Question 1

Can a production function with two factors, exhibit increasing returns to scale, while at the same time have diminishing returns to each factor?

Accepted Answer

The answer is YES. Look at the following

Question 2

C  where "s" and "a" refer to steel and aluminum, and Ps and Pa refer to the prices of steel and aluminum, and MPs and MPa refer to their marginal products. Has the firm come up with the right amounts of steel and aluminum, or should it reallocate its resources to make the maximum profit ?

Accepted Answer

No, currently the firm is not in equilib

Question 3

The Marginal Product curve of input Y shows:

Accepted Answer

A)  how the quantity of output produced changes for each amount of input Y, whether or not all other inputs are held constant. 
B)  how the quantity of output produced changes for each amount of input Y, holding all other inputs constant. 
C)  how the average quantity of output produced varies with input Y, whether or not all other inputs are held constant. 
D)  how the average quantity of output produced varies with input Y, holding all other inputs constant. 
A)  how the quantity of output produced changes for each amount of input Y, whether or not all other inputs are held constant. 
B)  how the quantity of output produced changes for each amount of input Y, holding all other inputs constant. 
C)  how the average quantity of output produced varies with input Y, whether or not all other inputs are held constant. 
D)  how the average quantity of output produced varies with input Y, holding all other inputs constant.

Question 4

A firm's average total cost is minimized when it produces 10 units. When it produces 10 units, the average total cost is $5/unit. What is the marginal cost when the firm produces 10 units?

Accepted Answer

A)  less than $5/unit 
B)  greater than $5/unit 
C)  $5/unit 
D)  $10/unit 
A)  less than $5/unit 
B)  greater than $5/unit 
C)  $5/unit 
D)  $10/unit

Question 5

A firm that produces widgets must pay fixed costs of $150. It costs an additional $30 for every widget that they produce. If the market price is $40, how many widgets does the firm have to sell so that they do not make a loss?

Accepted Answer

A)  1 
B)  5 
C)  10 
D)  15 
A)  1 
B)  5 
C)  10 
D)  15

Question 6

Why do economies of scale and learning curve effects look similar when they are graphed? What different concepts do they represent?

Accepted Answer

A graph of economies of scale shows that

Question 7

Assume SeatComfy Inc. produces table and chairs with the following total cost function, TC=10,000+10Q+0.1Q2, where Q=quantity of chairs produced. If SeatComfy can sell as many chairs it wishes at the current market price of $45, how many chairs should it produce to maximize its short-run profits?

Accepted Answer

A)  350 
B)  700 
C)  175 
D)  45 
A)  350 
B)  700 
C)  175 
D)  45

Question 8

Always Round Tire has a production function of Q = 300 L.75 K.5 . If Always Round Tire doubles the size of its production facility - increasing L from 250 to 500 and K from 25 to 50 - what happens to the cost of production, even though we do not know the wages of labor or the price of capital?

Accepted Answer

This production exhibits increasing retu

Question 9

The Springfield Bank received 1500 inquires following its latest advertisement describing its "establish a Certificate of Deposit (CD)-get a free CD (compact disk)" promotion in the Springfield Shopper, a local newspaper. The most recent similar ad in a similar advertising campaign in the Brockman Business Newsletter, a local business publication generated 500 inquires. Each ad in the Springfield Shopper costs $500. Each ad in the Brockman Business Newsletter costs $125. Inquires from both publications have the same success rate in turning inquires into sales.
(a.) Assuming that additional ads will generate similar response rates, is Springfield Bank running an optimal mix of ads in the Springfield Shopper and the Brockman Business Newsletter? Why or why not?
(b.) If you claim that the Springfield Bank is currently running an optimal mix of ads clearly explain why they are using an optimal mix of ads. If you claim that the Springfield Bank is currently not running an optimal mix of ads clearly explain how better manage the Springfield Bank.

Accepted Answer

@#IMG-DLM& Profit maximization requires cost minim

Question 10

The curve showing all the combinations of inputs that can be purchased with a given outlay of funds is called a(n):

Accepted Answer

A)  total cost curve. 
B)  isocost. 
C)  isoquant. 
D)  production function 
A)  total cost curve. 
B)  isocost. 
C)  isoquant. 
D)  production function

Question 11

A production with the form Q = 150L.75 K.50 will have __________ in the long run.

Accepted Answer

A)  increasing returns to scale 
B)  decreasing returns to scale 
C)  constant returns to scale 
D)  diminishing returns to the variable input 
A)  increasing returns to scale 
B)  decreasing returns to scale 
C)  constant returns to scale 
D)  diminishing returns to the variable input

Question 12

Refer to Figure 5.4. On the graph that shows total costs, what is the level of variable costs when 6 units are produced?

Accepted Answer

A)  $50 
B)  $100 
C)  $400 
D)  $500 
A)  $50 
B)  $100 
C)  $400 
D)  $500

Question 13

Which of the following statements about the average total cost curve is false?

Accepted Answer

A)  it is initially downward sloping because increases in quantity make the average fixed cost smaller 
B)  it eventually becomes upward sloping because the law of diminishing returns sets in 
C)  it is always downward sloping because the average fixed costs will always decrease as quantity increases 
D)  the marginal cost curve crosses the average total cost curve at the point at which average total cost is minimized 
A)  it is initially downward sloping because increases in quantity make the average fixed cost smaller 
B)  it eventually becomes upward sloping because the law of diminishing returns sets in 
C)  it is always downward sloping because the average fixed costs will always decrease as quantity increases 
D)  the marginal cost curve crosses the average total cost curve at the point at which average total cost is minimized

Question 14

Always Round Tire has a production function of Q = 300 L.75 K.5. In the short run, if L = 250 and K = 25, what happens to the output of tires if L jumps to 300 and then 350. What law does this illustrate?

Accepted Answer

When L=250 and K=25 then Q=94307. When L

Question 15

A production with the form Q = 40 L.75 K.20 will have __________ in the long run.

Accepted Answer

A)  increasing returns to scale 
B)  decreasing returns to scale 
C)  constant returns to scale 
D)  diminishing returns to the variable input 
A)  increasing returns to scale 
B)  decreasing returns to scale 
C)  constant returns to scale 
D)  diminishing returns to the variable input

Question 16

If the price of a variable input increases, then:

Accepted Answer

A)  the total cost curve will shift up. 
B)  the average total cost curve will shift down. 
C)  the marginal cost curve will shift down. 
D)  the fixed cost curve will shit up. 
A)  the total cost curve will shift up. 
B)  the average total cost curve will shift down. 
C)  the marginal cost curve will shift down. 
D)  the fixed cost curve will shit up.

Can a production function with two factors, exhibit increasing returns to scale, while at the same time have diminishing returns to each factor?

Currently where "s" and "a" refer to steel and aluminum, and Ps and Pa refer to the prices of steel and aluminum, and MPs and MPa refer to their marginal products. Has the firm come up with the right amounts of steel and aluminum, or should it reallocate its resources to make the maximum profit ?

The Marginal Product curve of input Y shows:

A firm's average total cost is minimized when it produces 10 units. When it produces 10 units, the average total cost is $5/unit. What is the marginal cost when the firm produces 10 units?

A firm that produces widgets must pay fixed costs of $150. It costs an additional $30 for every widget that they produce. If the market price is $40, how many widgets does the firm have to sell so that they do not make a loss?

Why do economies of scale and learning curve effects look similar when they are graphed? What different concepts do they represent?

Assume SeatComfy Inc. produces table and chairs with the following total cost function, TC=10,000+10Q+0.1Q², where Q=quantity of chairs produced. If SeatComfy can sell as many chairs it wishes at the current market price of $45, how many chairs should it produce to maximize its short-run profits?

