Question 1

The long-run average cost curve defines the minimum average cost of producing alternative levels of output,allowing for optimal selection of:

Accepted Answer

A)  fixed factors of production. 
B)  variable factors of production. 
C)  all factors of production. 
D)  sunk cost factors of production. 
A)  fixed factors of production. 
B)  variable factors of production. 
C)  all factors of production. 
D)  sunk cost factors of production.

Question 2

Given the production function Q = min {4K,3L},what is the average product of capital when 8 units of capital and 16 units of labor are used?

Accepted Answer

A)  16 
B)  2 
C)  4 
D)  32 
A)  16 
B)  2 
C)  4 
D)  32

Question 3

Which of the following statements is incorrect?

Accepted Answer

A)  Fixed costs do not vary with output. 
B)  Sunk costs are those costs that are forever lost after they have been paid. 
C)  Fixed costs are always greater than sunk costs. 
D)  Fixed costs could be positive when sunk costs are zero. 
A)  Fixed costs do not vary with output. 
B)  Sunk costs are those costs that are forever lost after they have been paid. 
C)  Fixed costs are always greater than sunk costs. 
D)  Fixed costs could be positive when sunk costs are zero.

Question 4

The manager institutes an incentive structure to ensure:

Accepted Answer

A)  workers are in fact working at the expected potential. 
B)  workers are in fact working at their utility-maximizing effort level. 
C)  the firm produces on the production function. 
D)  the firm produces above the production function. 
A)  workers are in fact working at the expected potential. 
B)  workers are in fact working at their utility-maximizing effort level. 
C)  the firm produces on the production function. 
D)  the firm produces above the production function.

Question 5

The minimum average cost of producing alternate levels of output,allowing for optimal selection of all variables of production is defined by the:

Accepted Answer

A)  long-run average total cost curve. 
B)  short-run average fixed cost curve. 
C)  short-run marginal cost curve. 
D)  long-run marginal cost curve. 
A)  long-run average total cost curve. 
B)  short-run average fixed cost curve. 
C)  short-run marginal cost curve. 
D)  long-run marginal cost curve.

Question 6

The costs of production include:

Accepted Answer

A)  the costs that appear on the income statements. 
B)  the opportunity costs foregone by producing a given product. 
C)  accounting costs. 
D)  accounting costs and opportunity costs. 
A)  the costs that appear on the income statements. 
B)  the opportunity costs foregone by producing a given product. 
C)  accounting costs. 
D)  accounting costs and opportunity costs.

Question 7

The absolute value of the slope of the isoquant is the:

Accepted Answer

A)  marginal rate of technical substitution. 
B)  marginal product of capital. 
C)  marginal rate of substitution. 
D)  value marginal product of labor. 
A)  marginal rate of technical substitution. 
B)  marginal product of capital. 
C)  marginal rate of substitution. 
D)  value marginal product of labor.

Question 8

If the last unit of input increases total product,we know that the marginal product is:

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate.

Question 9

For the cost function C(Q)= 50 + 4Q + 2Q2,the total variable cost of producing 7 units of output is:

Accepted Answer

A)  32. 
B)  102. 
C)  126. 
D)  None of the answers are correct. 
A)  32. 
B)  102. 
C)  126. 
D)  None of the answers are correct.

Question 10

With a linear production function there is a:

Accepted Answer

A)  perfect complementary relationship between all inputs. 
B)  perfect substitutable relationship between all inputs. 
C)  fixed-proportion relationship between all inputs. 
D)  variable-proportion relationship between all inputs. 
A)  perfect complementary relationship between all inputs. 
B)  perfect substitutable relationship between all inputs. 
C)  fixed-proportion relationship between all inputs. 
D)  variable-proportion relationship between all inputs.

Question 11

Which of the following cost functions exhibits cost complementarity?

