Question 1

If a firm's production function is f(z1,z2)= z1 + z2, its minimum cost of producing y units of output is:

Accepted Answer

A) y min(w1,w2). 
B) y(w1 + w2). 
C) y(w1 + w2)/2. 
D) yw1, if w1 2. 
A) y min(w1,w2). 
B) y(w1 + w2). 
C) y(w1 + w2)/2. 
D) yw1, if w1 2.

Question 2

A firm is currently producing 200 units of output using 60 hours of labour and 80 hours of capital. The marginal product of labour is 12 units of output per hour, and the marginal product of capital is 15 units of output per hour. If the wage rate is $6 per hour and the rental rate of capital is $3 per hour, then:

Accepted Answer

A) the firm should use more capital and less labour. 
B) the firm should use more labour and less capital. 
C) we cannot determine if the firm's use of inputs is efficient without more information. 
D) the firm's use of labour and capital is cost- efficient. 
A) the firm should use more capital and less labour. 
B) the firm should use more labour and less capital. 
C) we cannot determine if the firm's use of inputs is efficient without more information. 
D) the firm's use of labour and capital is cost- efficient.

Question 3

Suppose Diane's spa operates with the production function y = (1200z1z2)2/3. Diane's production function exhibits

Accepted Answer

A) scale production cannot be determined 
B) constant returns to scale 
C) increasing returns to scale 
D) decreasing returns to scale 
A) scale production cannot be determined 
B) constant returns to scale 
C) increasing returns to scale 
D) decreasing returns to scale

Question 4

The demand for inputs is conditional on the:

Accepted Answer

A) consumers' choice problem. 
B) marginal rate of technical substitution. 
C) supply of inputs. 
D) level of output. 
A) consumers' choice problem. 
B) marginal rate of technical substitution. 
C) supply of inputs. 
D) level of output.

Question 5

An isocost line is defined as the set of input bundles that:

Accepted Answer

A) can be produced at some specified cost. 
B) generate one particular level of output. 
C) produce the profit- maximizing level of output. 
D) can be purchased with a specified sum of money. 
A) can be produced at some specified cost. 
B) generate one particular level of output. 
C) produce the profit- maximizing level of output. 
D) can be purchased with a specified sum of money.

Question 6

When long run average costs reach their minimum, they:

Accepted Answer

A) are less than long run marginal cost. 
B) also minimize the long run marginal cost. 
C) are equal to long run marginal cost. 
D) are greater than long run marginal cost. 
A) are less than long run marginal cost. 
B) also minimize the long run marginal cost. 
C) are equal to long run marginal cost. 
D) are greater than long run marginal cost.

Question 7

If the price of just one input rises, a cost- maximizing firm that maintains a constant level of output will use less of the higher- priced input:

Accepted Answer

A) if the substitution effect outweighs the output effect. 
B) and all other inputs. 
C) if the output effect outweighs the substitution effect. 
D) in all cases. 
A) if the substitution effect outweighs the output effect. 
B) and all other inputs. 
C) if the output effect outweighs the substitution effect. 
D) in all cases.

Question 8

If a firm's production function is f(z1,z2)= z1 + z2, it exhibits:

Accepted Answer

A) decreasing returns to scale. 
B) increasing returns to scale. 
C) initially increasing, and subsequently decreasing returns to scale. 
D) constant returns to scale. 
A) decreasing returns to scale. 
B) increasing returns to scale. 
C) initially increasing, and subsequently decreasing returns to scale. 
D) constant returns to scale.

Question 9

If the production function is f(z1,z2)= min(z1,z2)and if the price of z1 is $20 and the price of z2 is
$15, then the minimum cost of producing 10 units of output is:

Accepted Answer

A) $350. 
B) $150. 
C) $200. 
D) $175. 
A) $350. 
B) $150. 
C) $200. 
D) $175.

Question 10

Suppose Tariq's body shop operates with the production function y = (1200z1z2)1/2. Tariq's production function exhibits

Accepted Answer

A) decreasing returns to scale 
B) scale production cannot be determined 
C) increasing returns to scale 
D) constant returns to scale 
A) decreasing returns to scale 
B) scale production cannot be determined 
C) increasing returns to scale 
D) constant returns to scale

Question 11

If a firm is producing at minimum cost and experiences a 4% increase in all input prices

Accepted Answer

A) output will fall by 4% 
B) profits will fall by 4% 
C) demand for all inputs will fall by 4% 
D) total costs increase by 4% 
A) output will fall by 4% 
B) profits will fall by 4% 
C) demand for all inputs will fall by 4% 
D) total costs increase by 4%

Question 12

Increasing returns to scale are said to occur when:

Accepted Answer

A) the scale elasticity of output is positive. 
B) the slope of the production function exceeds 1. 
C) the scale elasticity of output exceeds 1. 
D) the scale elasticity of output is increasing. 
A) the scale elasticity of output is positive. 
B) the slope of the production function exceeds 1. 
C) the scale elasticity of output exceeds 1. 
D) the scale elasticity of output is increasing.

Question 13

If the MRTS is constant:

Accepted Answer

A) the inputs are perfect substitutes. 
B) we are dealing with a fixed- proportions production function. 
C) the inputs are perfect complements. 
D) the production function exhibits constant returns to scale. 
A) the inputs are perfect substitutes. 
B) we are dealing with a fixed- proportions production function. 
C) the inputs are perfect complements. 
D) the production function exhibits constant returns to scale.

Question 14

A manufacturing firm uses only capital (K)and labour (L)to produce its product, using a production function of Q = 10KL. It pays its workers w = $15 per hour and has a rental cost of capital of r = $5 per hour. If the firm wants to produce 480 units of output, the optimal bundle of inputs is:

Accepted Answer

A) (3, 16). 
B) (4, 12). 
C) (12, 4) 
D) (6, 8). 
A) (3, 16). 
B) (4, 12). 
C) (12, 4) 
D) (6, 8).

Question 15

If a firm's cost functions fit the standard stylization, as its output increases its marginal and average costs:

Accepted Answer

A) decrease, then are constant, then increase. 
B) are constant, then increase, then decrease. 
C) increase, then decrease, then are constant. 
D) increase, then are constant, then decrease. 
A) decrease, then are constant, then increase. 
B) are constant, then increase, then decrease. 
C) increase, then decrease, then are constant. 
D) increase, then are constant, then decrease.

Question 16

Holding output constant, the MRTS is:

Accepted Answer

A) the ratio of the total products of two inputs. 
B) the ratio of the prices of two inputs. 
C) the ratio of the APs of two inputs. 
D) the ratio of the MPs of two inputs. 
A) the ratio of the total products of two inputs. 
B) the ratio of the prices of two inputs. 
C) the ratio of the APs of two inputs. 
D) the ratio of the MPs of two inputs.

Question 17

The Marginal Rate of Technical Substitution refers to:

Accepted Answer

A) the rate of exchange between inputs, holding output constant. 
B) the process of developing technical innovations. 
C) the rate of exchange between goods, holding utility constant. 
D) the process of adopting technical innovations. 
A) the rate of exchange between inputs, holding output constant. 
B) the process of developing technical innovations. 
C) the rate of exchange between goods, holding utility constant. 
D) the process of adopting technical innovations.

Question 18

If MPL/wL > MPK/wK, then the firm should produce using:

Accepted Answer

A) less L and less K. 
B) less L and more K. 
C) more L and more K. 
D) more L and less K. 
A) less L and less K. 
B) less L and more K. 
C) more L and more K. 
D) more L and less K.

Question 19

If a firm is producing at minimum cost using positive amounts of two inputs, an increase in the price of input one will cause

Accepted Answer

A) a decrease in the marginal rate of technical substitution 
B) an increase in the marginal product of input one 
C) a decrease in the absolute value of the slope of the isocost 
D) a decrease in the marginal product of input one 
A) a decrease in the marginal rate of technical substitution 
B) an increase in the marginal product of input one 
C) a decrease in the absolute value of the slope of the isocost 
D) a decrease in the marginal product of input one

Question 20

An input is said to be an inferior input if:

Accepted Answer

A) the quantity demanded falls as output rises. 
B) MP falls as more of the input is employed. 
C) output falls as more of the input is employed. 
D) the quantity demanded rises as its price rises. 
A) the quantity demanded falls as output rises. 
B) MP falls as more of the input is employed. 
C) output falls as more of the input is employed. 
D) the quantity demanded rises as its price rises.

If a firm's production function is f(z₁,z₂)= z₁+ z₂, its minimum cost of producing y units of output is:

Suppose Diane's spa operates with the production function y = (1200z₁z₂)^2/3. Diane's production function exhibits

The demand for inputs is conditional on the:

An isocost line is defined as the set of input bundles that:

When long run average costs reach their minimum, they:

If the price of just one input rises, a cost- maximizing firm that maintains a constant level of output will use less of the higher- priced input:

If a firm's production function is f(z₁,z₂)= z₁+ z₂, it exhibits:

If the production function is f(z₁,z₂)= min(z₁,z₂)and if the price of z₁is $20 and the price of z₂is $15, then the minimum cost of producing 10 units of output is:

Suppose Tariq's body shop operates with the production function y = (1200z₁z₂)^1/2. Tariq's production function exhibits

If a firm is producing at minimum cost and experiences a 4% increase in all input prices

Increasing returns to scale are said to occur when:

If the MRTS is constant:

A manufacturing firm uses only capital (K)and labour (L)to produce its product, using a production function of Q = 10KL. It pays its workers w = $15 per hour and has a rental cost of capital of r = $5 per hour. If the firm wants to produce 480 units of output, the optimal bundle of inputs is:

If a firm's cost functions fit the standard stylization, as its output increases its marginal and average costs:

Holding output constant, the MRTS is:

The Marginal Rate of Technical Substitution refers to:

If MPL/w_L> MPK/w_K_,then the firm should produce using:

If a firm is producing at minimum cost using positive amounts of two inputs, an increase in the price of input one will cause

An input is said to be an inferior input if:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 7: Production Cost: Many Variable Inputs

If a firm's production function is f(z1,z2)= z1 + z2, its minimum cost of producing y units of output is:

Suppose Diane's spa operates with the production function y = (1200z1z2)2/3. Diane's production function exhibits

The demand for inputs is conditional on the:

An isocost line is defined as the set of input bundles that:

When long run average costs reach their minimum, they:

If the price of just one input rises, a cost- maximizing firm that maintains a constant level of output will use less of the higher- priced input:

If a firm's production function is f(z1,z2)= z1 + z2, it exhibits:

If the production function is f(z1,z2)= min(z1,z2)and if the price of z1 is $20 and the price of z2 is $15, then the minimum cost of producing 10 units of output is:

Suppose Tariq's body shop operates with the production function y = (1200z1z2)1/2. Tariq's production function exhibits

If a firm is producing at minimum cost and experiences a 4% increase in all input prices

Increasing returns to scale are said to occur when:

If the MRTS is constant:

A manufacturing firm uses only capital (K)and labour (L)to produce its product, using a production function of Q = 10KL. It pays its workers w = $15 per hour and has a rental cost of capital of r = $5 per hour. If the firm wants to produce 480 units of output, the optimal bundle of inputs is:

If a firm's cost functions fit the standard stylization, as its output increases its marginal and average costs:

Holding output constant, the MRTS is:

The Marginal Rate of Technical Substitution refers to:

If MPL/wL > MPK/wK, then the firm should produce using:

If a firm is producing at minimum cost using positive amounts of two inputs, an increase in the price of input one will cause

An input is said to be an inferior input if:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

If a firm's production function is f(z₁,z₂)= z₁+ z₂, its minimum cost of producing y units of output is:

Suppose Diane's spa operates with the production function y = (1200z₁z₂)^2/3. Diane's production function exhibits

If a firm's production function is f(z₁,z₂)= z₁+ z₂, it exhibits:

If the production function is f(z₁,z₂)= min(z₁,z₂)and if the price of z₁is $20 and the price of z₂is $15, then the minimum cost of producing 10 units of output is:

Suppose Tariq's body shop operates with the production function y = (1200z₁z₂)^1/2. Tariq's production function exhibits

If MPL/w_L> MPK/w_K_,then the firm should produce using: