Question 1

An estimated short-run cost function

Accepted Answer

A)  can be used to make price and output decisions. 
B)  holds the capital stock constant. 
C)  can be estimated using time-series data. 
D)  both a and c 
E)  all of the above 
A)  can be used to make price and output decisions. 
B)  holds the capital stock constant. 
C)  can be estimated using time-series data. 
D)  both a and c 
E)  all of the above

Question 2

A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ2, is

Accepted Answer

A) a > 0, b > 0, c > 0 B) a > 0, b 0 C) a > 0, b > 0, c 0, b < 0, c < 0 A) a > 0, b > 0, c > 0 B) a > 0, b 0 C) a > 0, b > 0, c 0, b < 0, c < 0

Question 3

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$ 
Greene Enterprises faces total fixed costs (TFC) of $300,000.
-At Greene Enterprises, average variable cost (AVC) reaches its minimum value at $________.

Accepted Answer

A)  $28.00 
B)  $31.67 
C)  $39.64 
D)  $43.33 
E)  $82.00 
A)  $28.00 
B)  $31.67 
C)  $39.64 
D)  $43.33 
E)  $82.00

Question 4

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$ 
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
 $$\begin{array} { r l l l l l } 
\text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \
\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \
& & \begin{array} { l } 
\text { PARAMETER }
\end{array} & \text { STANDARD } & & \
\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \
\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \
\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }
\end{array}$$
-At Straker Industries, average variable cost (AVC) reaches its minimum value at $________.

Accepted Answer

A)  $24.50 
B)  $33.60 
C)  $72.80 
D)  $121.80 
A)  $24.50 
B)  $33.60 
C)  $72.80 
D)  $121.80

Question 5

When estimating a short-run production function of the form $Q = A L ^ { 3 } + B L ^ { 2 }$ , it is necessary to specify in the computer routine that

Accepted Answer

A)  A  0. 
C)  the intercept term is forced to equal zero. 
D)  a and b 
E)  all of the above 
A)  A  0. 
C)  the intercept term is forced to equal zero. 
D)  a and b 
E)  all of the above

Question 6

A linear specification, Q = aK + bL, is not appropriate for estimating a production function because

Accepted Answer

A)  the marginal products of the inputs are constant. 
B)  it does not allow the firm to substitute capital for labor. 
C)  the firm could produce positive levels of output at zero cost. 
D)  both b and c 
E)  all of the above 
A)  the marginal products of the inputs are constant. 
B)  it does not allow the firm to substitute capital for labor. 
C)  the firm could produce positive levels of output at zero cost. 
D)  both b and c 
E)  all of the above

Question 7

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$ 
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
 $$\begin{array} { r l l l l l } 
\text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \
\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \
& & \begin{array} { l } 
\text { PARAMETER }
\end{array} & \text { STANDARD } & & \
\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \
\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \
\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }
\end{array}$$
-If Straker Industries produces 12 units of output, what is estimated average variable cost (AVC)?

Accepted Answer

A)  $28.04 
B)  $32.40 
C)  $33.33 
D)  $38.60 
A)  $28.04 
B)  $32.40 
C)  $33.33 
D)  $38.60

Question 8

The empirical specification $T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }$ can be used to estimate

Accepted Answer

A)  a short-run cubic production function. 
B)  short-run cubic cost function. 
C)  a   -shaped TVC curve. 
D)  both b and c 
E)  none of the above 
A)  a short-run cubic production function. 
B)  short-run cubic cost function. 
C)  a   -shaped TVC curve. 
D)  both b and c 
E)  none of the above

Question 9

What is a problem with using a production function of the form Q = aK + bL (a > 0, b > 0)?

Accepted Answer

A)  MRTS is constant. 
B)  A positive output can be produced when one input is not used. 
C)  The marginal products of the inputs do not have diminishing marginal returns. 
D)  both a and b 
E)  all of the above 
A)  MRTS is constant. 
B)  A positive output can be produced when one input is not used. 
C)  The marginal products of the inputs do not have diminishing marginal returns. 
D)  both a and b 
E)  all of the above

Question 10

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$ 
Greene Enterprises faces total fixed costs (TFC) of $300,000.
-When Greene Enterprises produces 6,000 units, average variable cost (AVC) is $_________.

Accepted Answer

A)  $40 
B)  $49.62 
C)  $55 
D)  $60 
E)  $72.46 
A)  $40 
B)  $49.62 
C)  $55 
D)  $60 
E)  $72.46

Question 11

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$ 
Suppose the firm employs 12 units of capital.
-Average product when 10 units of labor are employed is

Accepted Answer

A)  12,248 
B)  13,142 
C)  14,287 
D)  15,984 
E)  30,672 
A)  12,248 
B)  13,142 
C)  14,287 
D)  15,984 
E)  30,672

Question 12

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$ 
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
 $$\begin{array} { r l l l l l } 
\text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \
\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \
& & \begin{array} { l } 
\text { PARAMETER }
\end{array} & \text { STANDARD } & & \
\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \
\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \
\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }
\end{array}$$
-The estimated short-run marginal cost function (SMC) at Straker Industries is:

