Question 1

Suppose a production function is q = K1/2L1/3 and in the short run capital (K)is fixed at 100. If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Accepted Answer

A) $2,000 
B) $200 
C) $20,000 
D) $0

Question 2

A firm's economic profits are given by

Accepted Answer

A) total revenue minus total accounting cost. 
B) the owner's opportunity cost. 
C) total revenue minus total economic cost. 
D) total revenue minus the cost of capital.

Question 3

Technical progress will

Accepted Answer

A) shift a firm's production function and its related cost curves. 
B) not affect the production function,but may shift cost curves. 
C) shift a firm's production function and alter its marginal revenue curve. 
D) shift a firm's production function and cause more capital (and less labor) to be hired.

Question 4

A firm's short-run average cost is defined as

Accepted Answer

A) the ratio of total output to short-run total cost. 
B) the ratio of short-run total cost to total output. 
C) the additional cost of producing one more unit of output while some input is fixed. 
D) the additional cost of producing one more unit of output while all inputs are fixed.

Question 5

Suppose a cost function is TC = Aq3 + bq2 + cq +d. Then the total fixed cost is

Accepted Answer

A) Aq2+ bq + cq +d/q 
B) Aq2 + bq + c 
C) Aq3 + bq2 + cq 
D) d

Question 6

Suppose MPL = 20 and MPK = 40 and the rental rate on capital is $10. If the level of production is currently efficient,the wage rate must be

Accepted Answer

A) $10 
B) $5 
C) $20 
D) $40

Question 7

A linear total cost curve which passes through the origin implies that

Accepted Answer

A) average cost is constant and marginal cost is variable. 
B) average cost is variable and marginal cost is constant. 
C) average and marginal costs are constant and equal. 
D) need more information to answer question.

Question 8

The shape of a firm's expansion path depends upon

Accepted Answer

A) the price of the labor input. 
B) the price of the capital input. 
C) the shape of the firm's production function. 
D) all of these factors.

Question 9

The shape of a firm's long-run average cost curve is determined by

Accepted Answer

A) the degree to which each input encounters diminishing marginal productivity. 
B) the underlying nature of the firm's production function when all inputs are able to be varied. 
C) how much the firm decides to produce. 
D) the way in which the firm's expansion path reacts to changes in the rental rate on capital.

Question 10

Suppose the production function for coffee (C)is C = min(B,W),where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Accepted Answer

A) B = 10W 
B) B = .1W 
C) B = W 
D) -10 = B + W

Question 11

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $6,what is the cost-minimizing fee combination producing P = 200?

Accepted Answer

A) C = 100 
B) S = 40 
C) C = 50,S = 20 
D) All points on the P = 200 isoquant would cost the same.

Question 12

A firm's marginal cost curve

Accepted Answer

A) is always U-shaped. 
B) always has a positive slope. 
C) is always below its average cost curve. 
D) always intersects its average cost curve at its minimum point.

Question 13

Suppose a production function is q = K1/2L1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Accepted Answer

A) q = 10L1/3 
B) q = 100L1/3 
C)  $q = \frac { 1 } { 10 } L ^ { 1 / 3 }$ 
D) q = 100

Question 14

The expansion path for a constant-returns-to-scale production function

Accepted Answer

A) is a straight line through the origin with a slope greater than 1 if w > v. 
B) is a straight line through the origin with a slope greater than 1 if w < v. 
C) is a straight line through the origin,though its slope cannot be determined by w and v alone. 
D) has a positive slope but is not necessarily a straight line.

Question 15

In the short run,

Accepted Answer

A) all inputs are fixed. 
B) all inputs are variable. 
C) some inputs are fixed. 
D) no production occurs.

Question 16

Suppose the production function for coffee (C)is C = min(B,W),where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

Accepted Answer

A) depends on the price of beans only. 
B) depends on the price of water only 
C) depends on the price of neither beans nor water. 
D) depends of the costs of both beans and water.

Question 17

The firm's expansion path records

Accepted Answer

A) profit-maximizing output choices for every possible price. 
B) cost-minimizing input choices for all possible output levels for when input prices expand along with production. 
C) cost-minimizing input choices for all possible output levels for a fixed set of input prices. 
D) cost-minimizing input choices for profit-maximizing output levels.

Question 18

In order to minimize the cost of a particular level of output,a firm should produce where

Accepted Answer

A) labor input equals capital input 
B) the RTS (of L for K) = $\frac { v } { w }$ 
C) the RTS (of L for K) = $\frac { w } { v }$ 
D) the MRS = $\frac { v } { w }$

Question 19

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost-minimizing feed combination producing P = 100?

Accepted Answer

A) C = 50 
B) S = 20 
C) C = 25,S = 10 
D) All points on the P = 100 isoquant,including those listed in a-c would cost the same.

Exam 7: Costs

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100. If the wage is $10 and the rental rate on capital is $20,the fixed cost is

A firm's economic profits are given by

Technical progress will

A firm's short-run average cost is defined as

Suppose a cost function is TC = Aq³ + bq² + cq +d. Then the total fixed cost is

Suppose MPL = 20 and MPK = 40 and the rental rate on capital is $10. If the level of production is currently efficient,the wage rate must be

A linear total cost curve which passes through the origin implies that

The shape of a firm's expansion path depends upon

The shape of a firm's long-run average cost curve is determined by

Suppose the production function for coffee (C) is C = min(B,W) ,where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $6,what is the cost-minimizing fee combination producing P = 200?

A firm's marginal cost curve

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

The expansion path for a constant-returns-to-scale production function

In the short run,

Suppose the production function for coffee (C) is C = min(B,W) ,where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

The firm's expansion path records

In order to minimize the cost of a particular level of output,a firm should produce where

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost-minimizing feed combination producing P = 100?

Exam 7: Costs

Suppose a production function is q = K1/2L1/3 and in the short run capital (K) is fixed at 100. If the wage is $10 and the rental rate on capital is $20,the fixed cost is

A firm's economic profits are given by

Technical progress will

A firm's short-run average cost is defined as

Suppose a cost function is TC = Aq3 + bq2 + cq +d. Then the total fixed cost is

Suppose MPL = 20 and MPK = 40 and the rental rate on capital is $10. If the level of production is currently efficient,the wage rate must be

A linear total cost curve which passes through the origin implies that

The shape of a firm's expansion path depends upon

The shape of a firm's long-run average cost curve is determined by

Suppose the production function for coffee (C) is C = min(B,W) ,where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $6,what is the cost-minimizing fee combination producing P = 200?

A firm's marginal cost curve

Suppose a production function is q = K1/2L1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

The expansion path for a constant-returns-to-scale production function

In the short run,

Suppose the production function for coffee (C) is C = min(B,W) ,where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

The firm's expansion path records

In order to minimize the cost of a particular level of output,a firm should produce where

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost-minimizing feed combination producing P = 100?

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100. If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Suppose a cost function is TC = Aq³ + bq² + cq +d. Then the total fixed cost is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is