Exam 7: The Production Process: the Behavior of Profit-Maximizing Firms

Refer to the information provided in Figure 7.1 below to answer the following question(s). Figure 7.1 -Refer to Figure 7.1. A corn producer's profit is $1,500 and it is producing 500 bushels of output. Then he must have a cost per bushel of

A production function shows the least amount that a firm will produce given the amount of labor input.

Use the information provided in Table 7.1 below to answer the question(s) that follow. Inputs Required to Produce a Product Using Alternative Technologies Technology Units of Capital Number of Employees A 4 18 B 6 12 C 8 8 D 12 6 Table 7.1 -Refer to Table 7.1. Which technology is the most capital intensive?

If we assume that labor is the only variable input, the slope of the short-run ________ curve measures the marginal product of labor.

Refer to the information provided in Figure 7.6 below to answer the question(s) that follow. Figure 7.6 -Refer to Figure 7.6. If the price of capital is $10 and the price of labor is $20, the optimal production technique is

If the product derived from the last dollar spent on labor is greater than the product derived from the last dollar spent on capital, then the firm

Refer to the information provided in Figure 7.2 below to answer the question(s) that follow. Figure 7.2 -Refer to Figure 7.2. The average product with two workers is ________ lawns mowed.

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The firm's isocost line could shift from CD to CE if the

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. The firm is currently along isocost CE. If the price of capital is $12, then the price of labor is

Refer to Scenario 7.2 below to answer the question(s) that follow. SCENARIO 7.2: You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year. -Refer to Scenario 7.2. Your accounting profit last year was

Refer to the information provided in Figure 7.11 below to answer the question(s) that follow. Figure 7.11 -Refer to Figure 7.11. If the firm's cost of capital is $24 per unit and its cost of labor is $48 per unit, the isocost line represents a total cost of

The marginal products of the first, second, and third workers are 20, 12, and 8, respectively. If four workers can produce 45 units of output, then the marginal product of the fourth worker is

Firms have an incentive to substitute labor for capital as the

Refer to Scenario 7.3 below to answer the question(s) that follow. SCENARIO 7.3: Upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $60,000 annually. Last year you earned a total revenue of $100,000. Rent and supplies last year were $50,000. -Refer to Scenario 7.3. Your annual economic costs are

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost AB is

The point of tangency between an isocost line and an isoquant is necessarily

If diminishing marginal returns have already set in for Danica's Dog Training Emporium and the marginal product of the fifth dog trainer is 18, then the marginal product of the fourth dog trainer must be

If diminishing marginal returns have already set in for The Picture Perfect Framing Store and the marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer must be

Factors of production such as labor and capital

In the short run, a firm