Accepted Answer

A)  −4Q1Q2 + 8Q1. 
B)  −4Q2 + 8Q1. 
C)  6Q1Q2 − Q1. 
D)  4Q2Q1 + 8Q1. 
A)  −4Q1Q2 + 8Q1. 
B)  −4Q2 + 8Q1. 
C)  6Q1Q2 − Q1. 
D)  4Q2Q1 + 8Q1.

Question 12

Which of the following cost functions exhibits cost complementarity?

Accepted Answer

A)  −3Q2 + 4Q1 
B)  5Q1Q2 − Q1 
C)  Q2Q1 + 2Q1 
D)  −5Q1Q2 + 7Q1 
A)  −3Q2 + 4Q1 
B)  5Q1Q2 − Q1 
C)  Q2Q1 + 2Q1 
D)  −5Q1Q2 + 7Q1

Question 13

A production function exhibits constant returns to scale if a twofold (threefold,etc.)increase in all inputs leads to a twofold (threefold,etc.)increase in output.For example,by doubling the use of capital and labor,the firm would exactly double its output.
a.What would the average and marginal cost curves look like under constant returns to scale?
 
b.Give an example of a production function that exhibits constant returns to scale.

Accepted Answer

a.Average and margin

Question 14

Which of the following is NOT a means of acquiring product and process innovations?

Accepted Answer

A)  Independent research and development 
B)  Mass production of the existing product 
C)  Reverse engineering 
D)  Hiring employees of innovating firms 
A)  Independent research and development 
B)  Mass production of the existing product 
C)  Reverse engineering 
D)  Hiring employees of innovating firms

Question 15

Given the Leontief production function Q = min{5.5K,6.7L},how much output is produced when K = 40 and L = 35?

Accepted Answer

A)  220 
B)  234.5 
C)  192.5 
D)  268 
A)  220 
B)  234.5 
C)  192.5 
D)  268

Question 16

For the cost function C(Q)= 500 + 12Q + 4Q2 + Q3,what is the marginal cost of producing the eighth unit of output?

Accepted Answer

A)  $184 
B)  $268 
C)  $524 
D)  $852 
A)  $184 
B)  $268 
C)  $524 
D)  $852

Question 17

Average fixed cost:

Accepted Answer

A)  initially declines, reaches a minimum, and then begins to increase as output increases. 
B)  increases continuously as output increases. 
C)  declines continuously as output is expanded. 
D)  keeps constant as output is expanded. 
A)  initially declines, reaches a minimum, and then begins to increase as output increases. 
B)  increases continuously as output increases. 
C)  declines continuously as output is expanded. 
D)  keeps constant as output is expanded.

Question 18

The production function is Q = K.4 L.6.The marginal rate of technical substitution is:

Accepted Answer

A)  3/2 K-1 L. 
B)  K-1 L-1. 
C)  3/2 K L-1. 
D)  K.6 L-.4. 
A)  3/2 K-1 L. 
B)  K-1 L-1. 
C)  3/2 K L-1. 
D)  K.6 L-.4.

Question 19

The marginal product of capital of producing 2,991 units of output (find point A)in the table below is:
$$\begin{array}{l}
\text { Production Function far God } \mathbf { X }\
\begin{array} { l l l l l } 
L ^ { * } & K & Q & M _ { K } = ( \Delta Q / \Delta K ) & \begin{array} { l } 
\mathbf { M P } _ { K } = ( Q / K ) \
\text { Mverage }
\end{array} \
\text { Labor } & \text { Capital } & \text { Output } & \begin{array} { l } 
\text { Product of } \
\text { Capital }
\end{array} & \begin{array} { l } 
\text { Product of } \
\text { Capital }
\end{array} \
9 & 0 & 0 & - & - \
9 & 10 & 57 & 5.7 & 5.70 \
9 & 20 & 324 & 26.7 & 16.20 \
9 & 30 & 657 & 33.3 & \mathbf { B } \
9 & 40 & 1,072 & 41.5 & 26.80 \
9 & 50 & 1,524 & 45.2 & 30.48 \
9 & 60 & 1,976 & 45.2 & 32.93 \
9 & 70 & 2,391 & 41.5 & 34.16 \
9 & 80 & 2,724 & 33.3 & 34.05 \
9 & 90 & 2,991 & \mathbf { A } & 33.23 \
9 & 100 & 3,048 & 5.7 & 30.48 \
9 & 110 & 3,016 & - 3.2 & 27.42 \
9 & 120 & 2,945 & - 7.1 & 24.54
\end{array}
\end{array}$$

