Question 1

If income effects are sufficiently strong, it may be the case that labor demand curves slope up.

Accepted Answer

A) True 
 B)False

Question 2

In the one-input model, the marginal product of labor curve falls below the horizontal axis only if the production frontier slopes down.

Accepted Answer

A) True 
 B)False

Question 3

For price-taking producers, isoprofit curves are always parallel to one another.

Accepted Answer

A) True 
 B)False

Question 4

In the one-input model of production, increasing marginal product implies non-convexity of the producer choice set.

Accepted Answer

A) True 
 B)False

Question 5

Labor demand curves are homogeneous of degree zero.

Accepted Answer

A) True 
 B)False

Question 6

Labor demand curves always slope down.

Accepted Answer

A) True 
 B)False

Question 7

Suppose a price-taking firm uses a single input - labor - to produce an output x.The production technology has diminishing marginal product of labor throughout.
a.On a graph with labor hours on the horizontal and output on the vertical axis, illustrate the production frontier for this firm.
b.For a given wage rate w and output price p, illustrate three isoprofit curves corresponding to profit levels π < π'< π" -- indicating slopes and intercepts.Suppose the profit maximizing plan results in profit π'.Then use isoprofit to illustrate the profit maximizing production plan for the firm and show how w and p are related to the marginal product of labor at that plan.
c.Where on your graph do all cost-minimizing production plans lie?
d.On a graph with output on the horizontal and dollars on the vertical axis, illustrate the shape of the cost curve for the firm (holding fixed w).Then suppose that, in addition to labor costs, the firm has to pay a recurring (long run) fixed cost F.Where does the long run cost curve lie in relation to the initial (short run) cost curve you drew?
e.On a separate graph, illustrate the short run marginal and average cost curves.Then, on the same graph illustrate the long run marginal and average cost curves in the presence of the recurring fixed cost.f.Indicate where in your graph you can locate the short and long run supply curves for this firm.

Accepted Answer

a. @#IMG-DLM& b. At the profit maximizing producti

Question 8

Suppose a single-input production function has initially increasing but eventually decreasing marginal product -- and suppose we know that an interior solution is profit maximizing.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 9

With all other inputs held fixed, the marginal product of any input must eventually increase as more of that input is hired.

Accepted Answer

A) True 
 B)False

Question 10

Price taking producers make zero economic profit when price falls

Accepted Answer

A) at the lowest point of the average cost curve 
B) at the point where marginal cost crosses average cost 
C) at the lowest point of the marginal cost curve 
D) both (a) and (b) 
E) both (a) and C
F)both (b) and (c)
G)All of the above
H)None of the above 
A) at the lowest point of the average cost curve 
B) at the point where marginal cost crosses average cost 
C) at the lowest point of the marginal cost curve 
D) both (a) and (b) 
E) both (a) and C
F)both (b) and (c)
G)All of the above
H)None of the above

Question 11

In the one-input model, the cost curve is the inverse of the production frontier if and only if the input price is 1.

Accepted Answer

A) True 
 B)False

Question 12

Suppose you solve the profit maximization problem for a single-input, price-taking producer whose technology is given by   The labor demand function is   
a.Suppose   Might   in fact be the correct labor demand function? Explain. 
b.Suppose   Might   in fact be the correct labor demand function? Explain. 
c.Intuitively explain how (b) might arise from the profit maximization problem.

Accepted Answer

a. Yes -- labor demand functions in face

Question 13

Since the marginal product of labor can increase initially as I hire more workers, demand for labor is also upward sloping for the initial workers I hire.

Accepted Answer

A) True 
 B)False

Question 14

Every profit-maximizing producer is cost minimizing.

Accepted Answer

A) True 
 B)False

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

If income effects are sufficiently strong, it may be the case that labor demand curves slope up.

In the one-input model, the marginal product of labor curve falls below the horizontal axis only if the production frontier slopes down.

For price-taking producers, isoprofit curves are always parallel to one another.

In the one-input model of production, increasing marginal product implies non-convexity of the producer choice set.

Labor demand curves are homogeneous of degree zero.

Labor demand curves always slope down.

Suppose a single-input production function has initially increasing but eventually decreasing marginal product -- and suppose we know that an interior solution is profit maximizing.In this case, the first order condition for the profit maximization problem

With all other inputs held fixed, the marginal product of any input must eventually increase as more of that input is hired.

Price taking producers make zero economic profit when price falls

In the one-input model, the cost curve is the inverse of the production frontier if and only if the input price is 1.

Since the marginal product of labor can increase initially as I hire more workers, demand for labor is also upward sloping for the initial workers I hire.

Every profit-maximizing producer is cost minimizing.

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