Accepted Answer

A)  $S M C = 43.4 Q - 1.4 Q ^ { 2 } + 0.07 Q ^ { 3 }$ 
B)  $S M C = 43.4 - 1.4 Q + 0.07 Q ^ { 2 }$ 
C)  $S M C = 43.4 Q - 5.6 Q ^ { 2 } + 0.6 Q ^ { 3 }$ 
D)  $SM C = 43.4 - 5.6 Q + 0.6 Q ^ { 2 }$ 
A)  $S M C = 43.4 Q - 1.4 Q ^ { 2 } + 0.07 Q ^ { 3 }$ 
B)  $S M C = 43.4 - 1.4 Q + 0.07 Q ^ { 2 }$ 
C)  $S M C = 43.4 Q - 5.6 Q ^ { 2 } + 0.6 Q ^ { 3 }$ 
D)  $SM C = 43.4 - 5.6 Q + 0.6 Q ^ { 2 }$

Question 13

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$ 
Suppose the firm employs 12 units of capital.
-Marginal product when 10 units of labor are employed is

Accepted Answer

A)  12,248 
B)  13,142 
C)  14,287 
D)  15,984 
E)  30,672 
A)  12,248 
B)  13,142 
C)  14,287 
D)  15,984 
E)  30,672

Question 14

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$ 
Suppose the firm employs 12 units of capital.
-The product curve(s) in the short-run are

Accepted Answer

A)  TP = -12.96 L3 + 1,728L2. 
B)  AP = -12.96 L3 + 1,728L2. 
C)  MP = -38.88 L2 + 3,456L. 
D)  both a and b 
E)  both a and c 
A)  TP = -12.96 L3 + 1,728L2. 
B)  AP = -12.96 L3 + 1,728L2. 
C)  MP = -38.88 L2 + 3,456L. 
D)  both a and b 
E)  both a and c

Question 15

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$ 
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
 $$\begin{array} { r l l l l l } 
\text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \
\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \
& & \begin{array} { l } 
\text { PARAMETER }
\end{array} & \text { STANDARD } & & \
\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \
\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \
\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }
\end{array}$$
-If Straker Industries produces 12 units of output, what is estimated total variable cost (TVC)?

Accepted Answer

A)  $171.40 
B)  $463.20 
C)  $1,348 
D)  $2,348 
A)  $171.40 
B)  $463.20 
C)  $1,348 
D)  $2,348

An estimated short-run cost function

A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ², is

When estimating a short-run production function of the form $Q = A L ^ { 3 } + B L ^ { 2 }$ , it is necessary to specify in the computer routine that

A linear specification, Q = aK + bL, is not appropriate for estimating a production function because

The empirical specification $T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }$ can be used to estimate

What is a problem with using a production function of the form Q = aK + bL (a > 0, b > 0)?

Refer to the following: A firm estimates its long-run production function to be $Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$ Suppose the firm employs 12 units of capital. -Average product when 10 units of labor are employed is

Refer to the following: A firm estimates its long-run production function to be $Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$ Suppose the firm employs 12 units of capital. -Marginal product when 10 units of labor are employed is

Refer to the following: A firm estimates its long-run production function to be $Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$ Suppose the firm employs 12 units of capital. -The product curve(s) in the short-run are

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 10: Production and Cost Estimation

An estimated short-run cost function

A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ2, is

When estimating a short-run production function of the form Q=AL3+BL2Q = A L ^ { 3 } + B L ^ { 2 }Q=AL3+BL2 , it is necessary to specify in the computer routine that

A linear specification, Q = aK + bL, is not appropriate for estimating a production function because

The empirical specification TVC=aQ+bQ2+cQ3T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }TVC=aQ+bQ2+cQ3 can be used to estimate

What is a problem with using a production function of the form Q = aK + bL (a > 0, b > 0)?

Refer to the following: A firm estimates its long-run production function to be Q=−0.0075K−3L3+12K2L2Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }Q=−0.0075K−3L3+12K2L2 Suppose the firm employs 12 units of capital. -Average product when 10 units of labor are employed is

Refer to the following: A firm estimates its long-run production function to be Q=−0.0075K−3L3+12K2L2Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }Q=−0.0075K−3L3+12K2L2 Suppose the firm employs 12 units of capital. -Marginal product when 10 units of labor are employed is

Refer to the following: A firm estimates its long-run production function to be Q=−0.0075K−3L3+12K2L2Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }Q=−0.0075K−3L3+12K2L2 Suppose the firm employs 12 units of capital. -The product curve(s) in the short-run are

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ², is

When estimating a short-run production function of the form $Q = A L ^ { 3 } + B L ^ { 2 }$ , it is necessary to specify in the computer routine that

The empirical specification $T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }$ can be used to estimate

Refer to the following: A firm estimates its long-run production function to be $Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$ Suppose the firm employs 12 units of capital. -Average product when 10 units of labor are employed is

Refer to the following: A firm estimates its long-run production function to be $Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$ Suppose the firm employs 12 units of capital. -Marginal product when 10 units of labor are employed is

Refer to the following: A firm estimates its long-run production function to be $Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$ Suppose the firm employs 12 units of capital. -The product curve(s) in the short-run are