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

Question 2

The scale- elasticity of output measures:

Accepted Answer

A) the slope of the production function. 
B) the responsiveness of factor supply to a change in factor price. 
C) responsiveness of output to a change in the scale of production. 
D) the degree to which inputs can be substituted as output changes. 
A) the slope of the production function. 
B) the responsiveness of factor supply to a change in factor price. 
C) responsiveness of output to a change in the scale of production. 
D) the degree to which inputs can be substituted as output changes.

Question 3

A normal input is:

Accepted Answer

A) one that is a complement with other inputs. 
B) one that increases in use with an increase in output. 
C) one that decreases in use when its price increases. 
D) one that increases in use when income increases. 
A) one that is a complement with other inputs. 
B) one that increases in use with an increase in output. 
C) one that decreases in use when its price increases. 
D) one that increases in use when income increases.

Question 4

If a firm's production function is f(z1,z2)= z1 + z2, and if the price of z1 is $10 and the price of z2 is
$8, then the minimum cost of producing 10 units of output is:

Accepted Answer

A) $180. 
B) $90. 
C) $80. 
D) $100. 
A) $180. 
B) $90. 
C) $80. 
D) $100.

Question 5

Scale elasticity refers to changes in:

Accepted Answer

A) output due to changes in cost. 
B) cost due to changes in output. 
C) output due to changes in scale. 
D) cost due to changes in scale. 
A) output due to changes in cost. 
B) cost due to changes in output. 
C) output due to changes in scale. 
D) cost due to changes in scale.

Question 6

A firm produces steel plates using a production process that can be described by the function: q = (KL)1/2.
i)How much output will the firm produce if it uses 1000 units of capital and 250 units of labour?
ii)If capital costs 25 per unit and labour costs 50 per unit, is the firm minimizing the long run costs when it uses 1000 units of capital and 250 units of labour?
iii)The national government wants to encourage companies to adopt new technologies. To that end, they offer tax credits for the purchase of new capital equipment, which effectively reduces the price of new capital. The credit applies only to additions to the firm's current capital stock. Show on a graph and explain what happens to the isocost line and the amounts of capital and labour the firm uses if they continue to produce the same level of output as before. You may assume the firm was previously in long run equilibrium.

Accepted Answer

i)Plug these input levels into the produ

Question 7

Suppose Kate's bakery operates with the production function y = (1200z1z2)1/3. Kate's production function exhibits

Accepted Answer

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

Question 8

The cost function, TC(y), shows the:

Accepted Answer

A) linear pattern of costs for homothetic production functions. 
B) relationship between expenditure on inputs and the scale of input use. 
C) minimum expenditure for different outputs, at constant input prices. 
D) minimum TC for a level of output, as input- prices vary. 
A) linear pattern of costs for homothetic production functions. 
B) relationship between expenditure on inputs and the scale of input use. 
C) minimum expenditure for different outputs, at constant input prices. 
D) minimum TC for a level of output, as input- prices vary.

Question 9

If input prices are constant and the quantity of an input decreases with increases in output, that input is said to be:

Accepted Answer

A) normal. 
B) inferior. 
C) advanced. 
D) obsolete. 
A) normal. 
B) inferior. 
C) advanced. 
D) obsolete.

Question 10

Explain the relationship between the long run marginal cost curve in the long- run average cost curve under conditions of decreasing returns to scale increasing returns to scale and constant returns to scale.

Accepted Answer

with increasing returns to scale, long-

Question 11

Define isoquant and isocost curves. If f(L,K)= 3L + 6K, and the price of capital is equal to 4, for what prices of labour would the firm hire only capital?

Accepted Answer

An isoquant is the set of all input bund

Question 12

When returns to scale are increasing, long run marginal cost is:

Accepted Answer

A) equal to long run average cost. 
B) greater than long run average cost. 
C) at its minimum. 
D) less than long run average cost. 
A) equal to long run average cost. 
B) greater than long run average cost. 
C) at its minimum. 
D) less than long run average cost.

Question 13

The Marginal Rate of Technical Substitution diminishes when:

Accepted Answer

A) marginal utility diminishes. 
B) demand curves slope down. 
C) isoquants are convex. 
D) isoquants are linear. 
A) marginal utility diminishes. 
B) demand curves slope down. 
C) isoquants are convex. 
D) isoquants are linear.

Question 14

For a firm that experiences decreasing returns to scale over the entire range of output:

Accepted Answer

A) the SRMC curve is downward- sloping. 
B) the LRAC curve is upward- sloping. 
C) the SRMC curve is upward- sloping. 
D) the SRAC curve is upward- sloping. 
A) the SRMC curve is downward- sloping. 
B) the LRAC curve is upward- sloping. 
C) the SRMC curve is upward- sloping. 
D) the SRAC curve is upward- sloping.

Question 15

When there are many inputs, a firm should employ them so that only inputs:

Accepted Answer

A) whose marginal product per dollar are identical are hired. 
B) with the lowest marginal cost are hired. 
C) with the highest marginal product are hired. 
D) whose marginal cost is less than their marginal product are hired. 
A) whose marginal product per dollar are identical are hired. 
B) with the lowest marginal cost are hired. 
C) with the highest marginal product are hired. 
D) whose marginal cost is less than their marginal product are hired.

Question 16

When the price of a resource increases, the cost minimizing quantity of that resource:

Accepted Answer

A) decreases. 
B) increases. 
C) is constant. 
D) does not increase. 
A) decreases. 
B) increases. 
C) is constant. 
D) does not increase.

Question 17

A change in the relative price of an input in the cost minimization problem:

Accepted Answer

A) leads to an increase in the use of the cheaper input. 
B) leads to less output being produced. 
C) leads to more output being produced. 
D) leads to higher profits. 
A) leads to an increase in the use of the cheaper input. 
B) leads to less output being produced. 
C) leads to more output being produced. 
D) leads to higher profits.

Question 18

In the long run a firm will attempt to

Accepted Answer

A) minimize average variable costs 
B) maximize profits subject to an output constraint 
C) minimize total costs subject to an input constraint 
D) minimize total costs subject to an output constraint 
A) minimize average variable costs 
B) maximize profits subject to an output constraint 
C) minimize total costs subject to an input constraint 
D) minimize total costs subject to an output constraint

Question 19

Suppose that Company X has a production function 3x+y. If the factor prices are 9 for x and 4 for y, how much will it cost to produce 50 units of output?

Accepted Answer

A) 200 
B) 875 
C) 1,550 
D) 150 
A) 200 
B) 875 
C) 1,550 
D) 150

Question 20

Long run total costs are always:

Accepted Answer

A) a function of inflation. 
B) greater than or equal to short run total costs. 
C) equal to short run total costs. 
D) less than or equal to short run total costs. 
A) a function of inflation. 
B) greater than or equal to short run total costs. 
C) equal to short run total costs. 
D) less than or equal to short run total costs.

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

The scale- elasticity of output measures:

A normal input is:

If a firm's production function is f(z₁,z₂)= z₁+ z₂, and if the price of z₁is $10 and the price of z₂is $8, then the minimum cost of producing 10 units of output is:

Scale elasticity refers to changes in:

Suppose Kate's bakery operates with the production function y = (1200z₁z₂)^1/3. Kate's production function exhibits

The cost function, TC(y), shows the:

If input prices are constant and the quantity of an input decreases with increases in output, that input is said to be:

Explain the relationship between the long run marginal cost curve in the long- run average cost curve under conditions of decreasing returns to scale increasing returns to scale and constant returns to scale.

Define isoquant and isocost curves. If f(L,K)= 3L + 6K, and the price of capital is equal to 4, for what prices of labour would the firm hire only capital?

When returns to scale are increasing, long run marginal cost is:

The Marginal Rate of Technical Substitution diminishes when:

For a firm that experiences decreasing returns to scale over the entire range of output:

When there are many inputs, a firm should employ them so that only inputs:

When the price of a resource increases, the cost minimizing quantity of that resource:

A change in the relative price of an input in the cost minimization problem:

In the long run a firm will attempt to

Suppose that Company X has a production function 3x+y. If the factor prices are 9 for x and 4 for y, how much will it cost to produce 50 units of output?

Long run total costs are always:

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:

The scale- elasticity of output measures:

A normal input is:

If a firm's production function is f(z1,z2)= z1 + z2, and if the price of z1 is $10 and the price of z2 is $8, then the minimum cost of producing 10 units of output is:

Scale elasticity refers to changes in:

Suppose Kate's bakery operates with the production function y = (1200z1z2)1/3. Kate's production function exhibits

The cost function, TC(y), shows the:

If input prices are constant and the quantity of an input decreases with increases in output, that input is said to be:

Explain the relationship between the long run marginal cost curve in the long- run average cost curve under conditions of decreasing returns to scale increasing returns to scale and constant returns to scale.

Define isoquant and isocost curves. If f(L,K)= 3L + 6K, and the price of capital is equal to 4, for what prices of labour would the firm hire only capital?

When returns to scale are increasing, long run marginal cost is:

The Marginal Rate of Technical Substitution diminishes when:

For a firm that experiences decreasing returns to scale over the entire range of output:

When there are many inputs, a firm should employ them so that only inputs:

When the price of a resource increases, the cost minimizing quantity of that resource:

A change in the relative price of an input in the cost minimization problem:

In the long run a firm will attempt to

Suppose that Company X has a production function 3x+y. If the factor prices are 9 for x and 4 for y, how much will it cost to produce 50 units of output?

Long run total costs are always:

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:

If a firm's production function is f(z₁,z₂)= z₁+ z₂, and if the price of z₁is $10 and the price of z₂is $8, then the minimum cost of producing 10 units of output is:

Suppose Kate's bakery operates with the production function y = (1200z₁z₂)^1/3. Kate's production function exhibits