and equal to 3. 
D)  increasing. 
E)  None of the above.

Question 4

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 + Q3
C2(Q) = 600 + 280Q - 20Q2 + Q3
Due to foreign competition, the market price of reclining chairs has fallen to $170. In the short run, firms using technology 1

Accepted Answer

A)  and firms using technology 2 will remain in business. 
B)  will remain in business and firms using technology 2 will shut down. 
C)  will shut down and firms using technology 2 will remain in business. 
D)  and firms using technology 2 will shut down. 
E)  More information is needed to make a judgment. 
A)  and firms using technology 2 will remain in business. 
B)  will remain in business and firms using technology 2 will shut down. 
C)  will shut down and firms using technology 2 will remain in business. 
D)  and firms using technology 2 will shut down. 
E)  More information is needed to make a judgment.

Question 5

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 + Q3
C2(Q) = 200 + 145Q - 10Q2 + Q3
Due to foreign competition, the market price of reclining chairs has fallen to $190. In the short run, firms using technology 1

Accepted Answer

A)  and firms using technology 2 will remain in business. 
B)  will remain in business and firms using technology 2 will shut down. 
C)  will shut down and firms using technology 2 will remain in business. 
D)  and firms using technology 2 will shut down. 
E)  More information is needed to make a judgment. 
A)  and firms using technology 2 will remain in business. 
B)  will remain in business and firms using technology 2 will shut down. 
C)  will shut down and firms using technology 2 will remain in business. 
D)  and firms using technology 2 will shut down. 
E)  More information is needed to make a judgment.

Question 6

North American Manufacturing has the production function Q = min{0.25K, 0.5L}, where K is units of
capital and L is hours of labor.
a. Without any warning, the price of capital doubles.What should North American Manufacturing do in response?
b. If North American were planning a new manufacturing plant, would there be any advantages to a larger facility?

Accepted Answer

a. North American Ma

Question 7

A firm's production function is given by q = min{M,   }, 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

Accepted Answer

A)  a straight line with slope 2. 
B)  upward sloping and gets flatter as Q increases. 
C)  upward sloping and gets steeper as Q increases 
D)  a straight line with slope 1. 
E)  a straight line with slope 2 
A)  a straight line with slope 2. 
B)  upward sloping and gets flatter as Q increases. 
C)  upward sloping and gets steeper as Q increases 
D)  a straight line with slope 1. 
E)  a straight line with slope 2

Question 8

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

Accepted Answer

A)  $30. 
B)  $25. 
C)  $105. 
D)  $185. 
E)  $345. 
A)  $30. 
B)  $25. 
C)  $105. 
D)  $185. 
E)  $345.

Question 9

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?

Accepted Answer

A)  10 
B)  The square root of 40 
C)  4 
D)  The square root of 20 
E)  5 
A)  10 
B)  The square root of 40 
C)  4 
D)  The square root of 20 
E)  5

Question 10

Mary Magnolia from your workbook has variable costs equal to   , 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?

Accepted Answer

A)  600 
B)  1,800 
C)  300 
D)  1,200 
E)  1,320 
A)  600 
B)  1,800 
C)  300 
D)  1,200 
E)  1,320

Question 11

Not long ago, the Canadian edition of a famous textbook on principles of economics had a diagram depicting a U-shaped average fixed cost curve. This occasioned great mirth around the campfires of some economists in the Great White North and did much to shorten a long hard winter. Explain what is wrong with drawing a U-shaped average fixed cost curve.

Accepted Answer

Average fixed cost must declin

Question 12

Average fixed cost curves will be U-shaped if the marginal cost curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 13

If marginal costs increase as output increases, then the average fixed cost curve will be U-shaped.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  $120. 
B)  $300. 
C)  $80. 
D)  $400. 
E)  $26. 
A)  $120. 
B)  $300. 
C)  $80. 
D)  $400. 
E)  $26.

Question 15

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

Accepted Answer

A)  4 
B)  16 
C)  0.75 
D)  3 
E)  None of the above. 
A)  4 
B)  16 
C)  0.75 
D)  3 
E)  None of the above.

Question 16

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

Accepted Answer

A)  $64. 
B)  $72. 
C)  $16. 
D)  $32. 
E)  $37. 
A)  $64. 
B)  $72. 
C)  $16. 
D)  $32. 
E)  $37.

Question 17

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

Accepted Answer

A)  If MC is rising, ATC must be rising. 
B)  If MC is rising, ATC must be greater than MC. 
C)  If MC is rising, ATC must be less than MC. 
D)  If ATC is rising, MC must be greater than ATC. 
E)  If ATC is rising, MC must be less than ATC. 
A)  If MC is rising, ATC must be rising. 
B)  If MC is rising, ATC must be greater than MC. 
C)  If MC is rising, ATC must be less than MC. 
D)  If ATC is rising, MC must be greater than ATC. 
E)  If ATC is rising, MC must be less than ATC.

Question 18

A firm has the production function Q =   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

Accepted Answer

A)  MC(Q) = 105. 
B)  MC(Q) =. 
C)  MC(Q) = 105 + 105Q2. 
D)  MC(Q) = 3Q. 
E)  MC(Q) = 35. 
A)  MC(Q) = 105. 
B)  MC(Q) =. 
C)  MC(Q) = 105 + 105Q2. 
D)  MC(Q) = 3Q. 
E)  MC(Q) = 35.

Question 19

A competitive firm has the short-run cost function c(y)= y3 -2y2 + 5y + 6. Write down equations for:
a. The firm's average variable cost function
b. The firm's marginal cost function
c. At what level of output is average variable cost minimized?
d. Graph the short-run supply function for this firm, being careful to label the key points on the graph with the numbers specifying the exact prices and quantities at these points.

Accepted Answer

a. y2 - 2y + 5.
b. 3y2 - 4y + 5.
c. y =

Question 20

Touchie McFeelie's production function for comic books is (0.1)   , 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   =

Accepted Answer

A) 3 
B) 12 
C) 9 
D) .2/3 
E)  6. 
A) 3 
B) 12 
C) 9 
D) .2/3 
E)  6.

Exam 20: Cost Curves

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

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

The production function of a competitive firm is described by the equation y = 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

A firm's production function is given by q = min{M, }, 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

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

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?

Average fixed cost curves will be U-shaped if the marginal cost curve is upward sloping.

If marginal costs increase as output increases, then the average fixed cost curve will be U-shaped.

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

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

A firm has the production function Q = 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

Budget Constraint

A: Budget Constraint

Preferences

A: Preferences

Utility

A: Utility

Choice

A: Choice

Demand

A: Demand

Revealed Preference

A: Revealed Preference

Slutsky Equation

A: Slutsky Equation

Buying and Selling

A: Buying and Selling

Intertemporal Choice

A: Intertemporal Choice

Asset Markets

A: Asset Markets

Uncertainty

A: Uncertainty

Risky Assets

A: Risky Assets

Consumers Surplus

A: Consumers Surplus

Market Demand

A: Market Demand

Equilibrium

A: Equilibrium

Auctions

A: Auctions

Technology

A: Technology

Profit Maximization

A: Profit Maximization

Cost Minimization

A: Cost Minimization

A: Cost Curves

Firm Supply

A: Firm Supply

Industry Supply

A: Industry Supply

Monopoly

A: Monopoly

Monopoly Behavior

A: Monopoly Behavior

Factor Markets

A: Factor Markets

Oligopoly

A: Oligopoly

Game Theory

A: Game Theory

Game Applications

A: Game Applications

Behavioral Economics

Exchange

A: Exchange

Production

A: Production

Welfare

A: Welfare

Externalities

A: Externalities

Information Technology

A: Information Technology