Always Round Tire has a production function of Q = 300 L^.75 K^.5 . If Always Round Tire doubles the size of its production facility - increasing L from 250 to 500 and K from 25 to 50 - what happens to the cost of production, even though we do not know the wages of labor or the price of capital?

The curve showing all the combinations of inputs that can be purchased with a given outlay of funds is called a(n):

A production with the form Q = 150L^.75 K^.50 will have __________ in the long run.

Refer to Figure 5.4. On the graph that shows total costs, what is the level of variable costs when 6 units are produced?

Which of the following statements about the average total cost curve is false?

Always Round Tire has a production function of Q = 300 L^.75 K^.5. In the short run, if L = 250 and K = 25, what happens to the output of tires if L jumps to 300 and then 350. What law does this illustrate?

A production with the form Q = 40 L^.75 K^.20 will have __________ in the long run.

If the price of a variable input increases, then:

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Demand

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters

Exam 5: Production and Cost

Can a production function with two factors, exhibit increasing returns to scale, while at the same time have diminishing returns to each factor?

Currently where "s" and "a" refer to steel and aluminum, and Ps and Pa refer to the prices of steel and aluminum, and MPs and MPa refer to their marginal products. Has the firm come up with the right amounts of steel and aluminum, or should it reallocate its resources to make the maximum profit ?

The Marginal Product curve of input Y shows:

A firm's average total cost is minimized when it produces 10 units. When it produces 10 units, the average total cost is $5/unit. What is the marginal cost when the firm produces 10 units?

A firm that produces widgets must pay fixed costs of $150. It costs an additional $30 for every widget that they produce. If the market price is $40, how many widgets does the firm have to sell so that they do not make a loss?

Why do economies of scale and learning curve effects look similar when they are graphed? What different concepts do they represent?

Assume SeatComfy Inc. produces table and chairs with the following total cost function, TC=10,000+10Q+0.1Q2, where Q=quantity of chairs produced. If SeatComfy can sell as many chairs it wishes at the current market price of $45, how many chairs should it produce to maximize its short-run profits?

Always Round Tire has a production function of Q = 300 L.75 K.5 . If Always Round Tire doubles the size of its production facility - increasing L from 250 to 500 and K from 25 to 50 - what happens to the cost of production, even though we do not know the wages of labor or the price of capital?

The curve showing all the combinations of inputs that can be purchased with a given outlay of funds is called a(n):

A production with the form Q = 150L.75 K.50 will have __________ in the long run.

Refer to Figure 5.4. On the graph that shows total costs, what is the level of variable costs when 6 units are produced?

Which of the following statements about the average total cost curve is false?

Always Round Tire has a production function of Q = 300 L.75 K.5. In the short run, if L = 250 and K = 25, what happens to the output of tires if L jumps to 300 and then 350. What law does this illustrate?

A production with the form Q = 40 L.75 K.20 will have __________ in the long run.

If the price of a variable input increases, then:

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Demand

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters

Assume SeatComfy Inc. produces table and chairs with the following total cost function, TC=10,000+10Q+0.1Q², where Q=quantity of chairs produced. If SeatComfy can sell as many chairs it wishes at the current market price of $45, how many chairs should it produce to maximize its short-run profits?

Always Round Tire has a production function of Q = 300 L^.75 K^.5 . If Always Round Tire doubles the size of its production facility - increasing L from 250 to 500 and K from 25 to 50 - what happens to the cost of production, even though we do not know the wages of labor or the price of capital?

A production with the form Q = 150L^.75 K^.50 will have __________ in the long run.

Always Round Tire has a production function of Q = 300 L^.75 K^.5. In the short run, if L = 250 and K = 25, what happens to the output of tires if L jumps to 300 and then 350. What law does this illustrate?

A production with the form Q = 40 L^.75 K^.20 will have __________ in the long run.