Question 1

In the Cobb-Douglas production function (Q = $\alpha$L $\beta$1  K $\beta$2 ):

Accepted Answer

A)  the marginal product of labor (L) is equal to $\beta$1 
B)  the average product of labor (L) is equal to $\beta$2 
C)  if the amount of labor input (L) is increased by 1 percent, the output will increase by $\beta$1 percent 
D)  a and b 
E)  a and c 
A)  the marginal product of labor (L) is equal to $\beta$1 
B)  the average product of labor (L) is equal to $\beta$2 
C)  if the amount of labor input (L) is increased by 1 percent, the output will increase by $\beta$1 percent 
D)  a and b 
E)  a and c C

Question 2

Which of the following statements concerning the long-run average cost curve of economic theory is true?

Accepted Answer

A)  It is L-shaped 
B)  It is $\cap$-shaped 
C)  It is $\cup$-shaped 
D)  It is$ \land$-shaped 
E)  It is M-shaped 
A)  It is L-shaped 
B)  It is $\cap$-shaped 
C)  It is $\cup$-shaped 
D)  It is$ \land$-shaped 
E)  It is M-shaped C

Question 3

A firm has determined that its variable costs are given by the following relationship: VC = .05Q3 -5Q2 + 500Q where Q is the quantity of output produced.
(a)Determine the output level where average variable costs are minimized.
(b)Determine the output level where marginal costs are minimized.

Accepted Answer

(a)   (b)

Question 4

____ include the opportunity costs of time and capital that the entrepreneur has invested in the firm.

Accepted Answer

A)  Implicit costs 
B)  Explicit costs 
C)  a and b 
D)  None of the above 
A)  Implicit costs 
B)  Explicit costs 
C)  a and b 
D)  None of the above

Question 5

For each of the following cost-output relationships, describe the shape (U-shape, decreasing, increasing, constant) of the average total cost and marginal cost functions (C = total cost, Q = output):
(a)C = 42,500,000 + 2550Q
(b)C = 8.48 + 0.65Q + .00220Q2

Accepted Answer

Question 6

A certain production process employs two inputs-labor (L) and raw materials (R). Output (Q) is a function of these two inputs and is given by the following relationship:Q = 6L2 R2 -.10L3 R3Assume that raw materials (input R) are fixed at 10 units.
(a)Determine the total product function (TPL) for input L.
(b)Determine the marginal product function for input L.
(c)Determine the average product function for input L.
(d)Find the number of units of input L that maximizes the total product function.
(e)Find the number of units of input L that maximizes the marginal product function.
(f)Find the number of units of input L that maximizes the average product function.
(g)Determine the boundaries for the three stages of production.

Accepted Answer

(a) @#IMG-DLM& (b) @#IMG-DLM&

Question 7

An industry can be characterized by the following production function:Q = 2.5L.60 C.40
(a)What is the algebraic expression for the marginal productivity of labor?
(b)What is the algebraic expression for the average productivity of labor?
(c)How would you characterize the returns-to-scale in the industry?

Accepted Answer

(a) @#IMG-DLM& (b) @#IMG-DLM& (c)This production function is

Question 8

Evidence from empirical studies of short-run cost-output relationships lends support to the:

Accepted Answer

A)  existence of a non-linear cubic total cost function 
B)  hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm 
C)  hypothesis that total costs increase quadratically over the ranges of output examined 
D)  hypothesis that total costs increase linearly over the range of output examined 
E)  none of the above 
A)  existence of a non-linear cubic total cost function 
B)  hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm 
C)  hypothesis that total costs increase quadratically over the ranges of output examined 
D)  hypothesis that total costs increase linearly over the range of output examined 
E)  none of the above

Question 9

In determining the shape of the cost-output relationship only ____ depreciation is relevant.

Accepted Answer

A)  direct 
B)  indirect 
C)  usage 
D)  time 
E)  scheduled 
A)  direct 
B)  indirect 
C)  usage 
D)  time 
E)  scheduled

Question 10

Offshore Petroleum's fixed costs are $2,500,000 and its debt repayment requirements are $1,000,000. Selling price per barrel of oil is $18 and variable costs per barrel are $10.
(a)Determine the breakeven output (in dollars).
(b)Determine the number of barrels of oil that offshore must produce and sell in order to earn a target (operating) profit of $1,500,000.
(c)Determine the degree of operating leverage at an output of 400,000 barrels.
(d)Assuming that sales of oil are normally distributed with a mean of 362,500 barrels and a standard deviation of 100,000 barrels, determine the probability that Offshore will incur an operating loss.
NOTE: Part (d) requires the use of statistical tables.

Accepted Answer

(a)S_b = 2,500,000 / (1 -10 /

In the Cobb-Douglas production function (Q = $\alpha$ L ^{$\beta$ 1} K ^{$\beta$ 2} ):

Which of the following statements concerning the long-run average cost curve of economic theory is true?

A firm has determined that its variable costs are given by the following relationship: VC = .05Q³ -5Q² + 500Q where Q is the quantity of output produced. (a)Determine the output level where average variable costs are minimized. (b)Determine the output level where marginal costs are minimized.

____ include the opportunity costs of time and capital that the entrepreneur has invested in the firm.

For each of the following cost-output relationships, describe the shape (U-shape, decreasing, increasing, constant) of the average total cost and marginal cost functions (C = total cost, Q = output): (a)C = 42,500,000 + 2550Q (b)C = 8.48 + 0.65Q + .00220Q²

Evidence from empirical studies of short-run cost-output relationships lends support to the:

In determining the shape of the cost-output relationship only ____ depreciation is relevant.

Fundamental Economic Concepts

Demand Analysis and Estimating Demand

Managing in the Global Economy , Business and Economic Forecasting

Pricing Techniques and Analysis

Differential Calculus Techniques in Management and Long-Term Investment Analysis

Linear Programming Applications

Pricing of Joint Products and Transfer Pricing

Decisions Under Risk and Uncertainty

Filters

Exam 4: Production Economics,applications of Cost Theory and Cost Analysis

In the Cobb-Douglas production function (Q = α\alphaα L β\betaβ 1 K β\betaβ 2 ):

Which of the following statements concerning the long-run average cost curve of economic theory is true?

A firm has determined that its variable costs are given by the following relationship: VC = .05Q3 -5Q2 + 500Q where Q is the quantity of output produced. (a)Determine the output level where average variable costs are minimized. (b)Determine the output level where marginal costs are minimized.

____ include the opportunity costs of time and capital that the entrepreneur has invested in the firm.

For each of the following cost-output relationships, describe the shape (U-shape, decreasing, increasing, constant) of the average total cost and marginal cost functions (C = total cost, Q = output): (a)C = 42,500,000 + 2550Q (b)C = 8.48 + 0.65Q + .00220Q2

Evidence from empirical studies of short-run cost-output relationships lends support to the:

In determining the shape of the cost-output relationship only ____ depreciation is relevant.

Fundamental Economic Concepts

Demand Analysis and Estimating Demand

Managing in the Global Economy , Business and Economic Forecasting

Pricing Techniques and Analysis

Differential Calculus Techniques in Management and Long-Term Investment Analysis

Linear Programming Applications

Pricing of Joint Products and Transfer Pricing

Decisions Under Risk and Uncertainty

Filters

In the Cobb-Douglas production function (Q = $\alpha$ L ^{$\beta$ 1} K ^{$\beta$ 2} ):

A firm has determined that its variable costs are given by the following relationship: VC = .05Q³ -5Q² + 500Q where Q is the quantity of output produced. (a)Determine the output level where average variable costs are minimized. (b)Determine the output level where marginal costs are minimized.

For each of the following cost-output relationships, describe the shape (U-shape, decreasing, increasing, constant) of the average total cost and marginal cost functions (C = total cost, Q = output): (a)C = 42,500,000 + 2550Q (b)C = 8.48 + 0.65Q + .00220Q²