Question 1

For the cost function C(Q)= 1000 + 14Q + 9Q2 + 3Q3,what is the marginal cost of producing the fourth unit of output?

Accepted Answer

A)  $42 
B)  $295 
C)  $230 
D)  $116

Question 2

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.

Question 3

The maker of Turbotax produces software that prepares federal income tax returns.In addition,it produces software that prepares various state income tax returns.Why doesn't it pay for the firm to specialize in federal software?

Accepted Answer

The answer of The maker of Turbotax produces software that...

Question 4

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

Accepted Answer

A)  MC(Q)  AC(Q), average costs decrease as output increases. 
D)  None of the answers are correct.

Question 5

Costs that are forever lost after they have been paid are:

Accepted Answer

A)  production costs. 
B)  fixed costs. 
C)  sunk costs. 
D)  variable costs.

Question 6

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 preceding statements is correct.

Question 7

Which of the following relations is the slope along a given isoquant?

Accepted Answer

A)  dQ = {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10K} dK + {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10L} dL, where dQ > 0 
B)  0 = {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10L} dK + {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10K} dL 
C)  0 = {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10K} dK + {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10L} dL 
D)  dQ = {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10K} dL + {F1F1F1S1F1F1F10F(K, L)/F1F1F1S1F1F1F10L} dK, where dQ > 0

Question 8

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

Accepted Answer

A)  3 
B)  4 
C)  11 
D)  45

Question 9

Suppose you are a manager of a factory.You purchase five (5)new machines at one million dollars each.If you can resell two of the machines for $500,000 and three of the machines for $200,000,what are the sunk costs of purchasing the machines?

Accepted Answer

A)  $5 million 
B)  $500,000 
C)  $3.4 million 
D)  $1.6 million

Question 10

An accountant for a car rental company was recently asked to report the firm's costs of producing various levels of output.The accountant knows that the most recent estimate available of the firm's cost function is $C ( Q ) = 100 + 10 Q + Q ^ { 2 }$ ,where costs are measured in thousands of dollars and output is measured in thousands of hours rented.
a.What is the average fixed cost of producing 2 units of output?
b.What is the average variable cost of producing 2 units of output?
c.What is the average total cost of producing 2 units of output?
d.What is the marginal cost of producing 2 units of output?
e.What is the relation between the answers to (a),(b),and (c)above?
 Is this a general property of average cost curves?

Accepted Answer

The answer of An accountant for a car rental company...

Question 11

You are the manager of a firm that sells output at a price of $40 per unit.You are interested in hiring a new worker who will increase your firm's output by 2,000 units per year.Several other firms also are interested in hiring this worker.
a.What is the highest annual salary you should be willing to pay this worker to come to your firm?
b.What will determine whether or not you actually have to offer this much to the worker to induce him to join your firm?

Accepted Answer

The answer of You are the manager of a firm...

Question 12

The average product of capital of producing 2,991 units of output (find point B)in the table below is:
$$\begin{array}{l}
\text { Production Function far God } \mathbf { X }\
\begin{array} { l l l l l } 
L ^ { * } & K & Q & M _ { K } = ( \Delta Q / \Delta K ) & \begin{array} { l } 
\mathbf { M P } _ { K } = ( Q / K ) \
\text { Mverage }
\end{array} \
\text { Labor } & \text { Capital } & \text { Output } & \begin{array} { l } 
\text { Product of } \
\text { Capital }
\end{array} & \begin{array} { l } 
\text { Product of } \
\text { Capital }
\end{array} \
9 & 0 & 0 & - & - \
9 & 10 & 57 & 5.7 & 5.70 \
9 & 20 & 324 & 26.7 & 16.20 \
9 & 30 & 657 & 33.3 & \mathbf { B } \
9 & 40 & 1,072 & 41.5 & 26.80 \
9 & 50 & 1,524 & 45.2 & 30.48 \
9 & 60 & 1,976 & 45.2 & 32.93 \
9 & 70 & 2,391 & 41.5 & 34.16 \
9 & 80 & 2,724 & 33.3 & 34.05 \
9 & 90 & 2,991 & \mathbf { A } & 33.23 \
9 & 100 & 3,048 & 5.7 & 30.48 \
9 & 110 & 3,016 & - 3.2 & 27.42 \
9 & 120 & 2,945 & - 7.1 & 24.54
\end{array}
\end{array}$$

Accepted Answer

A)  11.1. 
B)  21.9. 
C)  37. 
D)  73.

Question 13

The Leontief production function implies:

Accepted Answer

A)  straight-line isoquants. 
B)  convex-shaped isoquants. 
C)  A positive MRTS. 
D)  L-shaped isoquants.

Question 14

Economies of scale exist whenever long-run average costs:

Accepted Answer

A)  increase as output is increased. 
B)  decrease as output is increased. 
C)  remain constant as output is increased. 
D)  None of the preceding statements is correct.

Question 15

For given input prices,isocosts closer to the origin are associated with:

Accepted Answer

A)  lower costs. 
B)  the same costs. 
C)  higher costs. 
D)  initially lower, then higher costs.

Question 16

Suppose that production for good X is characterized by the following production function,Q = 4K0.5L0.5,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:

Accepted Answer

A)  $5.25. 
B)  $22.50. 
C)  $31.00. 
D)  There is insufficient information to determine the average total costs.

Question 17

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.
 $$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline ( I ) & ( 2 ) & ( 3 ) & ( 4 ) & ( 5 ) & ( 6 ) & ( 7 ) & ( 8 ) \
\hline Q & R C & V C & T C & A F C & A D C & A T C & M C \
\hline 0 & & & 1,000 & & & & \
\hline 10 & & & 2,000 & & & & \
\hline 20 & & & 2,500 & & & & \
\hline 30 & & & 4,000 & & & & \
\hline 40 & & & 6,000 & & & & \
\hline 50 & & & 10,000 & & & & \
\hline 60 & & & 15,000 & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of The total costs for Morris Industries are...

Question 18

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

Accepted Answer

A)  $401 
B)  $1,060 
C)  $560 
D)  $1,010

Question 19

The Cobb-Douglas production function is:

Accepted Answer

A)  Q = aK + bL. 
B)  Q = min {bK, cL}. 
C)  Q = max {bK, cL}. 
D)  Q = KaLb.

Question 20

For the cost function C(Q)= 75 + 4Q + 2Q2,the marginal cost of producing 5 units of output is:

Accepted Answer

A)  4. 
B)  54. 
C)  20. 
D)  24.

Exam 5: The Production Process and Costs

For the cost function C(Q) = 1000 + 14Q + 9Q² + 3Q³,what is the marginal cost of producing the fourth unit of output?

The demand for an input is:

The maker of Turbotax produces software that prepares federal income tax returns.In addition,it produces software that prepares various state income tax returns.Why doesn't it pay for the firm to specialize in federal software?

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

Costs that are forever lost after they have been paid 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:

Which of the following relations is the slope along a given isoquant?

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

Suppose you are a manager of a factory.You purchase five (5) new machines at one million dollars each.If you can resell two of the machines for $500,000 and three of the machines for $200,000,what are the sunk costs of purchasing the machines?

The Leontief production function implies:

Economies of scale exist whenever long-run average costs:

For given input prices,isocosts closer to the origin are associated with:

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

The Cobb-Douglas production function is:

For the cost function C(Q) = 75 + 4Q + 2Q²,the marginal cost of producing 5 units of output is:

Exam 5: The Production Process and Costs

For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3,what is the marginal cost of producing the fourth unit of output?

The demand for an input is:

The maker of Turbotax produces software that prepares federal income tax returns.In addition,it produces software that prepares various state income tax returns.Why doesn't it pay for the firm to specialize in federal software?

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

Costs that are forever lost after they have been paid 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:

Which of the following relations is the slope along a given isoquant?

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

Suppose you are a manager of a factory.You purchase five (5) new machines at one million dollars each.If you can resell two of the machines for $500,000 and three of the machines for $200,000,what are the sunk costs of purchasing the machines?

The Leontief production function implies:

Economies of scale exist whenever long-run average costs:

For given input prices,isocosts closer to the origin are associated with:

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

The Cobb-Douglas production function is:

For the cost function C(Q) = 75 + 4Q + 2Q2,the marginal cost of producing 5 units of output is:

For the cost function C(Q) = 1000 + 14Q + 9Q² + 3Q³,what is the marginal cost of producing the fourth unit of output?

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

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

For the cost function C(Q) = 75 + 4Q + 2Q²,the marginal cost of producing 5 units of output is: