Question 1

Refer to the following:
  
-What is the marginal rate of technical substitution at point D ?

Accepted Answer

A)  less than 1.5 
B)  less than 2.5 
C)  greater than 1.5 
D)  greater than 2.5 
A)  less than 1.5 
B)  less than 2.5 
C)  greater than 1.5 
D)  greater than 2.5

Question 2

Refer to the following:
   The price of capital is $100 per unit; the price of labor is $25 per unit.
-When output is 30 units, what is TOTAL cost?

Accepted Answer

A)  $1,000 
B)  $2,000 
C)  $10,000 
D)  $20,000 
E)  none of the above 
A)  $1,000 
B)  $2,000 
C)  $10,000 
D)  $20,000 
E)  none of the above

Question 3

Refer to the following:
   The price of capital is $100 per unit; the price of labor is $25 per unit.
-How much does the seventh unit of output add to total cost?

Accepted Answer

A)  nothing 
B)  $400 
C)  $800 
D)  $4,000 
E)  $8,000 
A)  nothing 
B)  $400 
C)  $800 
D)  $4,000 
E)  $8,000

Question 4

A cow will produce 8500 lbs. of milk if fed either 5000 lbs. of hay and 6200 lbs. of grain or 5600 lbs. of hay and 5400 lbs. of grain. Over this range, the marginal rate of technical substitution between hay and grain is

Accepted Answer

A)  0.17. 
B)  0.75. 
C)  0.98. 
D)  1.02. 
E)  6.00. 
A)  0.17. 
B)  0.75. 
C)  0.98. 
D)  1.02. 
E)  6.00.

Question 5

Refer to the following:
   The price of capital is $500 per unit.
-When output is 10,000 units, what is long-run average cost?

Accepted Answer

A)  $0.20 
B)  $5 
C)  $20 
D)  $500 
E)  none of the above 
A)  $0.20 
B)  $5 
C)  $20 
D)  $500 
E)  none of the above

Question 6

If the marginal rate of technical substitution of labor for capital is 6, the price of labor is $18, and the price of capital is $9, then the firm

Accepted Answer

A)  can substitute one unit of capital for six units of labor and keep output unchanged. 
B)  should use more labor and less capital. 
C)  should use more capital and less labor. 
D)  both a and b 
E)  both a and c 
A)  can substitute one unit of capital for six units of labor and keep output unchanged. 
B)  should use more labor and less capital. 
C)  should use more capital and less labor. 
D)  both a and b 
E)  both a and c

Question 7

Refer to the following:
   
The price of labor is $3 per unit.
-How many units of labor should a firm use in order to produce 100 units of output at the least cost?

Accepted Answer

A)  5 units of labor 
B)  10 units of labor 
C)  15 units of labor 
D)  20 units of labor 
A)  5 units of labor 
B)  10 units of labor 
C)  15 units of labor 
D)  20 units of labor

Question 8

The following graph shows 2 isocost curves for a firm. The price of capital is $200.   
a. The total cost associated with isocost I is $_________, and the price of labor is $_________.
b. The equation for isocost I is _____________________. With isocost I the firm must give up ______ units of capital to purchase one more unit of labor in the market.
c. The total cost associated with isocost II is $_________, and the price of labor is $_________.
d. The equation for isocost II is _____________________. With isocost II the firm must give up ______ units of capital to purchase one more unit of labor in the market.

Accepted Answer

a. $12,000; $300 
b.

Question 9

Diseconomies of scale

Accepted Answer

A)  exist when fixed cost increases as output increases. 
B)  exist when long-run average cost increases as output increases. 
C)  result eventually as the firm uses more and more labor with a fixed capital stock. 
D)  both a and b 
E)  all of the above 
A)  exist when fixed cost increases as output increases. 
B)  exist when long-run average cost increases as output increases. 
C)  result eventually as the firm uses more and more labor with a fixed capital stock. 
D)  both a and b 
E)  all of the above

Question 10

A sofa manufacturer currently is using 50 workers and 30 machines to produce 5,000 sofas a day. The wage rate is $200 and the rental rate for a machine is $1,000. At these input levels, another worker adds 200 sofas, while another machine adds 500 sofas. If the firm uses 45 workers and 31 machines instead, then its

