question
What is the MRTS for a firm with the following Cobb-Douglas production function , q = 200L0.5K0.5 with L = 4 and K = 16?
answer
MRTS = -4
question
The above figure shows Bobby's indifference map for soda and juice. B1 indicates his original budget line. B2 indicates his budget line resulting from a decrease in the price of soda. What change in quantity best represents his substitution effect?
answer
3
question
Joey cuts lawns during the summer. Let q equal the number of acres mowed per day, and let L equal the
number of hours worked per day. Joey never works more than eight hours per day, and during that time his short-run production function is q = 0.2 * L. Which of the following statements is FALSE?
number of hours worked per day. Joey never works more than eight hours per day, and during that time his short-run production function is q = 0.2 * L. Which of the following statements is FALSE?
answer
Joey's marginal productivity diminishes by 0.2 for each additional hour worked
question
The above figure shows Larry's indifference map and budget lines for ham and pork. Which of the following
statements is TRUE?
statements is TRUE?
answer
Ham is an inferior good
question
Suppose the production of mp3 players can be represented by the following production function: q = L0.4K0.4. Which of the following statements is TRUE?
answer
the production function has decreasing returns to scale
question
The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines
resulting from different prices for snacks. As the price of snacks rises, Bobby's utility
resulting from different prices for snacks. As the price of snacks rises, Bobby's utility
answer
decreases
question
The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines
resulting from different prices for snacks assuming he has $20 to spend on these goods. Which of the following points are on Bobby's demand curve for snacks?
resulting from different prices for snacks assuming he has $20 to spend on these goods. Which of the following points are on Bobby's demand curve for snacks?
answer
p = 2, q = 5
question
If a person supplies more hours of labor in response to a wage increase, then
answer
the substitution effect is greater than the income effect
question
Johnny has worked as a CPA for five years and wants to open his own public accounting practice. The cost of his college degree in accounting represents
answer
a sunk cost
question
Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. Which of the following
statements is TRUE at all levels of production?
statements is TRUE at all levels of production?
answer
MC = AVC
question
Suppose the current market wage rate (w) is $4. In the short run, a firm's marginal cost at the current output level is $2. What is this firm's marginal product of labor?
answer
MPL = 2
question
If the marginal rate of technical substitution for a cost minimizing firm is -10, and the wage rate for labor is $5, what is the rental rate for capital in dollars?
answer
.5
question
A firm produces output according to the production function, q = 5L1/2K1/2 and faces input prices equal to w =$9 and r = $64. What is the minimum cost of producing 12 units of output?
answer
Cost = 115.20
question
Suppose TC = 10 + (0.1 *q2). If p = 10, the firm's profit-maximizing level of output is
answer
50
question
Assuming a horizontal long-run market supply curve, which of the following statements is (are) TRUE about
competitive firms in the long run?
competitive firms in the long run?
answer
All of the above
A) profit = 0
B) p = MC
C) p = AC
A) profit = 0
B) p = MC
C) p = AC
question
Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how many firms will this industry sustain in the long run?
answer
100
question
Suppose the long-run supply curve for a perfectly competitive industry is horizontal at a price of $12, and the minimum short-run average variable cost for each of the identical N firms in the industry is $8. If the demand curve for the industry decreases so that it intersects the short-run supply curve of the industry at $10,
answer
in the short run the price will decrease to $10, and the number of firms will still be N. In the long run the price will return to $12, and the number of firms will be less than N.
question
If average cost is decreasing
answer
marginal cost is less than average cost
question
The above figure shows supply and demand curves for milk (pg 9). In an effort to help farmers, the government
passes a law that establishes a $3 per gallon price support. To maintain the price support, government
expenditures must equal
passes a law that establishes a $3 per gallon price support. To maintain the price support, government
expenditures must equal
answer
f + g + h + i + j + k
question
The above figure shows supply and demand curves for milk. In an effort to help farms, the government passes a law that establishes a $3 per gallon price support, but allows farmers to decide how much milk to produce. The government then provides a deficiency payment to guarantee that the farmers receive $3 per gallon. The
welfare loss of this price support is
welfare loss of this price support is
answer
j
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