question
A production function defines the output that can be produced
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if the firm is technically efficient
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Assume a Toyota plant manufactures automobiles according to the production function Q=2L+5K, where Q is the number of cars assembled per eight-hour shift, K (capital) is the number of robots used on the assembly line, and L (labor) is the number of workers hired per hour. If the Toyota plant uses K=20 robots and L=100 workers in order to produce Q=275 cars per shift, then we know that production is
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. technologically inefficient
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According to the table above, the marginal product of the 36th worker is
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42
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According to the table above, the average product of labor when 37 workers are employed is
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7.2
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Which of the following inputs are variable in the long run?
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all of these (Labor, Plant size, capital and Equipment)
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Assume the average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen
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average product is rising
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The law of diminishing returns assumes that
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there is at least one fixed input
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Marginal product crosses the horizontal axis (is equal to zero) at the point where
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total product is maximized
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The slope of the total product curve is the
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marginal product.
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You own a screen printing business with a fixed amount of presses (capital), and can change the number of workers that you employ per hour. Six employees can print an average product of five sweatshirts per person in each hour, and eight employees can print an average product of four sweatshirts per person in each hour. What is the marginal product of labor as you increase the labor from six to eight employees?
answer
MP = 1 sweatshirt
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If we take the production function and hold the level of output constant, allowing the amounts of capital and labor to vary, the curve that is traced out is called:
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an isoquant.
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According to the above diagram, which shows an isoquant for the production of soy, which point has the highest marginal productivity of capital?
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point A
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If capital is measured on the vertical axis and labor is measured on the horizontal axis, the slope of an isoquant can be interpreted as the
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rate at which the firm can replace capital with labor, holding output constant
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The marginal rate of technical substitution is equal to the
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ratio of the marginal products of the inputs
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A straight line isoquant
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would indicate that capital and labor are perfect substitutes in production
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An L-shaped isoquant
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would indicate that capital and labor cannot be substituted for each other in production
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A firm's marginal product of labor is 10 and it's marginal product of capital is 8. If the firm adds one unit of labor, but does not want its output to change, the firm should
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use 1.25 fewer units of capital
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Increasing returns to scale in production means
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less than twice as much of all inputs are required to double output
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With decreasing returns to scale, isoquants for unit increases in output get
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farther and farther apart
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A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function C = L0.5M0.75. This production function exhibits
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increasing returns to scale for all output levels
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A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function C = L0.5 + M0.75. This production function exhibits
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decreasing returns to scale for all output levels
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Which of the following production functions exhibits constant returns to scale?
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q = K + L
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The difference between the economic and accounting costs of a firm are
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the opportunity costs of the factors of production that the firm owns.
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Phyllis wants to buy two tickets to a concert. Tickets cost $15 each, and she expects to wait 30 minutes in line to buy them. If her wage is $16 per hour, the economic cost of the two tickets is
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$38
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Use the information in Scenario 1 below to answer the next 3 questions:
Scenario 1:
The average total cost (ATC) to produce 100 cookies is $0.25 per cookie. The marginal cost (MC) is constant at $0.10 for all cookies produced.
The total cost to produce 100 cookies is
Scenario 1:
The average total cost (ATC) to produce 100 cookies is $0.25 per cookie. The marginal cost (MC) is constant at $0.10 for all cookies produced.
The total cost to produce 100 cookies is
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$25.00
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According to the the information in Scenario 1 above, the total cost to produce 50 cookies is
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$20
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According to the information in Scenario 1 above, for 100 cookies, the average total cost is
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falling.
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Which of the following costs always declines as output increases?
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Average fixed cost
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Use the following cost function to answer the next (6) questions:
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's fixed cost:
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's fixed cost:
answer
4000
question
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's variable cost:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's variable cost:
answer
5Q+10Q2
question
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's average variable cost:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's average variable cost:
answer
5+10Q
question
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's average total cost:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's average total cost:
answer
4000/Q+5+10Q
question
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's marginal cost:
TC = 4000 + 5Q + 10Q2.
Write an expression for the firm's marginal cost:
answer
5+20Q
question
A firm's total cost function is given by the equation:
TC = 4000 + 5Q + 10Q2.
Determine the output level that minimizes ATC:
TC = 4000 + 5Q + 10Q2.
Determine the output level that minimizes ATC:
answer
20
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In a short-run production process, the marginal cost is rising and the average variable cost is falling as output is increased. Thus,
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marginal cost is below average variable cost.
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Trisha believes the production of a dress requires 4 labor hours and 2 machine hours to produce. If Trisha decides to operate in the short run, she must spend $500 to lease her business space. Also, a labor hour costs $15 (w) and a machine hour costs $35 (r). What is Trisha's cost of production as a function of dresses produced?
answer
C(Q)=500+130Q
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An isocost line reveals the
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input combinations that can be purchased with a given outlay of funds.
question
Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental rate of capital is $25 per hour, the slope of the isocost curve will be
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-4/5.
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A firm's expansion path isF
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a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices.
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At the optimum combination of two inputs,
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all of the above (the slopes of the isoquant and isocost curves are equal., costs are minimized for the production of a given output., the marginal rate of technical substitution equals the ratio of input prices.)
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Suppose that the price of labor (w) is $10 and the price of capital (r) is $20. What is the equation of the isocost line corresponding to a total cost of $100?
answer
100 = 10L + 20K
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A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm
answer
could reduce the cost of producing its current output level by employing more labor and less capital.
question
Use the following information to answer the next (5) questions:
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
What is the firm's optimal (cost minimizing) ratio of waste water to capital?
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
What is the firm's optimal (cost minimizing) ratio of waste water to capital?
answer
K=.25W
question
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
What is the equation of the firm's isocost line?
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
What is the equation of the firm's isocost line?
answer
300,000=7.50W+30K
question
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
Given the firm's $300,000 budget, how much waste water (W) should the firm employ?
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
Given the firm's $300,000 budget, how much waste water (W) should the firm employ?
answer
20,000 gallons
question
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
Given the firm's $300,000 budget, how much capital (K) should the firm employ?
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
Given the firm's $300,000 budget, how much capital (K) should the firm employ?
answer
5,000 hours
question
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
Given your previous answers about waste water and capital usage, how much output will the firm produce?
Q = 6KW,
where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year. The marginal products of capital and labor are given as follows:
MPK = 6W; MPW = 6K
The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The operating budget for capital and waste water is $300,000 per year.
Given your previous answers about waste water and capital usage, how much output will the firm produce?
answer
Q = 600,000,000
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