Question 1

Mr. O. Carr has the cost function c(y) = y2 + 144 if his output, y, is positive and c(0) = 0. If the price of output is 18, Mr. Carr's profit-maximizing output is zero.

Accepted Answer

A) True 
 B)False

Question 2

The Lost Mountains of northern Iowa are inhabited by the rare Marshallian deer. Patches of grass are far apart in this rugged land. If a deer finds a fresh patch of grass and spends h hours grazing it, it gets the square root of h units of grass. The deer compete for grass. When there are n deer, it takes a deer n 2 minutes to find a fresh patch. A deer can survive if it gets 1 unit of grass every 200 minutes.
a. Find the average cost in time of a unit of grass if a deer gets y units of grass from each patch.
b. How much time will an efficient deer spend in each patch when there are n deer? (Hint: Minimize aver-age cost.)
c. Since there is free entry into the deer business, the equilibrium population is the maximum number of efficient deer who can survive. How many is this?

Accepted Answer

a. y + @#IMG-DLM& .

Question 3

A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}.The price of factor 1 is $4 and the price of factor 2 is $1. Due to a lack of warehouse space, the company cannot use more than 15 units of x1. The firm must pay a fixed cost of $90 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount?

Accepted Answer

A)  $15 
B)  $21 
C)  $5 
D)  $24 
E)  $11 
A)  $15 
B)  $21 
C)  $5 
D)  $24 
E)  $11

Question 4

Suppose that Dent Carr's long-run total cost of repairing s cars per week is c(s) = 3s2 + 75. If the price he receives for repairing a car is $18, then in the long run, how many cars will he fix per week if he maximizes profits?

Accepted Answer

A)  3 
B)  0 
C)  6 
D)  4.50 
E)  9 
A)  3 
B)  0 
C)  6 
D)  4.50 
E)  9

Question 5

A firm with the cost function c(y) = 20y2 + 500 has a U-shaped cost curve.

Accepted Answer

A) True 
 B)False

Question 6

A competitive firm has a long-run total cost function c(y) = 5y2 + 1,125 for y > 0 and c(0) = 0. Its long-run supply function is described as

Accepted Answer

A) y =if p > 148, y = 0 if p 150, y = 0 if p 153, y = 0 if p 153, y = 0 if p 155, y = 0 if p < 145. A) y =if p > 148, y = 0 if p 150, y = 0 if p 153, y = 0 if p 153, y = 0 if p 155, y = 0 if p < 145.

Question 7

A competitive firm produces its output according to the production function y = min{   , 10}. Let w be the price of the factor x, and let the price of output be $1.The demand for factor x, when the factor price is w, is

Accepted Answer

A)  x = min{, 10} 
B)  x = max{, 100}. 
C)  x = min{w2, 100}. 
D)  x = 10 +. 
E)  None of the above. 
A)  x = min{, 10} 
B)  x = max{, 100}. 
C)  x = min{w2, 100}. 
D)  x = 10 +. 
E)  None of the above.

Question 8

A competitive firm has a single factory with the cost function c(y) = 4y2 + 89 and produces 28 units in order to maximize profits. Although the price of output does not change, the firm decides to build a second factory with the cost function c(y) = 8y2 + 39. To maximize its profits, how many units should it produce in the second factory?

Accepted Answer

A)  14 
B)  21 
C)  9 
D)  13 
E)  None of the above. 
A)  14 
B)  21 
C)  9 
D)  13 
E)  None of the above.

Question 9

A firm's production function is f(x1, x2) =   . If the price of factor 1 is w1 = $5 per unit and the price of factor 2 is w2 = $25 per unit, then its supply function is given by the equation S(p) =

Accepted Answer

A)  . 
B)  max{w1, 5w2}p. 
C)  min{w1, 5w2}p. 
D)  10p. 
E)  min{5p, 125p}p. 
A)  . 
B)  max{w1, 5w2}p. 
C)  min{w1, 5w2}p. 
D)  10p. 
E)  min{5p, 125p}p.

Question 10

A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}.The price of factor 1 is $8 and the price of factor 2 is $5. Due to a lack of warehouse space, the company cannot use more than 10 units of x1. The firm must pay a fixed cost of $80 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount?

Accepted Answer

A)  $44 
B)  $41 
C)  $29 
D)  $13 
E)  $21 
A)  $44 
B)  $41 
C)  $29 
D)  $13 
E)  $21

Question 11

A competitive firm has a long-run total cost function c(y) = 2y2 + 288 for y > 0 and c(0) = 0. Its long-run supply function is described as

Accepted Answer

A) y =if p > 46, y = 0 if p 51, y = 0 if p 48, y = 0 if p 51, y = 0 if p 53, y = 0 if p < 43. A) y =if p > 46, y = 0 if p 51, y = 0 if p 48, y = 0 if p 51, y = 0 if p 53, y = 0 if p < 43.

Question 12

The area under the marginal cost curve measures total variable costs.

Accepted Answer

A) True 
 B)False

Question 13

A competitive firm has a continuous marginal cost curve. It finds that as output increases, its marginal cost curve first rises, then falls, then rises again. If it wants to maximize profits, the firm should never produce at a positive output where price equals marginal cost and marginal cost decreases as output increases.

