Exam 5: The Production Process and Costs

Suppose the production function is given by Q = 4K + 3L. What is the average product of labor when 10 units of capital and 5 units of labor are employed?

Suppose the production function is Q = min{K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed?

Firm managers should use inputs at levels where the:

The manager institutes an incentive structure to ensure:

Suppose the cost function is C(Q) = 50 + Q - 10Q² + 2Q³. At 3 units of output, the marginal cost curve is:

The management of Morris Industries is considering a plan to terminate a new employee. The action stemmed from documented evidence supplied by the firm's accounting department that this new employee did not add as much to the firm's overall output as did a worker hired two weeks earlier. Based on this evidence, do you agree that the latest worker hired should be fired? Explain.

There are over 5,000 banks in the United States-more than 10 times more per person than in other industrialized countries. A recent study suggests that the long-run average cost curve for an individual bank is relatively flat. If Congress took steps to consolidate banks, thereby reducing the total number to 2,500, what would you expect to happen to costs within the banking industry? Explain.

If a firm's production function is Leontief and the price of capital goes down, the:

What is the value marginal product of labor if: P = $10, MP_L = $25, and AP_L = 40?

A production function exhibits constant returns to scale if a twofold (threefold, etc.) increase in all inputs leads to a twofold (threefold, etc.) increase in output. For example, by doubling the use of capital and labor, the firm would exactly double its output. a. What would the average and marginal cost curves look like under constant returns to scale? Explain. b. Give an example of a production function that exhibits constant returns to scale.

Which of the following cost functions exhibits cost complementarity?

With a linear production function there is a:

A production function exhibits decreasing returns to scale if a twofold (threefold, etc.) increase in all inputs increases output by less than twofold (less than threefold, etc.). For example, by doubling the use of capital and labor, the firm would less than double its output. a. What would the average and marginal cost curves look like under decreasing returns to scale? Explain. b. Give an example of a production function that exhibits decreasing returns to scale.