question

The marginal product of the second and third workers might be increasing because

answer

workers can

specialize at a separate task,

and output will increase at an increasing rate.

specialize at a separate task,

and output will increase at an increasing rate.

question

Eventually, as successive workers continue to be added to the production process,

answer

they may no longer be able to specialize, and output will increase at a diminishing rate.

question

A production function defines the output that can be produced

answer

if the firm is technically efficient.

question

A farmer uses L units of labor and K units of capital to produce Q units of corn using a production function F(K,L). A production plan that uses K' =L' = 10 to produce Q' units of corn where Q' < F (10,10) is said to be

answer

technically feasible and inefficient.

question

When labor usage is at 12 units, output is 36 units. From this, we may infer that

answer

the average product of labor is 3.

question

Calculate MPK given the following production function: q=2kL^2

answer

2L^2

question

Calcualte MPL given the following production function: q = 2KL^2

answer

4KL

question

What is the difference between a production function and an isoquant?

answer

A production function describes the maximum output that can be achieved with any given combination of inputs. An isoquant identifies all of the different combinations of inputs that can be used to produce one particular level of output.

question

The slope, or the MRTS, is constant. This means that the same number of units of one input can always be exchanged for a unit of the other input and output can be maintained. The inputs are perfect substitutes.

A.Convex isoquant

B.Linear Isoquant

C.L-shaped isoquant

A.Convex isoquant

B.Linear Isoquant

C.L-shaped isoquant

answer

Linear Isoquant

question

Within some range, a declining number of units of one input can be substituted for a unit of the other input, and output can be maintained at the same level. In this case, the MRTS is diminishing as we move down along the isoquant.

A.Convex isoquant

B.Linear Isoquant

C.L-shaped isoquant

A.Convex isoquant

B.Linear Isoquant

C.L-shaped isoquant

answer

Convex isoquant

question

The inputs are perfect complements, or that the firm is producing under a fixed proportions type of technology. In this case, the firm cannot give up one input in exchange for the other and still maintain the same level of output.

answer

L-shaped isoquant

question

Explain the term "marginal rate of technical substitution."

answer

The MRTS gives the amount by which the quantity of one input can be reduced when one extra unit of another input is used, so that output remains constant.

question

What does a MRTS = 6 mean? It means that if the input on the horizontal axis is increased by one unit, then the input on the vertical axis _____ by 6 units and output will ______.

answer

1.Decrease

2.Not change

2.Not change

question

Calculate MRTSLK given the following production function: q=2KL^2

answer

2K/L

question

The production function q=22K^0.5L^0.6 exhibits

answer

Increasing returns to scale

question

*How to tell if theres increasing, decreasing, or constant returns to scale

answer

Add the exponents and if they are >1 then it's increasing. <1 decreasing. =1 constant

question

If fixed costs are constant then it's ____-run

answer

short

question

Jose rents office space for $20,000 per year. He uses the office to fill out tax returns for 1,000 clients per year. If the office rent increases to $25,000 per year, the marginal cost of filling out tax returns will ______

answer

Not change

question

The production function for a product is given by q=100KL. Its marginal product functions are MPL=100K and MPK=100L. If the price of capital, r, is $120 per day and the price of labor, w, is $30 per day, what is the minimum cost of producing 10,000 units of output?

Part 2

The minimum cost of producing 10,000 units of output is $______

Part 2

The minimum cost of producing 10,000 units of output is $______

answer

$1,200

question

What do accounting costs include

answer

Accounting costs include only actual expenses plus depreciation.

question

Assume that a firm's production process is subject to increasing returns to scale over a broad range of outputs. Long-run average costs over this output will tend to

answer

decline.

question

*returns of scale

answer

...

question

*returns of scope

answer

...

question

When Ajax Co. produced 3 units of output per week, its total fixed cost was $100 and total variable cost was $45. When output increased to 4 units per week, total fixed cost remained at $100 and total variable cost increased to $65.

Part 2

When output was 4 units per week, total cost was ______

Part 3

When output was 4 units per week, average variable cost was ______

Part 4

When output was 4 units per week, average fixed cost was ______

Part 5

When output was 4 units per week, average total cost was ______

Part 6

The marginal cost of producing the fourth units was ______

Part 2

When output was 4 units per week, total cost was ______

Part 3

When output was 4 units per week, average variable cost was ______

Part 4

When output was 4 units per week, average fixed cost was ______

Part 5

When output was 4 units per week, average total cost was ______

Part 6

The marginal cost of producing the fourth units was ______

answer

1. 165

2. 16.25

3. 25

4. 41.25

5.20

2. 16.25

3. 25

4. 41.25

5.20

question

Suppose that a firm's production function is:

q=10L0.5K0.5.

Its marginal product functions are:

MPL=5K0.5/L0.5=0.5q/L

and

MPK=5L0.5/K0.5=0.5q/K.

The cost of a unit of labor, w, is $20 and the cost of a unit of capital, r, is $80.

Part 2

Initially, the firm is producing 140 units of output and has determined that the cost-minimizing quantities of labor and capital are 28 and 7, respectively.

Part 3

Suppose now that the firm wants to increase output to 280 units. If capital is fixed in the short run, how much labor will the firm require?

Part 4

The firm will now require ______ units of labor.

Part 5

If the marginal rate of technical substitution is KL, find the optimal level of capital and labor required to produce the 280 units of output.

Part 6

The optimal level of capital is ____ units and the optimal level of labor is ____ units. (Enter your responses as integers.)

q=10L0.5K0.5.

Its marginal product functions are:

MPL=5K0.5/L0.5=0.5q/L

and

MPK=5L0.5/K0.5=0.5q/K.