Accepted Answer

A) True 
 B)False

Question 14

A competitive firm is choosing an output level to maximize its profits in the short run. Which of the following is not necessarily true? (Assume that marginal cost is not constant and is well defined at all levels of output.)

Accepted Answer

A)  Marginal cost is at least as large as average variable cost. 
B)  Total revenues are at least as large as total costs. 
C)  Price is at least as large as average variable cost. 
D)  Price equals marginal cost. 
E)  The marginal cost curve is rising. 
A)  Marginal cost is at least as large as average variable cost. 
B)  Total revenues are at least as large as total costs. 
C)  Price is at least as large as average variable cost. 
D)  Price equals marginal cost. 
E)  The marginal cost curve is rising.

Question 15

A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}.The price of factor 1 is $4 and the price of factor 2 is $5. Due to a lack of warehouse space, the company cannot use more than 17 units of x1. The firm must pay a fixed cost of $136 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount?

Accepted Answer

A)  $36 
B)  $33 
C)  $21 
D)  $9 
E)  $17 
A)  $36 
B)  $33 
C)  $21 
D)  $9 
E)  $17

Question 16

In a perfectly competitive industry, the demand curve for the total output of the industry may be downward sloping.

Accepted Answer

A) True 
 B)False

Question 17

A profit-maximizing firm continues to operate even though it is losing money. It sells its product at a price of $100.

Accepted Answer

A)  Average total cost is less than $100. 
B)  Average fixed cost is less than $100. 
C)  Marginal cost is increasing. 
D)  Average variable cost is less than $100. 
E)  Marginal cost is decreasing. 
A)  Average total cost is less than $100. 
B)  Average fixed cost is less than $100. 
C)  Marginal cost is increasing. 
D)  Average variable cost is less than $100. 
E)  Marginal cost is decreasing.

Question 18

Mr. O. Carr has the cost function c(y) = y2 + 64 if his output, y, is positive and c(0) = 0. If the price of output is 12, Mr. Carr's profit-maximizing output is zero.

Accepted Answer

A) True 
 B)False

Question 19

A competitive firm produces its output according to the production function y = min{x3, 1000}. Let p be the price of output, and let the price of input x be $1. The profit maximizing output for this firm is

Accepted Answer

A) 1,000 if p > 1 and 0 otherwise. B) 10 for all p. C) 1,000 for all p. D) 0 if p 1 and 0 otherwise. B) 10 for all p. C) 1,000 for all p. D) 0 if p

Question 20

Irma's production function is f(x1, x2) =   . If the price of factor 1 is w1 = $3 and the price of factor 2 is w2 = $4, then her supply function is given by the equation

Accepted Answer

A)  S(p) = p(min{w1, 2w2})2. 
B)  S(p) =. 
C)  S(p) = p(max{w1, 2w2})2. 
D)  S(p) = 5p. 
E)  S(p) = min{3p, 8p}. 
A)  S(p) = p(min{w1, 2w2})2. 
B)  S(p) =. 
C)  S(p) = p(max{w1, 2w2})2. 
D)  S(p) = 5p. 
E)  S(p) = min{3p, 8p}.

Exam 21: Firm Supply

Mr. O. Carr has the cost function c(y) = y2 + 144 if his output, y, is positive and c(0) = 0. If the price of output is 18, Mr. Carr's profit-maximizing output is zero.

Suppose that Dent Carr's long-run total cost of repairing s cars per week is c(s) = 3s2 + 75. If the price he receives for repairing a car is $18, then in the long run, how many cars will he fix per week if he maximizes profits?

A firm with the cost function c(y) = 20y2 + 500 has a U-shaped cost curve.

A competitive firm has a long-run total cost function c(y) = 5y2 + 1,125 for y > 0 and c(0) = 0. Its long-run supply function is described as

A competitive firm produces its output according to the production function y = min{ , 10}. Let w be the price of the factor x, and let the price of output be $1.The demand for factor x, when the factor price is w, is

A firm's production function is f(x1, x2) = . If the price of factor 1 is w1 = $5 per unit and the price of factor 2 is w2 = $25 per unit, then its supply function is given by the equation S(p) =

A competitive firm has a long-run total cost function c(y) = 2y2 + 288 for y > 0 and c(0) = 0. Its long-run supply function is described as

The area under the marginal cost curve measures total variable costs.

A competitive firm is choosing an output level to maximize its profits in the short run. Which of the following is not necessarily true? (Assume that marginal cost is not constant and is well defined at all levels of output.)

In a perfectly competitive industry, the demand curve for the total output of the industry may be downward sloping.

A profit-maximizing firm continues to operate even though it is losing money. It sells its product at a price of $100.

Mr. O. Carr has the cost function c(y) = y2 + 64 if his output, y, is positive and c(0) = 0. If the price of output is 12, Mr. Carr's profit-maximizing output is zero.

A competitive firm produces its output according to the production function y = min{x3, 1000}. Let p be the price of output, and let the price of input x be $1. The profit maximizing output for this firm is

Irma's production function is f(x1, x2) = . If the price of factor 1 is w1 = $3 and the price of factor 2 is w2 = $4, then her supply function is given by the equation

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

Cost Curves

A: Cost Curves

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