Accepted Answer

A)  cost will be unchanged, and its output will decrease by 500 units. 
B)  cost will be unchanged, and its output will increase by 300 units. 
C)  cost will be unchanged, and its output will increase by 500 units. 
D)  output will be unchanged, and its cost will decrease by $800. 
E)  none of the above 
A)  cost will be unchanged, and its output will decrease by 500 units. 
B)  cost will be unchanged, and its output will increase by 300 units. 
C)  cost will be unchanged, and its output will increase by 500 units. 
D)  output will be unchanged, and its cost will decrease by $800. 
E)  none of the above

Question 11

Refer to the following:
  
-As you move from point A to point B,

Accepted Answer

A)  output is unchanged. 
B)  cost is unchanged. 
C)  the rate at which the firm can substitute labor for capital while holding output constant decreases. 
D)  both a and b 
E)  both a and c 
A)  output is unchanged. 
B)  cost is unchanged. 
C)  the rate at which the firm can substitute labor for capital while holding output constant decreases. 
D)  both a and b 
E)  both a and c

Question 12

Refer to the following figure:
   The price of capital is $50 per unit.
-The minimum cost of producing 800 units of output is

Accepted Answer

A)  $ 6,000. 
B)  $ 7,500. 
C)  $ 8,000. 
D)  $10,000. 
A)  $ 6,000. 
B)  $ 7,500. 
C)  $ 8,000. 
D)  $10,000.

Question 13

Which of the following statements is true?

Accepted Answer

A)  In the short run all inputs are fixed. 
B)  In the long run a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. 
C)  Diminishing returns to labor means that adding one more worker will decrease output. 
D)  all of the above 
E)  none of the above 
A)  In the short run all inputs are fixed. 
B)  In the long run a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. 
C)  Diminishing returns to labor means that adding one more worker will decrease output. 
D)  all of the above 
E)  none of the above

Question 14

The marginal rate of technical substitution is

Accepted Answer

A)  the market rate of exchange between labor and capital. 
B)  the rate at which the firm can substitute labor for capital while holding total cost constant. 
C)  the rate at which the firm can substitute labor for capital while holding output constant. 
D)  both a and b 
E)  both a and c 
A)  the market rate of exchange between labor and capital. 
B)  the rate at which the firm can substitute labor for capital while holding total cost constant. 
C)  the rate at which the firm can substitute labor for capital while holding output constant. 
D)  both a and b 
E)  both a and c

Question 15

Refer to the following:
   
The price of labor is $3 per unit.
-How many units of capital should a firm use in order to produce 300 units of output at the least cost?

Accepted Answer

A)  17 units of capital 
B)  18 units of capital 
C)  19 units of capital 
D)  20 units of capital 
A)  17 units of capital 
B)  18 units of capital 
C)  19 units of capital 
D)  20 units of capital

Question 16

Refer to the following:
   
The price of labor is $3 per unit.
-What is the price per unit of capital?

Accepted Answer

A)  $1.50 
B)  $2.00 
C)  $2.10 
D)  $5.00 
A)  $1.50 
B)  $2.00 
C)  $2.10 
D)  $5.00

Question 17

Refer to the following:
The price of capital (r) is $20.
  
-Why wouldn't the firm choose to produce 5,000 units of output with the combination at B?

Accepted Answer

A)  At B, MRTS K / r > MPL / w. 
C)  At B, MPL K. 
D)  both a and b 
E)  none of the above 
A)  At B, MRTS K / r > MPL / w. 
C)  At B, MPL K. 
D)  both a and b 
E)  none of the above

Question 18

Refer to the following:
The price of capital (r) is $20.
  
-At the optimal combination of inputs for producing 14,000 units of output, what is the marginal rate of technical substitution?

Accepted Answer

A)  2.5 
B)  0.67 
C)  1.5 
D)  0.80 
E)  impossible to tell from the graph 
A)  2.5 
B)  0.67 
C)  1.5 
D)  0.80 
E)  impossible to tell from the graph

Question 19

Refer to the following figure:
   The price of capital is $50 per unit.
-What is the minimum cost of producing 400 units of output?

Accepted Answer

A)  $3,000 
B)  $4,000 
C)  $5,000 
D)  $6,000 
E)  none of the above 
A)  $3,000 
B)  $4,000 
C)  $5,000 
D)  $6,000 
E)  none of the above

Question 20

Refer to the following:
   The price of capital is $500 per unit.
-Between 30,000 and 50,000 units of output, how much does each additional unit of output add to long-run total cost?

Accepted Answer

A)  $1.50 
B)  $2.45 
C)  $300 
D)  $30,000 
E)  none of the above 
A)  $1.50 
B)  $2.45 
C)  $300 
D)  $30,000 
E)  none of the above

Refer to the following: -What is the marginal rate of technical substitution at point D ?

Refer to the following: The price of capital is $100 per unit; the price of labor is $25 per unit. -When output is 30 units, what is TOTAL cost?

Refer to the following: The price of capital is $100 per unit; the price of labor is $25 per unit. -How much does the seventh unit of output add to total cost?

A cow will produce 8500 lbs. of milk if fed either 5000 lbs. of hay and 6200 lbs. of grain or 5600 lbs. of hay and 5400 lbs. of grain. Over this range, the marginal rate of technical substitution between hay and grain is

Refer to the following: The price of capital is $500 per unit. -When output is 10,000 units, what is long-run average cost?

If the marginal rate of technical substitution of labor for capital is 6, the price of labor is $18, and the price of capital is $9, then the firm

Refer to the following: The price of labor is $3 per unit. -How many units of labor should a firm use in order to produce 100 units of output at the least cost?

Diseconomies of scale

Refer to the following: -As you move from point A to point B,

Refer to the following figure: The price of capital is $50 per unit. -The minimum cost of producing 800 units of output is

Which of the following statements is true?

The marginal rate of technical substitution is

Refer to the following: The price of labor is $3 per unit. -How many units of capital should a firm use in order to produce 300 units of output at the least cost?

Refer to the following: The price of labor is $3 per unit. -What is the price per unit of capital?

Refer to the following: The price of capital (r) is $20. -Why wouldn't the firm choose to produce 5,000 units of output with the combination at B?

Refer to the following: The price of capital (r) is $20. -At the optimal combination of inputs for producing 14,000 units of output, what is the marginal rate of technical substitution?

Refer to the following figure: The price of capital is $50 per unit. -What is the minimum cost of producing 400 units of output?

Refer to the following: The price of capital is $500 per unit. -Between 30,000 and 50,000 units of output, how much does each additional unit of output add to long-run total cost?

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: -What is the marginal rate of technical substitution at point D ?

Refer to the following: The price of capital is $100 per unit; the price of labor is $25 per unit. -When output is 30 units, what is TOTAL cost?

Refer to the following: The price of capital is $100 per unit; the price of labor is $25 per unit. -How much does the seventh unit of output add to total cost?

A cow will produce 8500 lbs. of milk if fed either 5000 lbs. of hay and 6200 lbs. of grain or 5600 lbs. of hay and 5400 lbs. of grain. Over this range, the marginal rate of technical substitution between hay and grain is

Refer to the following: The price of capital is $500 per unit. -When output is 10,000 units, what is long-run average cost?

If the marginal rate of technical substitution of labor for capital is 6, the price of labor is $18, and the price of capital is $9, then the firm

Refer to the following: The price of labor is $3 per unit. -How many units of labor should a firm use in order to produce 100 units of output at the least cost?

Diseconomies of scale

Refer to the following: -As you move from point A to point B,

Refer to the following figure: The price of capital is $50 per unit. -The minimum cost of producing 800 units of output is

Which of the following statements is true?

The marginal rate of technical substitution is

Refer to the following: The price of labor is $3 per unit. -How many units of capital should a firm use in order to produce 300 units of output at the least cost?

Refer to the following: The price of labor is $3 per unit. -What is the price per unit of capital?

Refer to the following: The price of capital (r) is $20. -Why wouldn't the firm choose to produce 5,000 units of output with the combination at B?

Refer to the following: The price of capital (r) is $20. -At the optimal combination of inputs for producing 14,000 units of output, what is the marginal rate of technical substitution?

Refer to the following figure: The price of capital is $50 per unit. -What is the minimum cost of producing 400 units of output?

Refer to the following: The price of capital is $500 per unit. -Between 30,000 and 50,000 units of output, how much does each additional unit of output add to long-run total cost?

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