The cost of a unit of labor, w, is $20 and the cost of a unit of capital, r, is $80.

Part 2

Initially, the firm is producing 140 units of output and has determined that the cost-minimizing quantities of labor and capital are 28 and 7, respectively.

Part 3

Suppose now that the firm wants to increase output to 280 units. If capital is fixed in the short run, how much labor will the firm require?

Part 4

The firm will now require ______ units of labor.

Part 5

If the marginal rate of technical substitution is KL, find the optimal level of capital and labor required to produce the 280 units of output.

Part 6

The optimal level of capital is ____ units and the optimal level of labor is ____ units. (Enter your responses as integers.)

answer

1. 112

2.14

3.56

2.14

3.56

question

A firm produces output with capital and labor. Suppose currently the marginal product of labor is 17 and the marginal product of capital is 2. Each unit of labor costs $6 and each unit of capital costs $1. Is the firm minimizing the cost of production? Explain.

Part 2

Let MPK be the marginal product of capital, MPL be the marginal product of labor, r be the price of capital, w be the cost of labor, and MRTS be the marginal rate of technical substitution.

Part 3

The firm is

Part 4

A.

minimizing the cost of production because (MPK/r)<(MPL/w.)

B.

minimizing the cost of production because MRTS=(MPK)/(MPL.)

C.

minimizing the cost of production because (MPK/r)=(MPL/w.)

D.

not minimizing the cost of production because MRTS>(MPK/MPL.)

E.

not minimizing the cost of production because (MPK/r)<(MPL/w.)

Part 5

If not, how could the firm decrease the cost of production holding output constant?

Part 6

The firm could decrease the cost of production holding output constant by using more ____ and less _____.

Part 2

Let MPK be the marginal product of capital, MPL be the marginal product of labor, r be the price of capital, w be the cost of labor, and MRTS be the marginal rate of technical substitution.

Part 3

The firm is

Part 4

A.

minimizing the cost of production because (MPK/r)<(MPL/w.)

B.

minimizing the cost of production because MRTS=(MPK)/(MPL.)

C.

minimizing the cost of production because (MPK/r)=(MPL/w.)

D.

not minimizing the cost of production because MRTS>(MPK/MPL.)

E.

not minimizing the cost of production because (MPK/r)<(MPL/w.)

Part 5

If not, how could the firm decrease the cost of production holding output constant?

Part 6

The firm could decrease the cost of production holding output constant by using more ____ and less _____.

answer

1.not minimizing the cost of production because (MPK/r)<(MPL/w.)

2.labor

3.capital

2.labor

3.capital

question

Suppose a production function is given by: F(K,L)=KL2.

Its marginal product functions are:

MPL=2KL

and

MPK=L2.

The price of capital, r, is $40 and the price of labor, w, is $25. What combination of labor and capital minimizes the cost of producing any given output?

Part 2

The capital-to-labor ratio should be ____ to minimize the cost of producing any given output.

Its marginal product functions are:

MPL=2KL

and

MPK=L2.

The price of capital, r, is $40 and the price of labor, w, is $25. What combination of labor and capital minimizes the cost of producing any given output?

Part 2

The capital-to-labor ratio should be ____ to minimize the cost of producing any given output.

answer

.31

question

Which of the following is the user cost of capital per dollar of capital?

answer

A.The opportunity cost of capital

B.The user cost of capital

C.Depreciation + interest rate

D.All of the above

B.The user cost of capital

C.Depreciation + interest rate

D.All of the above

question

A firm's producer surplus equals its economic profit when

answer

fixed costs are zero.

question

The short-run supply curve for a competitive firm is

answer

its MC curve above the minimum point of the AVC curve.

question

A perfectly competitive firm maximizes its profit by

answer

producing the output at which marginal cost equals the market price.

question

Suppose you are the manager of a watchmaking firm operating in a competitive market. Your cost of production is given by

C=400+2q^2,

where q is the level of output and C is total cost.

If the price of a watch is $100, how many watches should you produce to maximize profits?

You should produce ____ watches. (Enter your response as an integer.)

What will the profit level be?

Profit will be ______.

C=400+2q^2,

where q is the level of output and C is total cost.

If the price of a watch is $100, how many watches should you produce to maximize profits?

You should produce ____ watches. (Enter your response as an integer.)

What will the profit level be?

Profit will be ______.

answer

1. 25

2. $850

2. $850

question

Suppose that a competitive firm has a total cost function of

C(q)=418+15q+2q^2

If the market price is P=$151 per unit, find the level of output produced by the firm. Find the level of profit.

The level of output produced by the firm is

q=_____ units.

The firm's profit is

π=_____

C(q)=418+15q+2q^2

If the market price is P=$151 per unit, find the level of output produced by the firm. Find the level of profit.

The level of output produced by the firm is

q=_____ units.

The firm's profit is

π=_____

answer

1. 34

2. $1894

2. $1894

question

Consider a perfectly competitive market in which each firm's short-run total cost function is C = 49 + 9q + q2, where q is the number of units of output produced. The associated marginal cost curve is MC = 9 + 2q.

In the short run each firm is willing to supply a positive amount of output at any price above $_____

If the market price is $29, each firm will produce ____ units in the short-run.

Each firm earns a profit of $____.

In the long run, firms will ____ the industry.

In the short run each firm is willing to supply a positive amount of output at any price above $_____

If the market price is $29, each firm will produce ____ units in the short-run.

Each firm earns a profit of $____.

In the long run, firms will ____ the industry.

answer

1. $9

2.10

3. 51

4. enter

2.10

3. 51

4. enter

question

*In a decreasing−cost industry, the long-run industry supply curve is

answer

downward sloping

question

All the Table questions

answer

...