Exam 5: The Production Process and Costs

Suppose that production for good X is characterized by the following production function, Q = 4K^0.5L^0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $12 and the per-unit wage, w, is $20, then the average total cost of using 25 units of capital and 49 units of labor is:

As long as marginal product is increasing, marginal product is:

If a firm's production function is Leontief and the wage rate goes up, the:

The derivative, dAC(Q)/dQ = (1/Q₂) {Q(dC/dQ) - C(Q)}, illustrates that when:

Economies of scope exist when:

Which of the following "costs" could a firm that wants to remain in business avoid if it halted current production?

Suppose the production function is given by Q = K^1/2L^1/2, and that Q = 30 and K = 25. How much labor is employed by the firm?

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 $86.80 and the per-unit wage, w, is $20, then the average total cost of using 25 units of capital and 49 units of labor is:

Show that the Cobb-Douglas production function exhibits the law of diminishing marginal rate of technical substitution.

When there are economies of scope between two products which are separately produced by two firms, merging into a single firm can:

Which of the following is the most common source of technology?

You have been hired to replace the manager of a firm that used only two inputs, capital and labor, to produce output. The firm can hire as much labor as it wants at a wage of $5 per hour and can rent as much capital as it wants at a price of $50 per hour. After you look at the company books, you learn that the company has been using capital and labor in amounts that imply a marginal product of labor of 50 and a marginal product of capital of 100. Do you know why the firm hired you? Explain.

Which of the following cost functions exhibits cost complementarity?

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of:

Suppose the w = $20 and r = $30. The isocost line for a firm in this industry is:

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

If the price of labor increases, in order to minimize the costs of producing a given level of output, the firm manager should use:

Total product begins to fall when:

When there are economies of scope between products, selling off an unprofitable subsidiary could lead to:

Constant returns to scale exist when long-run average costs: