Question 1

Which of the following statements is (are) TRUE, assuming the firm is choosing the optimal bundle of inputs that minimizes the cost of producing a given quantity of output?

Accepted Answer

A)  I and II 
B)  I, II, III, and IV 
C)  IV 
D)  I and III 
A)  I and II 
B)  I, II, III, and IV 
C)  IV 
D)  I and III

Question 2

A firm has the production function Q = K0.1L0.9, where Q measures output, K represents machine hours, and L measures labor hours. Suppose that the wage rate is $45 and the firm wants to produce 100,000 units of output. Use calculus for the following:
a. to derive the demand for capital
b. to confirm that the demand for capital satisfies the law of demand
c. What is the optimal level of capital if the rental rate on capital is $25?

Accepted Answer

a. We could solve this problem using a L

Question 3

In the short run, the marginal product of labor:

Accepted Answer

A)  is always diminishing. 
B)  will eventually fall. 
C)  continues to increase so long as the firm adds labor slowly. 
D)  always increases because laborers become more efficient with experience. 
A)  is always diminishing. 
B)  will eventually fall. 
C)  continues to increase so long as the firm adds labor slowly. 
D)  always increases because laborers become more efficient with experience.

Question 4

Suppose that a hot dog vendor uses a cart (K) and his time (L) to make and sell hot dogs. The vendor's production function is   , where Q is the number of hot dogs per day. Suppose that the rental on hot dog carts is $50 per day and that the vendor wants to produce 500 hot dogs per day.
a. Use calculus to derive the demand for labor.
b. Use calculus to show that the demand for labor satisfies the law of demand.

Accepted Answer

a. The hot dog vendor solves the followi

Question 5

Use the following to answer question:
Figure 6.7  
-(Figure 6.7) The movement in the isocost line is caused by a(n):

Accepted Answer

A)  increase in the rental rate of capital. 
B)  decrease in the rental rate of capital. 
C)  decrease in the wage rate. 
D)  increase in the wage rate. 
A)  increase in the rental rate of capital. 
B)  decrease in the rental rate of capital. 
C)  decrease in the wage rate. 
D)  increase in the wage rate.

Question 6

(Figure 6.1) Which of the following statements is (are) TRUE?

Accepted Answer

A)  I and II 
B)  III 
C)  I and IV 
D)  II 
A)  I and II 
B)  III 
C)  I and IV 
D)  II

Question 7

If a firm is using a lot of capital and just a little labor, the marginal product of labor is_____ relative to the marginal product of capital making it _____ to substitute labor for capital.

Accepted Answer

A)  low; more difficult 
B)  high; easier 
C)  high; more difficult 
D)  low; easier 
A)  low; more difficult 
B)  high; easier 
C)  high; more difficult 
D)  low; easier

Question 8

Which of the following statements is (are) TRUE?

Accepted Answer

A)  I, II, and III 
B)  I 
C)  III 
D)  I and II 
A)  I, II, and III 
B)  I 
C)  III 
D)  I and II

Question 9

Use the following to answer questions 26-27:
Figure 6.3  
-(Figure 6.3) Which of the following statements is (are) TRUE?

Accepted Answer

A)  I, II, and III 
B)  II 
C)  III 
D)  II and III 
A)  I, II, and III 
B)  II 
C)  III 
D)  II and III

Question 10

Suppose the production function for a coffee shop is:
Q = 2K + 5L
where Q is the number of cups of coffee produced, K is the number of coffee makers, and L is the number of workers. Use calculus for the following:
a. to determine a function for the marginal product of labor
b. to determine a function for the marginal product of capital
c. to find the marginal rate of technical substitution
d. to discuss how MRTSLK changes as the firm uses more labor, holding output constant

Accepted Answer

a. Marginal product of labor is the part

Question 11

Capital cannot be adjusted in the short run because:

Accepted Answer

A)  there is not sufficient time to adjust it. 
B)  it is too expensive to alter the capital stock. 
C)  capital markets do not function well enough in the short run. 
D)  in the short run the firm has yet to decide what product to produce, so it does not yet know what kind of capital it needs. 
A)  there is not sufficient time to adjust it. 
B)  it is too expensive to alter the capital stock. 
C)  capital markets do not function well enough in the short run. 
D)  in the short run the firm has yet to decide what product to produce, so it does not yet know what kind of capital it needs.

Question 12

Suppose a firm with a production function given by Q = 30K0.5L0.5 produces 1,500 units of output. The firm pays a wage of $40 per unit and pays a rental rate of capital of $640 per unit. How many units of labor and capital should the firm employ to minimize the cost of producing 1,500 units of output? (Note:   )

Accepted Answer

A)  L = 200; K = 12.5 
B)  L = 625; K = 4. 
C)  L = 275; K = 8.75 
D)  L = 150; K = 10 
A)  L = 200; K = 12.5 
B)  L = 625; K = 4. 
C)  L = 275; K = 8.75 
D)  L = 150; K = 10

Question 13

Use the following to answer question:
Figure 6.18  
-(Figure 6.18) the MPL at point A is _____, and the APL is _____. What do your results imply about how APL will change with increased production?

Accepted Answer

15; 60; AP_L decreases To find marginal pr

Question 14

Suppose a firm's short-run production function is given by Q = 16L0.8. What is the marginal product of the fourth worker?

Accepted Answer

A)  36 
B)  10 
C)  49 
D)  1.85 
A)  36 
B)  10 
C)  49 
D)  1.85

Question 15

The short-run production function for sea kayaks is given by Q = 30L0.5, where Q is the number of sea kayaks produced and L is the number of employees. Complete the table and draw the corresponding graphs. Round all answers to two decimal points.

Accepted Answer

To find the output column (Q), plug the

Question 16

Why are the slopes of isocost lines constant?

Accepted Answer

A)  because firms must use capital and labor inputs in fixed proportions 
B)  because firms can hire as much of an input as they desire without changing wages or rental rates 
C)  because firms must use less labor if employing more capital 
D)  because the marginal rate of technical substitution of labor for capital is constant 
A)  because firms must use capital and labor inputs in fixed proportions 
B)  because firms can hire as much of an input as they desire without changing wages or rental rates 
C)  because firms must use less labor if employing more capital 
D)  because the marginal rate of technical substitution of labor for capital is constant

Question 17

Which of the following statements best exemplifies the firm's constrained minimization problem?

Accepted Answer

A)  The firm desires to produce a given quantity of output by choosing values of W and R that minimize RK + WL. 
B)  The firm desires to produce as much output as possible subject to the constraint that C = RK + WL. 
C)  The firm desires to produce as much output as possible by choosing values of L and K that minimize RK + WL. 
D)  The firm desires to produce a given quantity of output by choosing values of L and K that minimize RK + WL. 
A)  The firm desires to produce a given quantity of output by choosing values of W and R that minimize RK + WL. 
B)  The firm desires to produce as much output as possible subject to the constraint that C = RK + WL. 
C)  The firm desires to produce as much output as possible by choosing values of L and K that minimize RK + WL. 
D)  The firm desires to produce a given quantity of output by choosing values of L and K that minimize RK + WL.

Question 18

Use the following to answer question:
Figure 6.14  
-(Figure 6.14) Refer to the production function, which has a slope of 1/L0.5.

Accepted Answer

a. AP_L= Q/L AP_L(L = 1) = 1/1 = 1

Question 19

Use the following to answer question:
Table 6.2  
-(Table 6.2) Which of the following statements is (are) TRUE?

Accepted Answer

A)  At L = 1, marginal product is greater than average product. 
B)  At L = 3, the quantity of output produced per unit of labor is 82.2. 
C)  The additional output produced by using the second unit of labor is 86.6. 
D)  At L = 2, the APL = L/Q = 0.011. 
A)  At L = 1, marginal product is greater than average product. 
B)  At L = 3, the quantity of output produced per unit of labor is 82.2. 
C)  The additional output produced by using the second unit of labor is 86.6. 
D)  At L = 2, the APL = L/Q = 0.011.

Question 20

Production is an extremely complicated task, so economists make a number of simplifying assumptions. Which of the following assumptions do economists make in their basic model of producer behavior?

Accepted Answer

A)  I and IV 
B)  I, II, III, and IV 
C)  II, III, and IV 
D)  I and III 
A)  I and IV 
B)  I, II, III, and IV 
C)  II, III, and IV 
D)  I and III

Which of the following statements is (are) TRUE, assuming the firm is choosing the optimal bundle of inputs that minimizes the cost of producing a given quantity of output?

