Exam 7: Costs

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the quantity of output using two units of labor is ____.

(Figure: Cost and Quantity of Output II) The variable cost of producing an output of 12 is $____.

(Figure: Total Cost and Quantity of Output VI) Answer the following question. At an output level of 4, the total cost is $____.

A firm has a production function of Q = KL + L, where MP_L = K + 1 and MP_K = L. The wage rate (W) is $100 per worker and the rental (R) is $100 per unit of capital. a. In the short run, capital (K) is fixed at 4 and the firm produces 100 units of output. What is the firm's total cost? b. In the long run, what is the total cost of producing 100 units of output?

Suppose a firm's total cost and marginal cost are given by TC = 192 + 10Q + 3Q² and MC = 10 + 6Q. What is the output level that minimizes average total cost?

A firm has a production function of , the rental rate of capital is $50, and the wage rate is $15. In the short run, Is fixed at 80 units. The short-run demand for labor is L = ____.

Suppose a firm's total cost curve is TC = Q² + Q + 100. The firm's marginal cost is MC = ____.

(Table: Detailers for Cars I) Carl's Detailing is a small business that travels to people's homes to meticulously clean their high-end sports cars. Carl hires detailers (labor) at a wage of $80 per worker per day. A van that is used to carry cleaning supplies to clients' homes has a fixed cost of $20 per day. The table shows the relationship between the number of cars cleaned and the number of detailers. The marginal cost of cleaning the first car is _____, and the marginal cost of cleaning the third car is _____.

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the total cost when using two units of labor is $____.

To find the firm's generalized marginal cost curve in the short run, take the derivative of the _____ cost curve with respect to quantity Q while _____.

(Figure: Cost and Quantity of Output Per Week I) At 6 units of output, FC is _____ and VC is _____.

If TC = 1,500 + 7.5Q + Q², the cost function for AVC is AVC = ____.

Assume a company has the long-run production function featured in the accompanying table. Suppose the price of capital and labor per unit both equal $50. Graph the company's long-run average cost curve.

A firm is producing 50 units of output at a total cost of $1,000, with a per-unit variable cost of $8. What is the firm's average fixed cost?

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon. Fran ____ close the beauty salon because ____.

Suppose a firm's total cost and marginal cost functions are given by TC = 18 + Q + 2Q² and MC = 1 + 4Q, respectively. What is the output level that minimizes average total cost?

Use the following table to answer the question. At an output level of 1, the average total cost is $____.

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. With 4 workers, the variable cost is $____.

Long-run marginal cost is:

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon. a. What is the value of Fran's beauty salon if it remains open? b. What is the value of Fran's beauty salon if she closes it? c. Explain whether Fran should close down the beauty salon.