Question 1

The marginal product of capital of producing 2,991 units of output (find point A) in the table below is:

Accepted Answer

A)  26.7. 
B)  19.5. 
C)  5.7. 
D)  2.4. 
A)  26.7. 
B)  19.5. 
C)  5.7. 
D)  2.4.

Question 2

Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, 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 total cost of using 81 units of capital and 9 units of labor is:

Accepted Answer

A)  $5. 
B)  $75. 
C)  $80. 
D)  There is insufficient information to determine the average total costs. 
A)  $5. 
B)  $75. 
C)  $80. 
D)  There is insufficient information to determine the average total costs.

Question 3

If the last unit of input increases total product, we know that the marginal product is:

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate.

Question 4

In 1995 the U.S. Justice Department sued to block a merger between Microsoft and Intuit, the producer of the nation's best-selling business software. The Justice Department argued that the merger would lessen competition and raise prices of business software. Is there an economic argument that the merger might actually result in lower prices? Explain.

Accepted Answer

If there are economies of scope or cost

Question 5

Isoquants are normally drawn with a convex shape because:

Accepted Answer

A)  inputs are perfectly substitutable. 
B)  inputs are perfectly complementary. 
C)  inputs are not perfectly substitutable. 
D)  inputs are not perfectly complementary. 
A)  inputs are perfectly substitutable. 
B)  inputs are perfectly complementary. 
C)  inputs are not perfectly substitutable. 
D)  inputs are not perfectly complementary.

Question 6

What is the average product of labor, given that the level of labor equals 10, total output equals 1200, and the marginal product of labor equals 200?

Accepted Answer

A)  20 
B)  120 
C)  6 
D)  2,000 
A)  20 
B)  120 
C)  6 
D)  2,000

Question 7

The demand for an input is:

Accepted Answer

A)  sloping upward. 
B)  the VMP of the input. 
C)  determined by MPL = W. 
D)  derived from input owner's profit-maximizing condition. 
A)  sloping upward. 
B)  the VMP of the input. 
C)  determined by MPL = W. 
D)  derived from input owner's profit-maximizing condition.

Question 8

Which of the following sets of economic data is minimizing the cost of producing a given level of output?

Accepted Answer

A)  MPL = 20, MPK = 40, w = $16, r = $32. 
B)  MPL = 20, MPK = 40, w = $32, r = $16. 
C)  MPL = 40, MPK = 20, w = $16, r = $32. 
D)  MPL = 40, MPK = 40, w = $16, r = $32. 
A)  MPL = 20, MPK = 40, w = $16, r = $32. 
B)  MPL = 20, MPK = 40, w = $32, r = $16. 
C)  MPL = 40, MPK = 20, w = $16, r = $32. 
D)  MPL = 40, MPK = 40, w = $16, r = $32.

Question 9

Larger firms can produce a product at lower average cost than small firms when:

Accepted Answer

A)  economies of scope exist. 
B)  diseconomies of scale exist. 
C)  economies of scale exist. 
D)  cost complementarities exist. 
A)  economies of scope exist. 
B)  diseconomies of scale exist. 
C)  economies of scale exist. 
D)  cost complementarities exist.

Question 10

According to the table below, what is the marginal cost of producing 90 units of output?

Accepted Answer

A)  5.32 
B)  8.75 
C)  11.67 
D)  21.00 
A)  5.32 
B)  8.75 
C)  11.67 
D)  21.00

Question 11

As the usage of an input increases, marginal product:

Accepted Answer

A)  initially increases then begins to decline. 
B)  initially decreases then begins to increase. 
C)  consistently decreases. 
D)  consistently increases. 
A)  initially increases then begins to decline. 
B)  initially decreases then begins to increase. 
C)  consistently decreases. 
D)  consistently increases.

Question 12

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use:

Accepted Answer

A)  less capital and more labor. 
B)  less labor and more capital. 
C)  less labor and less capital. 
D)  more labor and more capital. 
A)  less capital and more labor. 
B)  less labor and more capital. 
C)  less labor and less capital. 
D)  more labor and more capital.

Question 13

Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, 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 fixed cost of using 81 units of capital and 9 units of labor is:

Accepted Answer

A)  $2,160. 
B)  $2,025. 
C)  $135. 
D)  There is insufficient information to determine the fixed costs. 
A)  $2,160. 
B)  $2,025. 
C)  $135. 
D)  There is insufficient information to determine the fixed costs.

Question 14

For the cost function C(Q) = 100 + 4Q + 19Q2 + 2Q3, what is the marginal cost of producing the fourth unit of output?

Accepted Answer

A)  $42 
B)  $295 
C)  $252 
D)  $116 
A)  $42 
B)  $295 
C)  $252 
D)  $116

Question 15

The first-order conditions for maximizing profits, π = P × F(K, L) - wL - rK, are:

Accepted Answer

A) 
  
B)  P × MPK - r = 0 and P × MPL - w = 0. 
C)  VMPK = r and VMPL = w. 
D)  All of the answers are correct. 
A) 
  
B)  P × MPK - r = 0 and P × MPL - w = 0. 
C)  VMPK = r and VMPL = w. 
D)  All of the answers are correct.

Question 16

Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are:

Accepted Answer

A)  convex to the origin. 
B)  concave to the origin. 
C)  L-shaped. 
D)  linear. 
A)  convex to the origin. 
B)  concave to the origin. 
C)  L-shaped. 
D)  linear.

Question 17

Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use:

Accepted Answer

A)  more capital and less labor. 
B)  more labor and less capital. 
C)  equal amounts of labor and capital. 
D)  None of the statements is correct. 
A)  more capital and less labor. 
B)  more labor and less capital. 
C)  equal amounts of labor and capital. 
D)  None of the statements is correct.

Question 18

The manager of a meat-packing plant can use either butchers (labor) or meat saws (capital) to prepare packages of sirloin steak. Based on estimates provided by an efficiency expert, the firm's production function for sirloin steak is given by Q = K + L
a. Graph the isoquant corresponding to 5 units of output.
b. What is the marginal product of capital and labor? Does the answer depend on how much labor and capital are used?
c. If the price of labor is $2 per hour and the rental price of capital is $3 per hour, how much capital and labor should be used to minimize the cost of producing 5 units of output?

Accepted Answer

a. See Figure 5-1. @#IMG-DLM& b. MP_K = 1; MP_L = 1. T

Question 19

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

Accepted Answer

A)  Land. 
B)  Production. 
C)  Capital. 
D)  Technology. 
A)  Land. 
B)  Production. 
C)  Capital. 
D)  Technology.

Question 20

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

Accepted Answer

A)  is cost minimizing. 
B)  should use less L and more K to cost minimize. 
C)  should use more L and less K to cost minimize. 
D)  is profit maximizing but not cost minimizing. 
A)  is cost minimizing. 
B)  should use less L and more K to cost minimize. 
C)  should use more L and less K to cost minimize. 
D)  is profit maximizing but not cost minimizing.

The marginal product of capital of producing 2,991 units of output (find point A) in the table below is:

If the last unit of input increases total product, we know that the marginal product is:

Isoquants are normally drawn with a convex shape because:

What is the average product of labor, given that the level of labor equals 10, total output equals 1200, and the marginal product of labor equals 200?

The demand for an input is:

Which of the following sets of economic data is minimizing the cost of producing a given level of output?

Larger firms can produce a product at lower average cost than small firms when:

According to the table below, what is the marginal cost of producing 90 units of output?

As the usage of an input increases, marginal product:

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use:

For the cost function C(Q) = 100 + 4Q + 19Q² + 2Q³, what is the marginal cost of producing the fourth unit of output?

The first-order conditions for maximizing profits, π = P × F(K, L) - wL - rK, are:

Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are:

Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use:

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MP_L = 20, and MP_K = 40 the firm:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 5: The Production Process and Costs

The marginal product of capital of producing 2,991 units of output (find point A) in the table below is:

If the last unit of input increases total product, we know that the marginal product is:

Isoquants are normally drawn with a convex shape because:

What is the average product of labor, given that the level of labor equals 10, total output equals 1200, and the marginal product of labor equals 200?

The demand for an input is:

Which of the following sets of economic data is minimizing the cost of producing a given level of output?

Larger firms can produce a product at lower average cost than small firms when:

According to the table below, what is the marginal cost of producing 90 units of output?

As the usage of an input increases, marginal product:

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use:

For the cost function C(Q) = 100 + 4Q + 19Q2 + 2Q3, what is the marginal cost of producing the fourth unit of output?

The first-order conditions for maximizing profits, π = P × F(K, L) - wL - rK, are:

Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are:

Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use:

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

For the cost function C(Q) = 100 + 4Q + 19Q² + 2Q³, what is the marginal cost of producing the fourth unit of output?

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MP_L = 20, and MP_K = 40 the firm: