Exam 6: Production Cost: One Variable Input

In a community where poor people do not associate with members of the opposite sex until they are 21 years old, the cost of hiring a teenage babysitter on weekends will be:

Suppose that the average product of labour is 100 and the marginal product of labour is 50 when 5 workers are employed. It therefore must be true that the average product of labour will be greater than 100 when one more worker is hired.

The US "cash for clunkers" program took roughly 7 million cars off the road. Economists would consider this a colossal failure because:

If a firm's Short- Run Total Cost function is given by STC = 4 + q², then:

If STC = 7q³ + 3q + 7, then AFC is:

The cost to an airline of letting its employees fly at no charge:

A profit maximizing firm would like to produce at least the number of units which minimizes short run:

SMC may be defined as the rate at which:

Suppose that a firm uses a technology for which the MP of a variable factor is initially rising. Then:

Which of the following statements is necessarily false?

Suppose the production function is F(L,K)= 3L + 2K. In the short run Labour is fixed at L = 2. If w = 2 and v = 1, what is the cheapest way to make 12 units of output in the short run?

In order to maximize output from a technology that uses one variable input, one must employ the input in such a way that its:

K and L are perfect substitutes in production in the following production function:

Which of the following is most likely to be a variable cost in the short run?

The law of diminishing returns to a variable input:

Self- interested commuters may choose a suboptimal equilibrium because:

Suppose the production function for widgets is given by Y = KL - 0.8K² - 0.2L² where Y represents the annual quantity of widgets produced, K represents annual capital input, and L represents annual labour input. i)Supposing K = 10, graph the total and average product of labour curves. At what level of labour input does this average product reach a maximum? How many widgets are produced at that point? ii)Again assuming that K = 10 graph the marginal product of labour (MPL)curve. At what level of labour input does MPL = 0? iii)Suppose that the capital inputs were increased to K = 20. How would your answers to parts a and b change?

A fixed- proportions production function is one in which:

Capital inputs may cause confusion if they are purchased because firms must:

If STC = 3q² + 7q, then: