Question 1

A country that has an abundance of cheap labor will tend to

Accepted Answer

A)  import goods that are produced using a lot of labor. 
B)  refrain from international trade entirely. 
C)  export goods that are produced using a lot of labor. 
D)  export goods that are produced using little labor. 
A)  import goods that are produced using a lot of labor. 
B)  refrain from international trade entirely. 
C)  export goods that are produced using a lot of labor. 
D)  export goods that are produced using little labor.

Question 2

When an input's average product exceeds its marginal product, average product is increasing.

Accepted Answer

A) True 
 B)False

Question 3

The law of diminishing returns is a long-run concept.

Accepted Answer

A) True 
 B)False

Question 4

The firm hires 100 new employees and the total costs increase by 25,000 per time period. What is the marginal resource cost of labor?

Accepted Answer

A)  $250 
B)  $2,500 
C)  $25,000 
D)  $250,000 
A)  $250 
B)  $2,500 
C)  $25,000 
D)  $250,000

Question 5

All inputs are variable in the long run.

Accepted Answer

A) True 
 B)False

Question 6

Output elasticity is equal to the marginal product of an input divided by the average product of the input.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions below:
  
-Refer to the total product (TP) curve graph. At what quantity of labor is the marginal product of labor increasing?

Accepted Answer

A)  2 
B)  5 
C)  8 
D)  None of the above is correct. 
A)  2 
B)  5 
C)  8 
D)  None of the above is correct.

Question 8

Use the following to answer questions below:
  
-Refer to the equilibrium graph. If total cost is $100 at point B, what are the rental price of capital (r) and the wage rate of labor (w)?

Accepted Answer

A)  r = $10 and w = $10 
B)  r = $20 and w = $10 
C)  r = $50 and w = $10 
D)  None of the above is correct 
A)  r = $10 and w = $10 
B)  r = $20 and w = $10 
C)  r = $50 and w = $10 
D)  None of the above is correct

Question 9

If the output elasticities of all inputs used by a firm are summed together, then the total

Accepted Answer

A)  will be greater than one if returns to scale are decreasing. 
B)  will be equal to one if returns to scale are constant. 
C)  will be less than one if returns to scale are increasing. 
D)  All of the above are correct. 
A)  will be greater than one if returns to scale are decreasing. 
B)  will be equal to one if returns to scale are constant. 
C)  will be less than one if returns to scale are increasing. 
D)  All of the above are correct.

Question 10

Given: Q = 100K0.5L0.5, C* = $1,000, w = $30, and r = $40. Determine the amount of labor and capital that the firm should use in order to maximize output. What is this level of output?

Accepted Answer

The answer of Given: Q = 100K0.5L0.5, C* = $1,000,...

Question 11

If a firm is minimizing the total cost of producing a given level of output, then it must also be maximizing the level of output produced at a given level of total cost.

Accepted Answer

A) True 
 B)False

Question 12

Consider the following scenario: the firm estimates that currently, its marginal product of labor is 40, while the marginal product of capital is 160. The firm pays $40 in the rental price of capital and $15 in wage. Can this firm improve its profits by adjusting its labor and capital combination while holding the overall costs of production constant? And if yes, how? (Assume the standard assumptions about the production function, i.e. diminishing marginal products).

Accepted Answer

A)  No, as the firm optimizes its production already. 
B)  Yes, the firm should reduce its labor level and increase its capital stock. 
C)  Yes, the firm should reduce its capital stock and increase its labor level. 
D)  Not enough information is provided. 
A)  No, as the firm optimizes its production already. 
B)  Yes, the firm should reduce its labor level and increase its capital stock. 
C)  Yes, the firm should reduce its capital stock and increase its labor level. 
D)  Not enough information is provided.

Question 13

Inputs that can be easily varied during the time period under consideration are called

Accepted Answer

A)  short run inputs. 
B)  long run inputs. 
C)  fixed inputs. 
D)  variable inputs. 
A)  short run inputs. 
B)  long run inputs. 
C)  fixed inputs. 
D)  variable inputs.

Question 14

The point of inflection on the total product curve corresponds to the level of output where

Accepted Answer

A)  stage II of production begins. 
B)  average product is at a maximum. 
C)  marginal product is at a maximum. 
D)  All of the above are correct. 
A)  stage II of production begins. 
B)  average product is at a maximum. 
C)  marginal product is at a maximum. 
D)  All of the above are correct.

Question 15

The combination of inputs is optimal

Accepted Answer

A)  at points of tangency between isoquants and isocosts. 
B)  if the marginal revenue product is equal to the marginal resource cost for all inputs. 
C)  if the marginal rate of technical substitution between every pair of inputs is equal to the ratio of the prices of those inputs. 
D)  All of the above are correct. 
A)  at points of tangency between isoquants and isocosts. 
B)  if the marginal revenue product is equal to the marginal resource cost for all inputs. 
C)  if the marginal rate of technical substitution between every pair of inputs is equal to the ratio of the prices of those inputs. 
D)  All of the above are correct.

Question 16

Production function can be represented as

Accepted Answer

A)  an equation. 
B)  a table. 
C)  a graph. 
D)  an equation, a table and a graph. 
A)  an equation. 
B)  a table. 
C)  a graph. 
D)  an equation, a table and a graph.

Question 17

The average product of labor is equal to

Accepted Answer

A)  the additional labor required to produce one more unit of output. 
B)  marginal product when average product is at a minimum. 
C)  the additional output produced by hiring one more unit of labor. 
D)  the slope of a ray drawn from the origin to a point on the total product curve. 
A)  the additional labor required to produce one more unit of output. 
B)  marginal product when average product is at a minimum. 
C)  the additional output produced by hiring one more unit of labor. 
D)  the slope of a ray drawn from the origin to a point on the total product curve.

Question 18

Having a Cobb-Douglas production function with parameters A = 10 and α = 0.5, set up an output table varying each of the inputs from 0 to 4.

Accepted Answer

The answer of Having a Cobb-Douglas production function with parameters...

Question 19

Use the following to answer questions below:
  
-Refer to the isoquant maps graph. Assume that the four isoquants in each graph represent output levels of 100, 200, 300, and 400. Which of the four graphs shows an isoquant map in which returns to scale are continuously increasing?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  None of the above is correct. 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  None of the above is correct.

Question 20

Given: Q = 100K0.5L0.5, C* = $1,000, w = $30, and r = $40. Determine the amount of labor and capital that the firm should use in order to maximize output. What is this level of output?

Accepted Answer

The answer of Given: Q = 100K0.5L0.5, C* = $1,000,...

A country that has an abundance of cheap labor will tend to

When an input's average product exceeds its marginal product, average product is increasing.

The law of diminishing returns is a long-run concept.

The firm hires 100 new employees and the total costs increase by 25,000 per time period. What is the marginal resource cost of labor?

All inputs are variable in the long run.

Output elasticity is equal to the marginal product of an input divided by the average product of the input.

Use the following to answer questions below: -Refer to the total product (TP) curve graph. At what quantity of labor is the marginal product of labor increasing?

Use the following to answer questions below: -Refer to the equilibrium graph. If total cost is $100 at point B, what are the rental price of capital (r) and the wage rate of labor (w)?

If the output elasticities of all inputs used by a firm are summed together, then the total

Given: Q = 100K0.5L0.5, C* = $1,000, w = $30, and r = $40. Determine the amount of labor and capital that the firm should use in order to maximize output. What is this level of output?

If a firm is minimizing the total cost of producing a given level of output, then it must also be maximizing the level of output produced at a given level of total cost.

Inputs that can be easily varied during the time period under consideration are called

The point of inflection on the total product curve corresponds to the level of output where

The combination of inputs is optimal

Production function can be represented as

The average product of labor is equal to

Having a Cobb-Douglas production function with parameters A = 10 and α = 0.5, set up an output table varying each of the inputs from 0 to 4.

Use the following to answer questions below: -Refer to the isoquant maps graph. Assume that the four isoquants in each graph represent output levels of 100, 200, 300, and 400. Which of the four graphs shows an isoquant map in which returns to scale are continuously increasing?

Given: Q = 100K0.5L0.5, C* = $1,000, w = $30, and r = $40. Determine the amount of labor and capital that the firm should use in order to maximize output. What is this level of output?

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

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Exam 7: Production Theory and Estimation

A country that has an abundance of cheap labor will tend to

When an input's average product exceeds its marginal product, average product is increasing.

The law of diminishing returns is a long-run concept.

The firm hires 100 new employees and the total costs increase by 25,000 per time period. What is the marginal resource cost of labor?

All inputs are variable in the long run.

Output elasticity is equal to the marginal product of an input divided by the average product of the input.

Use the following to answer questions below: -Refer to the total product (TP) curve graph. At what quantity of labor is the marginal product of labor increasing?

Use the following to answer questions below: -Refer to the equilibrium graph. If total cost is $100 at point B, what are the rental price of capital (r) and the wage rate of labor (w)?

If the output elasticities of all inputs used by a firm are summed together, then the total

Given: Q = 100K0.5L0.5, C* = $1,000, w = $30, and r = $40. Determine the amount of labor and capital that the firm should use in order to maximize output. What is this level of output?

If a firm is minimizing the total cost of producing a given level of output, then it must also be maximizing the level of output produced at a given level of total cost.

Inputs that can be easily varied during the time period under consideration are called

The point of inflection on the total product curve corresponds to the level of output where

The combination of inputs is optimal

Production function can be represented as

The average product of labor is equal to

Having a Cobb-Douglas production function with parameters A = 10 and α = 0.5, set up an output table varying each of the inputs from 0 to 4.

Use the following to answer questions below: -Refer to the isoquant maps graph. Assume that the four isoquants in each graph represent output levels of 100, 200, 300, and 400. Which of the four graphs shows an isoquant map in which returns to scale are continuously increasing?

Given: Q = 100K0.5L0.5, C* = $1,000, w = $30, and r = $40. Determine the amount of labor and capital that the firm should use in order to maximize output. What is this level of output?

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters