Question 1

In the one-input model, a convex producer choice set implies an upward sloping marginal cost curve.

Accepted Answer

A) True 
 B)False  True

Question 2

The output level is constant along any isoprofit line.

Accepted Answer

A) True 
 B)False  False

Question 3

Price-taking producers have horizontal marginal revenue curves.

Accepted Answer

A) True 
 B)False  True

Question 4

When single-input producer choice sets are non-convex, the first order condition of the profit maximization problem is neither necessary nor sufficient for identifying the profit maximizing production plan.

Accepted Answer

A) True 
 B)False

Question 5

An increase in the wage will cause the output supply curve in the one-input model to shift in unless labor is an inferior input.

Accepted Answer

A) True 
 B)False

Question 6

Every cost-minimizing producer is profit-maximizing.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following may be consistent with profit-maximizing behavior by a price-taking producer:

Accepted Answer

A) Output is set where price is equal to marginal cost. 
B) Output is set where marginal revenue is equal to marginal cost. 
C) No output is produced. 
D) (a) and (b) 
E) (a) and C
F)(b) and (c)
G)All of the above
H)None of the above 
A) Output is set where price is equal to marginal cost. 
B) Output is set where marginal revenue is equal to marginal cost. 
C) No output is produced. 
D) (a) and (b) 
E) (a) and C
F)(b) and (c)
G)All of the above
H)None of the above

Question 8

Whenever average cost is increasing, marginal cost must also be increasing.

Accepted Answer

A) True 
 B)False

Question 9

In the one-input model, profit is always maximized where marginal revenue product is equal to the input price.

Accepted Answer

A) True 
 B)False

Question 10

If the single-input producer choice set is fully convex, the first order conditions of the profit maximization problem are necessary but not sufficient for identifying the profit maximizing production plan.

Accepted Answer

A) True 
 B)False

Question 11

A competitive (price-taking) firm will produce so long as its economic profit is sufficiently above zero to enable the firm to pay the owners of the firm for their time and effort.

Accepted Answer

A) True 
 B)False

Question 12

In the one-input model, a decrease in output price will always cause labor demand to shift in.

Accepted Answer

A) True 
 B)False

Question 13

Calvin buys newspapers and delivers them (by bike) to his customers' houses while Hobbes sells lemonade at his lemonade stand.One day they compare notes and find that Calvin, after paying for the newspapers and the maintenance on his bike, clears $5 per hour while Hobbes, after paying for the lemonade ingredients and upkeep of his lemonade stand, clears $4.50 per hour.The newspaper and lemonade businesses are the only possible trades for Calvin and Hobbes.
a.If Calvin and Hobbes are identical, how much economic profit (per hour) is each making?
b.Suppose Hobbes is slower on his bike than Calvin -- and he could only deliver half as many newspapers per hour.What's his economic profit in the lemonade business?

Accepted Answer

a. Calvin's economic profit is 50 cents

Question 14

If the single-input producer choice set is convex, the marginal product of labor curve must have a negative slope that is getting steeper with increases in labor input.

Accepted Answer

A) True 
 B)False

Question 15

The law of diminishing marginal product holds so long as the input is not a Giffen good.

Accepted Answer

A) True 
 B)False

Question 16

Suppose a technology is described by the production function   
a.For a price taking producer who faces output price p and wage w, derive the first order condition and interpret it.
b.Without knowing more about the function f, is the condition you derived in (a) either necessary or sufficient for deriving the profit maximizing production plan? Explain.
c.Suppose   .Derive the first order condition you illustrated in (a) and solve for   . 
d.For what values of   is this first order condition necessary and sufficient for deriving a profit maximizing production plan? Explain.

Accepted Answer

a. We solve the profit maximization prob

Question 17

Output supply curves always slope up in the one-input model.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a single-input production function has initially increasing but eventually decreasing marginal product.In this case, the first order condition for the profit maximization problem

Accepted Answer

A) is necessary for identifying the profit maximizing production plan. 
B) is sufficient for identifying the profit maximizing production plan. 
C) is both necessary and sufficient for identifying the profit maximizing production plan. 
D) is neither necessary nor sufficient for identifying the profit maximizing production plan. 
A) is necessary for identifying the profit maximizing production plan. 
B) is sufficient for identifying the profit maximizing production plan. 
C) is both necessary and sufficient for identifying the profit maximizing production plan. 
D) is neither necessary nor sufficient for identifying the profit maximizing production plan.

Question 19

If profit from producing would be negative, producers will shut down.

Accepted Answer

A) True 
 B)False

Question 20

In the one-input model, the marginal cost curve is U-shaped.

Accepted Answer

A) True 
 B)False

Exam 11: One Input and One Output: a Short-Run Producer Model

In the one-input model, a convex producer choice set implies an upward sloping marginal cost curve.

The output level is constant along any isoprofit line.

Price-taking producers have horizontal marginal revenue curves.

When single-input producer choice sets are non-convex, the first order condition of the profit maximization problem is neither necessary nor sufficient for identifying the profit maximizing production plan.

An increase in the wage will cause the output supply curve in the one-input model to shift in unless labor is an inferior input.

Every cost-minimizing producer is profit-maximizing.

Which of the following may be consistent with profit-maximizing behavior by a price-taking producer:

Whenever average cost is increasing, marginal cost must also be increasing.

In the one-input model, profit is always maximized where marginal revenue product is equal to the input price.

If the single-input producer choice set is fully convex, the first order conditions of the profit maximization problem are necessary but not sufficient for identifying the profit maximizing production plan.

A competitive (price-taking) firm will produce so long as its economic profit is sufficiently above zero to enable the firm to pay the owners of the firm for their time and effort.

In the one-input model, a decrease in output price will always cause labor demand to shift in.

If the single-input producer choice set is convex, the marginal product of labor curve must have a negative slope that is getting steeper with increases in labor input.

The law of diminishing marginal product holds so long as the input is not a Giffen good.

Output supply curves always slope up in the one-input model.

Suppose a single-input production function has initially increasing but eventually decreasing marginal product.In this case, the first order condition for the profit maximization problem

If profit from producing would be negative, producers will shut down.

In the one-input model, the marginal cost curve is U-shaped.

Introduction

A Consumers Economic Circumstances

Economic Circumstances in Labor and Financial Markets

Tastes and Indifference Curves

Different Types of Tastes

Doing the Best We Can

Income and Substitution Effects in Consumer Goods Markets

Wealth and Substitution Effects in Labor and Capital Markets

Demand for Goods and Supply of Labor and Capital

Consumer Surplus and Deadweight Loss

Production With Multiple Inputs

Production Decisions in the Short and Long Run

Competitive Market Equilibrium

The Invisible Hand and the First Welfare Theorem

General Equilibrium

Choice and Markets in the Presence of Risk

Elasticities, Price-Distorting Policies, and Non-Price Rationing

Distortionary Taxes and Subsidies

Prices and Distortions Across Markets

Externalities in Competitive Markets

Asymmetric Information in Competitive Markets

Monopoly

Strategic Thinking and Game Theory

Oligopoly

Product Differentiation and Innovation in Markets

Public Goods

Governments and Politics

What Is Good Challenges From Psychology and Philosophy

Filters