In the short run, the marginal product of labor:

Use the following to answer question: Figure 6.7 -(Figure 6.7) The movement in the isocost line is caused by a(n):

(Figure 6.1) Which of the following statements is (are) TRUE?

If a firm is using a lot of capital and just a little labor, the marginal product of labor is_ relative to the marginal product of capital making it _ to substitute labor for capital.

Which of the following statements is (are) TRUE?

Use the following to answer questions 26-27: Figure 6.3 -(Figure 6.3) Which of the following statements is (are) TRUE?

Capital cannot be adjusted in the short run because:

Use the following to answer question: Figure 6.18 -(Figure 6.18) the MP_L at point A is _____, and the AP_L is _____. What do your results imply about how AP_Lwill change with increased production?

Suppose a firm's short-run production function is given by Q = 16L^0.8. What is the marginal product of the fourth worker?

The short-run production function for sea kayaks is given by Q = 30L^0.5, where Q is the number of sea kayaks produced and L is the number of employees. Complete the table and draw the corresponding graphs. Round all answers to two decimal points.

Why are the slopes of isocost lines constant?

Which of the following statements best exemplifies the firm's constrained minimization problem?

Use the following to answer question: Figure 6.14 -(Figure 6.14) Refer to the production function, which has a slope of 1/L^0.5.

Use the following to answer question: Table 6.2 -(Table 6.2) Which of the following statements is (are) TRUE?

Production is an extremely complicated task, so economists make a number of simplifying assumptions. Which of the following assumptions do economists make in their basic model of producer behavior?

Supply and Demand

Using Supply and Demand to Analyze Markets

Consumer Behavior

Individual and Market Demand

Costs

Supply in a Competitive Market

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

Exam 6: Producer Behavior

Which of the following statements is (are) TRUE, assuming the firm is choosing the optimal bundle of inputs that minimizes the cost of producing a given quantity of output?

In the short run, the marginal product of labor:

Use the following to answer question: Figure 6.7 -(Figure 6.7) The movement in the isocost line is caused by a(n):

(Figure 6.1) Which of the following statements is (are) TRUE?

If a firm is using a lot of capital and just a little labor, the marginal product of labor is_____ relative to the marginal product of capital making it _____ to substitute labor for capital.

Which of the following statements is (are) TRUE?

Use the following to answer questions 26-27: Figure 6.3 -(Figure 6.3) Which of the following statements is (are) TRUE?

Capital cannot be adjusted in the short run because:

Use the following to answer question: Figure 6.18 -(Figure 6.18) the MPL at point A is _____, and the APL is _____. What do your results imply about how APL will change with increased production?

Suppose a firm's short-run production function is given by Q = 16L0.8. What is the marginal product of the fourth worker?

The short-run production function for sea kayaks is given by Q = 30L0.5, where Q is the number of sea kayaks produced and L is the number of employees. Complete the table and draw the corresponding graphs. Round all answers to two decimal points.

Why are the slopes of isocost lines constant?

Which of the following statements best exemplifies the firm's constrained minimization problem?

Use the following to answer question: Figure 6.14 -(Figure 6.14) Refer to the production function, which has a slope of 1/L0.5.

Use the following to answer question: Table 6.2 -(Table 6.2) Which of the following statements is (are) TRUE?

Production is an extremely complicated task, so economists make a number of simplifying assumptions. Which of the following assumptions do economists make in their basic model of producer behavior?

Supply and Demand

Using Supply and Demand to Analyze Markets

Consumer Behavior

Individual and Market Demand

Costs

Supply in a Competitive Market

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

If a firm is using a lot of capital and just a little labor, the marginal product of labor is_ relative to the marginal product of capital making it _ to substitute labor for capital.

Use the following to answer question: Figure 6.18 -(Figure 6.18) the MP_L at point A is _____, and the AP_L is _____. What do your results imply about how AP_Lwill change with increased production?

Suppose a firm's short-run production function is given by Q = 16L^0.8. What is the marginal product of the fourth worker?

The short-run production function for sea kayaks is given by Q = 30L^0.5, where Q is the number of sea kayaks produced and L is the number of employees. Complete the table and draw the corresponding graphs. Round all answers to two decimal points.

Use the following to answer question: Figure 6.14 -(Figure 6.14) Refer to the production function, which has a slope of 1/L^0.5.