Question 1

Explain the difference between fixed costs in the short run and fixed costs in the long run.

Accepted Answer

In the short,run fix

Question 2

Explain why in the long run a firm that is cost minimizing will choose K and L where:
w/MPL = r/MPK
What does this tell you about the marginal cost of increasing output through hiring labor and the marginal cost of increasing output through adding capital?

Accepted Answer

This is just a simple rearrangement of t

Question 3

Explain why the long-run total cost curve,not the short-run total cost curve,shows the lowest cost of producing any level of output.Is there an exception?

Accepted Answer

In the long run,all costs are variable s

Question 4

Suppose the production function is q = 12 L0.25 K0.75.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

Accepted Answer

The firm minimizes costs by se

Question 5

In the short run,the expansion path is

Accepted Answer

A) horizontal. 
B) vertical. 
C) diagonal. 
D) indeterminate. 
A) horizontal. 
B) vertical. 
C) diagonal. 
D) indeterminate.

Question 6

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The marginal cost of the 5th T-shirt is

Accepted Answer

A) 2. 
B) 10. 
C) 12. 
D) 60. 
A) 2. 
B) 10. 
C) 12. 
D) 60.

Question 7

Many universities have either a top football program OR a top basketball program.Very few have both.These results suggest the presence of

Accepted Answer

A) economies of scope. 
B) diseconomies of scope. 
C) returns to scale. 
D) the law of diminishing marginal returns. 
A) economies of scope. 
B) diseconomies of scope. 
C) returns to scale. 
D) the law of diminishing marginal returns.

Question 8

What are the functions for MC and AC if TC = 100q + 100   
? Are the returns to scale increasing,decreasing,or constant?

Accepted Answer

MC = 100 + 200q
AC = 100 + 100

Question 9

At the XYZ Co. ,a unit of capital costs three times as much as a unit of labor.If MPK = 10,MPL = 5,then this firm

Accepted Answer

A) is minimizing its cost at current output level. 
B) should use more capital and less labor to raise output at current cost. 
C) should use less capital and more labor to raise output at current cost. 
D) None of above. 
A) is minimizing its cost at current output level. 
B) should use more capital and less labor to raise output at current cost. 
C) should use less capital and more labor to raise output at current cost. 
D) None of above.

Question 10

The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."

Accepted Answer

A) True 
 B)False

Question 11

Suppose a firm acts to minimize the cost of producing 500 units of output and determines this cost to be $25,000.Then,if the firm acts to maximize output for a total cost of $25,000,the maximum output attainable is

Accepted Answer

A) 500. 
B) less than 500. 
C) more than 500. 
D) unknown. 
A) 500. 
B) less than 500. 
C) more than 500. 
D) unknown.

Question 12

The production of cigarettes is highly automated;however,a worker is required to monitor each machine.Machines and workers do not interact with one another.Given this information,there are most likely

Accepted Answer

A) economies of scale. 
B) economies of scope. 
C) constant returns to scale. 
D) increasing returns to scale. 
A) economies of scale. 
B) economies of scope. 
C) constant returns to scale. 
D) increasing returns to scale.

Explain the difference between fixed costs in the short run and fixed costs in the long run.

Explain why in the long run a firm that is cost minimizing will choose K and L where: w/MP_L = r/MP_K What does this tell you about the marginal cost of increasing output through hiring labor and the marginal cost of increasing output through adding capital?

Explain why the long-run total cost curve,not the short-run total cost curve,shows the lowest cost of producing any level of output.Is there an exception?

Suppose the production function is q = 12 L^0.25 K^0.75.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

In the short run,the expansion path is

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The marginal cost of the 5th T-shirt is

Many universities have either a top football program OR a top basketball program.Very few have both.These results suggest the presence of

What are the functions for MC and AC if TC = 100q + 100 ? Are the returns to scale increasing,decreasing,or constant?

At the XYZ Co. ,a unit of capital costs three times as much as a unit of labor.If MPK = 10,MPL = 5,then this firm

The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."

Suppose a firm acts to minimize the cost of producing 500 units of output and determines this cost to be $25,000.Then,if the firm acts to maximize output for a total cost of $25,000,the maximum output attainable is

The production of cigarettes is highly automated;however,a worker is required to monitor each machine.Machines and workers do not interact with one another.Given this information,there are most likely

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 7: Costs

Explain the difference between fixed costs in the short run and fixed costs in the long run.

Explain why in the long run a firm that is cost minimizing will choose K and L where: w/MPL = r/MPK What does this tell you about the marginal cost of increasing output through hiring labor and the marginal cost of increasing output through adding capital?

Explain why the long-run total cost curve,not the short-run total cost curve,shows the lowest cost of producing any level of output.Is there an exception?

Suppose the production function is q = 12 L0.25 K0.75.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

In the short run,the expansion path is

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The marginal cost of the 5th T-shirt is

Many universities have either a top football program OR a top basketball program.Very few have both.These results suggest the presence of

What are the functions for MC and AC if TC = 100q + 100 ? Are the returns to scale increasing,decreasing,or constant?

At the XYZ Co. ,a unit of capital costs three times as much as a unit of labor.If MPK = 10,MPL = 5,then this firm

The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."

Suppose a firm acts to minimize the cost of producing 500 units of output and determines this cost to be $25,000.Then,if the firm acts to maximize output for a total cost of $25,000,the maximum output attainable is

The production of cigarettes is highly automated;however,a worker is required to monitor each machine.Machines and workers do not interact with one another.Given this information,there are most likely

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Explain why in the long run a firm that is cost minimizing will choose K and L where: w/MP_L = r/MP_K What does this tell you about the marginal cost of increasing output through hiring labor and the marginal cost of increasing output through adding capital?

Suppose the production function is q = 12 L^0.25 K^0.75.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).