Exam 5: The Production Process and Costs

Your firm produces two products, Q₁ and Q₂. An economic consulting firm has estimated your cost function to be a. Are there economies of scope? b. Are there cost complementarities? c. Your market for Q₁ is not very good, and an overseas firm has offered to buy the division of your company that produces Q₁. What will happen to your marginal cost of producing Q₂ if you sell the division?

Suppose the production function is given by Q = 2K + L. If w = $4 and r = $4, how many units of K and L will be utilized in the production process?

Given a cost function C(Q) = 200 + 14Q + 8Q², what is the marginal cost function?

Suppose the cost function is C(Q) = 50 + Q - 10Q² + 2Q³. At 10 units of output, the average cost curve is:

Given the Leontief production function Q = min{5.5K, 6.7L}, how much output is produced when K = 40 and L = 35?

According to the table below, at what level of output is marginal cost minimized?

The total costs for Morris Industries are summarized in the following table. Based on this information, fill in the missing entries in the table for fixed cost, variable cost, average fixed cost, average variable cost, average total cost, and marginal cost.

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

The production function is Q = K^.4 L^.6. The marginal rate of technical substitution is:

The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the:

The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production is defined by the:

The change in total output attributable to the last unit of an input is the:

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

Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing stage, there exist:

According to the table below, what is the average variable cost of producing 50 units of output?

Suppose that production for good X is characterized by the following production function, Q = K^0.5L^0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the average variable cost of using 81 units of capital and 9 units of labor is:

Suppose the production function of automobiles is given by a. Show that the marginal product of any given quantity of labor increases as capital is increased. b. Suppose Japanese and U.S. automakers produce on identical isoquants with this Cobb-Douglas production function and that labor costs are higher in Japan than in the United States. Do autoworkers in Japan have a higher marginal product than American autoworkers? Explain carefully. c. Now suppose Japanese automakers produce on a different isoquant from U.S. firms, but the prices of Japanese and American cars are identical. Do Japanese or American autoworkers have a higher marginal product? Why?

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

In order for isoquants to have a diminishing marginal rate of substitution, they must be:

The average product of labor depends on how many units of: