Question 1

Refer to the following:
   The price of capital is $500 per unit.
-Which of the following combinations of capital and labor lies on the expansion path?

Accepted Answer

A)  500L, 100K 
B)  800L, 160K 
C)  1100L, 220K 
D)  both a and b 
E)  none of the above 
A)  500L, 100K 
B)  800L, 160K 
C)  1100L, 220K 
D)  both a and b 
E)  none of the above E

Question 2

Refer to the following:
   
The price of labor is $3 per unit.
-What is the minimum cost of producing 100 units of output?

Accepted Answer

A)  $150 
B)  $105 
C)  $ 75 
D)  $ 60 
A)  $150 
B)  $105 
C)  $ 75 
D)  $ 60 B

Question 3

Refer to the following:
   The price of capital is $100 per unit.
-If a firm decides that total cost must not exceed $3,500, what is the maximum amount of output it can produce?

Accepted Answer

A)  100 
B)  500 
C)  1,000 
D)  1,500 
E)  none of the above 
A)  100 
B)  500 
C)  1,000 
D)  1,500 
E)  none of the above C

Question 4

Refer to the following:
   The price of labor is $15 per unit.
-How many units of labor should a firm use to produce 2,000 units of output at the least cost?

Accepted Answer

A)  40 
B)  50 
C)  80 
D)  100 
E)  none of the above 
A)  40 
B)  50 
C)  80 
D)  100 
E)  none of the above

Question 5

Which of the following is FALSE?

Accepted Answer

A)  A change in input prices shifts the isoquant map. 
B)  Convex isoquants mean that the marginal rate of technical substitution decreases as the firm substitutes labor for capital. 
C)  A change in cost shifts the isocost curve. 
D)  At the optimal input choice, the rate at which the firm can substitute labor for capital in production is equal to the rate at which the firm can substitute labor for capital in the market. 
E)  none of the above. 
A)  A change in input prices shifts the isoquant map. 
B)  Convex isoquants mean that the marginal rate of technical substitution decreases as the firm substitutes labor for capital. 
C)  A change in cost shifts the isocost curve. 
D)  At the optimal input choice, the rate at which the firm can substitute labor for capital in production is equal to the rate at which the firm can substitute labor for capital in the market. 
E)  none of the above.

Question 6

Answer the following questions concerning an expansion path.
a. At each point on an expansion path _________ equals _________ or, alternatively, _________ equals _________.
b. An expansion path shows each combination of inputs that _________ of producing _________.
c. An expansion path also shows each combination of inputs that maximizes ____________ at each _____________________.

Accepted Answer

a. MRTS; the input price ratio

Question 7

A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last printing press added 50 books to total output. The publishing house

Accepted Answer

A)  is using the cost-minimizing combination of printers and printing presses. 
B)  should use more printers because they are cheaper than printing presses. 
C)  should use more printing presses because they are more productive than printers. 
D)  could produce the same number of books at a lower cost by using more printing presses and fewer printers. 
E)  could produce the same number of books at a lower cost by using more printers and fewer printing presses. 
A)  is using the cost-minimizing combination of printers and printing presses. 
B)  should use more printers because they are cheaper than printing presses. 
C)  should use more printing presses because they are more productive than printers. 
D)  could produce the same number of books at a lower cost by using more printing presses and fewer printers. 
E)  could produce the same number of books at a lower cost by using more printers and fewer printing presses.

Question 8

In the long run

Accepted Answer

A)  all inputs are fixed. 
B)  a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. 
C)  the expansion path shows how the input marginal products change as the firm's output level changes. 
D)  both a and b 
E)  none of the above 
A)  all inputs are fixed. 
B)  a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. 
C)  the expansion path shows how the input marginal products change as the firm's output level changes. 
D)  both a and b 
E)  none of the above

Question 9

Economies of scale exist when

Accepted Answer

A)  fixed cost decreases as output increases. 
B)  long-run average cost decreases as output increases. 
C)  long-run marginal cost is less than long-run average cost. 
D)  both a and b 
E)  both b and c 
A)  fixed cost decreases as output increases. 
B)  long-run average cost decreases as output increases. 
C)  long-run marginal cost is less than long-run average cost. 
D)  both a and b 
E)  both b and c

Question 10

Refer to the following:
The price of capital (r) is $20.
  
-If, at the optimal combination of inputs for producing 14,000 units of output, the marginal product of capital is 40, what is the marginal product of labor?

Accepted Answer

A)  60 
B)  40 
C)  27.67 
D)  80 
E)  impossible to tell from the graph 
A)  60 
B)  40 
C)  27.67 
D)  80 
E)  impossible to tell from the graph

Question 11

Refer to the following:

A producer is hiring 20 units of labor and 6 units of capital (bundle A).  The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20.

-The producer

Accepted Answer

A)  is using the optimal combination of capital and labor. 
B)  should use more labor and less capital. 
C)  should use more capital and less labor. 
D)  cannot determine without more information. 
A)  is using the optimal combination of capital and labor. 
B)  should use more labor and less capital. 
C)  should use more capital and less labor. 
D)  cannot determine without more information.

Question 12

Refer to the following:
The price of capital is $12 per unit.
  
-If the price of labor is $30 per unit, the lowest possible cost of producing 200 units of output is

Accepted Answer

A)  $1,200. 
B)  $2,400. 
C)  $3,000. 
D)  $4,000. 
E)  none of the above 
A)  $1,200. 
B)  $2,400. 
C)  $3,000. 
D)  $4,000. 
E)  none of the above

Question 13

Refer to the following:
The price of capital (r) is $20.
  
-What combination of K and L should the firm choose to produce 14,000 units of output at the lowest cost?

Accepted Answer

A)  180K, 120L 
B)  180K, 0L 
C)  60K, 120L 
D)  90K, 60L 
E)  none of the above 
A)  180K, 120L 
B)  180K, 0L 
C)  60K, 120L 
D)  90K, 60L 
E)  none of the above

Question 14

In the following figure, isoquant I is one of a firm's isoquants:
   
a. The marginal rate of technical substitution between points A and C is _________.
b. The marginal rate of technical substitution between points C and B is _________.
c. The marginal rate of technical substitution at point C is _________.

Accepted Answer

a. 2 
b. ½

Question 15

Refer to the following:
   The price of capital is $100 per unit; the price of labor is $25 per unit.
-When output is 20 units, what is AVERAGE cost?

Accepted Answer

A)  $350 
B)  $700 
C)  $3,500 
D)  $7,000 
E)  none of the above 
A)  $350 
B)  $700 
C)  $3,500 
D)  $7,000 
E)  none of the above

Question 16

To answer the  questions, use the following figure that shows a firm's isoquant for producing 3,000 units of output and four isocost curves. Labor and capital each cost $100 per unit.
  
-Answer the following:
a. At point A, the MRTS is ____________ (less than, greater than, equal to) the input price ratio, w/r. The total cost of producing 3,000 units of output with input combination A is $____________.
b. By moving from A to B, the firm _______________ (increases, decreases) labor usage and _______________ (increases, decreases) capital usage. At point B the MRTS is _______________ (greater than, less than, equal to) the input price ratio, w/r. The movement from A to B _______________ (increased, decreased) total cost by $_________.
c. At point C the firm __________________ the cost of producing 3,000 units of output. The MRTS is _______________ (greater than, less than, equal to) the input price ratio, w/r.
d. The optimal input combination is _________ units of labor and _________ units of capital. At this combination, total cost of producing 3,000 units is $____________.

Accepted Answer

a. greater than; $4,000 
b. in

Question 17

Refer to the following:
The price of capital (r) is $20.
  
-What is the lowest possible cost of producing 5,000 units of output?

Accepted Answer

A)  $1,800 
B)  $2,400 
C)  $2,600 
D)  $1,400 
E)  $3,000 
A)  $1,800 
B)  $2,400 
C)  $2,600 
D)  $1,400 
E)  $3,000

Question 18

Refer to the following:
The price of capital (r) is $20.
  
-What combination of labor (L) and capital (K) can produce 5,000 units of output at lowest cost?

Accepted Answer

A)  90K, 60L 
B)  110K, 10L 
C)  42K, 52L 
D)  60K, 20L 
E)  10K, 110L 
A)  90K, 60L 
B)  110K, 10L 
C)  42K, 52L 
D)  60K, 20L 
E)  10K, 110L

Question 19

Refer to the following figure:
   The price of capital is $50 per unit.
-What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

Accepted Answer

A)  0.80 
B)  0.40 
C)  2.50 
D)  2.00 
E)  impossible to tell without marginal products 
A)  0.80 
B)  0.40 
C)  2.50 
D)  2.00 
E)  impossible to tell without marginal products

Question 20

Refer to the following:
   The price of capital is $500 per unit.
-At point A, the firm can exchange

Accepted Answer

A)  1 unit of capital for 5 units of labor and keep output unchanged. 
B)  5 units of capital for 1 unit of labor and keep output unchanged. 
C)  5 units of capital for 1 unit of labor and keep cost unchanged. 
D)  both b and c 
E)  none of the above 
A)  1 unit of capital for 5 units of labor and keep output unchanged. 
B)  5 units of capital for 1 unit of labor and keep output unchanged. 
C)  5 units of capital for 1 unit of labor and keep cost unchanged. 
D)  both b and c 
E)  none of the above

Refer to the following: The price of capital is $500 per unit. -Which of the following combinations of capital and labor lies on the expansion path?

Refer to the following: The price of labor is $3 per unit. -What is the minimum cost of producing 100 units of output?

Refer to the following: The price of capital is $100 per unit. -If a firm decides that total cost must not exceed $3,500, what is the maximum amount of output it can produce?

Refer to the following: The price of labor is $15 per unit. -How many units of labor should a firm use to produce 2,000 units of output at the least cost?

Which of the following is FALSE?

A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last printing press added 50 books to total output. The publishing house

In the long run

Economies of scale exist when

Refer to the following: The price of capital (r) is $20. -If, at the optimal combination of inputs for producing 14,000 units of output, the marginal product of capital is 40, what is the marginal product of labor?

Refer to the following: A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. -The producer

Refer to the following: The price of capital is $12 per unit. -If the price of labor is $30 per unit, the lowest possible cost of producing 200 units of output is

Refer to the following: The price of capital (r) is $20. -What combination of K and L should the firm choose to produce 14,000 units of output at the lowest cost?

In the following figure, isoquant I is one of a firm's isoquants: a. The marginal rate of technical substitution between points A and C is _____. b. The marginal rate of technical substitution between points C and B is _. c. The marginal rate of technical substitution at point C is _____.

Refer to the following: The price of capital is $100 per unit; the price of labor is $25 per unit. -When output is 20 units, what is AVERAGE cost?

Refer to the following: The price of capital (r) is $20. -What is the lowest possible cost of producing 5,000 units of output?

Refer to the following: The price of capital (r) is $20. -What combination of labor (L) and capital (K) can produce 5,000 units of output at lowest cost?

Refer to the following figure: The price of capital is $50 per unit. -What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

Refer to the following: The price of capital is $500 per unit. -At point A, the firm can exchange

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 Estimation

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 9: Production and Cost in the Long Run

Refer to the following: The price of capital is $500 per unit. -Which of the following combinations of capital and labor lies on the expansion path?

Refer to the following: The price of labor is $3 per unit. -What is the minimum cost of producing 100 units of output?

Refer to the following: The price of capital is $100 per unit. -If a firm decides that total cost must not exceed $3,500, what is the maximum amount of output it can produce?

Refer to the following: The price of labor is $15 per unit. -How many units of labor should a firm use to produce 2,000 units of output at the least cost?

Which of the following is FALSE?

A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last printing press added 50 books to total output. The publishing house

In the long run

Economies of scale exist when

Refer to the following: The price of capital (r) is $20. -If, at the optimal combination of inputs for producing 14,000 units of output, the marginal product of capital is 40, what is the marginal product of labor?

Refer to the following: A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. -The producer

Refer to the following: The price of capital is $12 per unit. -If the price of labor is $30 per unit, the lowest possible cost of producing 200 units of output is

Refer to the following: The price of capital (r) is $20. -What combination of K and L should the firm choose to produce 14,000 units of output at the lowest cost?

Refer to the following: The price of capital is $100 per unit; the price of labor is $25 per unit. -When output is 20 units, what is AVERAGE cost?

Refer to the following: The price of capital (r) is $20. -What is the lowest possible cost of producing 5,000 units of output?

Refer to the following: The price of capital (r) is $20. -What combination of labor (L) and capital (K) can produce 5,000 units of output at lowest cost?

Refer to the following figure: The price of capital is $50 per unit. -What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

Refer to the following: The price of capital is $500 per unit. -At point A, the firm can exchange

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 Estimation

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