Question 1

Suppose a cost function is TC = Aq3 + bq2 + cq +d. Then the average variable 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 B

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 marginal cost is

Accepted Answer

A) 1000 + q3 
B)  $\frac { 3 q ^ { 2 } } { 100 }$ 
C) q3 
D) 2q3 
A) 1000 + q3 
B)  $\frac { 3 q ^ { 2 } } { 100 }$ 
C) q3 
D) 2q3 B

Question 3

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)1/2,where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

Accepted Answer

A) the wage rate only. 
B) the rental rate only. 
C) both the wage and rental rates. 
D) neither the wage nor rental rates. 
A) the wage rate only. 
B) the rental rate only. 
C) both the wage and rental rates. 
D) neither the wage nor rental rates. C

Question 4

Suppose MPL = 40 and MPK = 20 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 5

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 6

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 the price of soybean feed is $5,what is the cost-minimizing feed combination producing P = 200?

Accepted Answer

A) C = 100 
B) S = 40 
C) C = 50,S = 20 
D) C = 20,S = 50 
A) C = 100 
B) S = 40 
C) C = 50,S = 20 
D) C = 20,S = 50

Question 7

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.

Question 8

For a constant-returns-to-scale production function,

Accepted Answer

A) marginal costs are constant but the average cost curve has a U-shape. 
B) both average and marginal costs are constant. 
C) marginal cost has a U-shape; average costs are constant. 
D) both average and marginal cost curves are U-shaped. 
A) marginal costs are constant but the average cost curve has a U-shape. 
B) both average and marginal costs are constant. 
C) marginal cost has a U-shape; average costs are constant. 
D) both average and marginal cost curves are U-shaped.

Question 9

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 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 =5S/2 
B) S =2C/5 
C) the horizontal axis 
D) the vertical axis 
A) C =5S/2 
B) S =2C/5 
C) the horizontal axis 
D) the vertical axis

Question 11

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 12

Suppose a cost function is TC = Aq3 + bq2 + cq +d. Then the average total 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 13

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.The expansion path depends

Accepted Answer

A) on the price of corn-based feed only. 
B) on the price of soybean-based feed only. 
C) on neither the price of corn-based or soybean-based feed. 
D) on whether the price of corn-based feed is greater than or less than 2/5 the price of soybean-based feed. 
A) on the price of corn-based feed only. 
B) on the price of soybean-based feed only. 
C) on neither the price of corn-based or soybean-based feed. 
D) on whether the price of corn-based feed is greater than or less than 2/5 the price of soybean-based feed.

Question 14

As long as marginal cost is below average cost,average cost will be

Accepted Answer

A) falling 
B) rising. 
C) constant. 
D) changing in a direction that cannot be determined without more information 
A) falling 
B) rising. 
C) constant. 
D) changing in a direction that cannot be determined without more information

Question 15

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)  $\frac { 2,000 } { q } + \frac { q ^ { 2 } } { 100 }$ 
B)  $\frac { 200 } { q } + 10 q ^ { 2 }$ 
C)  $\frac { 2,000 } { q }$ 
D)  $q ^ { 2 }$ 
A)  $\frac { 2,000 } { q } + \frac { q ^ { 2 } } { 100 }$ 
B)  $\frac { 200 } { q } + 10 q ^ { 2 }$ 
C)  $\frac { 2,000 } { q }$ 
D)  $q ^ { 2 }$

Question 16

The opportunity cost of producing a bicycle refers to

Accepted Answer

A) the out-of-pocket payments made to produce the bicycle. 
B) the value of the goods that were given up to produce the bicycle. 
C) the bicycle's retail price. 
D) the marginal cost of the last bicycle produced. 
A) the out-of-pocket payments made to produce the bicycle. 
B) the value of the goods that were given up to produce the bicycle. 
C) the bicycle's retail price. 
D) the marginal cost of the last bicycle produced.

Question 17

The accountant's cost of producing a bicycle refers to

Accepted Answer

A) the out-of-pocket payments made to produce the bicycle. 
B) the value of the goods that were given up to produce the bicycle. 
C) the bicycle's retail price. 
D) the marginal cost of the last bicycle produced. 
A) the out-of-pocket payments made to produce the bicycle. 
B) the value of the goods that were given up to produce the bicycle. 
C) the bicycle's retail price. 
D) the marginal cost of the last bicycle produced.

Question 18

Suppose the production function for coffee (C)is C = min(B,W),where B = beans in pounds and W = water in gallons. Suppose 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 19

Short-run total cost is the sum of

Accepted Answer

A) short-run fixed cost,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,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 20

In the long run

Accepted Answer

A) all inputs are fixed. 
B) all inputs are variable. 
C) some inputs are fixed. 
D) production levels never change. 
A) all inputs are fixed. 
B) all inputs are variable. 
C) some inputs are fixed. 
D) production levels never change.

Suppose a cost function is TC = Aq³ + bq² + cq +d. Then the average variable 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 that a lawn mowing services production function for lawns mowed in a week is M = (LK)1/2,where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

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

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

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 the price of soybean feed is $5,what is the cost-minimizing feed combination producing P = 200?

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

For a constant-returns-to-scale production function,

A firm's marginal cost is defined as

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?

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

Suppose a cost function is TC = Aq³ + bq² + cq +d. Then the average total 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.The expansion path depends

As long as marginal cost is below average cost,average cost will be

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

The opportunity cost of producing a bicycle refers to

The accountant's cost of producing a bicycle refers to

Suppose the production function for coffee (C)is C = min(B,W),where B = beans in pounds and W = water in gallons. Suppose 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

Short-run total cost is the sum of

In the long run

Economic Models

Utility and Choice

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

Suppose a cost function is TC = Aq3 + bq2 + cq +d. Then the average variable cost 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

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)1/2,where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

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

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

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 the price of soybean feed is $5,what is the cost-minimizing feed combination producing P = 200?

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

For a constant-returns-to-scale production function,

A firm's marginal cost is defined as

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?

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

Suppose a cost function is TC = Aq3 + bq2 + cq +d. Then the average total 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.The expansion path depends

As long as marginal cost is below average cost,average cost will be

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

The opportunity cost of producing a bicycle refers to

The accountant's cost of producing a bicycle refers to

Suppose the production function for coffee (C)is C = min(B,W),where B = beans in pounds and W = water in gallons. Suppose 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

Short-run total cost is the sum of

In the long run

Economic Models

Utility and Choice

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 cost function is TC = Aq³ + bq² + cq +d. Then the average variable 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 a cost function is TC = Aq³ + bq² + cq +d. Then the average total 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 average cost is