Accepted Answer

A)  26.7. 
B)  19.5. 
C)  5.7. 
D)  2.4. 
A)  26.7. 
B)  19.5. 
C)  5.7. 
D)  2.4.

Question 20

What is the average product of labor,given that the level of labor equals 10,total output equals 1200,and the marginal product of labor equals 200?

Accepted Answer

A)  20 
B)  120 
C)  6 
D)  2,000 
A)  20 
B)  120 
C)  6 
D)  2,000

The long-run average cost curve defines the minimum average cost of producing alternative levels of output,allowing for optimal selection of:

Given the production function Q = min {4K,3L},what is the average product of capital when 8 units of capital and 16 units of labor are used?

Which of the following statements is incorrect?

The manager institutes an incentive structure to ensure:

The minimum average cost of producing alternate levels of output,allowing for optimal selection of all variables of production is defined by the:

The costs of production include:

The absolute value of the slope of the isoquant is the:

If the last unit of input increases total product,we know that the marginal product is:

For the cost function C(Q)= 50 + 4Q + 2Q²,the total variable cost of producing 7 units of output is:

With a linear production function there is a:

Which of the following cost functions exhibits cost complementarity?

Which of the following cost functions exhibits cost complementarity?

Which of the following is NOT a means of acquiring product and process innovations?

Given the Leontief production function Q = min{5.5K,6.7L},how much output is produced when K = 40 and L = 35?

For the cost function C(Q)= 500 + 12Q + 4Q² + Q³,what is the marginal cost of producing the eighth unit of output?

Average fixed cost:

The production function is Q = K^.4 L^.6.The marginal rate of technical substitution is:

What is the average product of labor,given that the level of labor equals 10,total output equals 1200,and the marginal product of labor equals 200?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 5: The Production Process and Costs

The long-run average cost curve defines the minimum average cost of producing alternative levels of output,allowing for optimal selection of:

Given the production function Q = min {4K,3L},what is the average product of capital when 8 units of capital and 16 units of labor are used?

Which of the following statements is incorrect?

The manager institutes an incentive structure to ensure:

The minimum average cost of producing alternate levels of output,allowing for optimal selection of all variables of production is defined by the:

The costs of production include:

The absolute value of the slope of the isoquant is the:

If the last unit of input increases total product,we know that the marginal product is:

For the cost function C(Q)= 50 + 4Q + 2Q2,the total variable cost of producing 7 units of output is:

With a linear production function there is a:

Which of the following cost functions exhibits cost complementarity?

Which of the following cost functions exhibits cost complementarity?

Which of the following is NOT a means of acquiring product and process innovations?

Given the Leontief production function Q = min{5.5K,6.7L},how much output is produced when K = 40 and L = 35?

For the cost function C(Q)= 500 + 12Q + 4Q2 + Q3,what is the marginal cost of producing the eighth unit of output?

Average fixed cost:

The production function is Q = K.4 L.6.The marginal rate of technical substitution is:

What is the average product of labor,given that the level of labor equals 10,total output equals 1200,and the marginal product of labor equals 200?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

For the cost function C(Q)= 50 + 4Q + 2Q²,the total variable cost of producing 7 units of output is:

For the cost function C(Q)= 500 + 12Q + 4Q² + Q³,what is the marginal cost of producing the eighth unit of output?

The production function is Q = K^.4 L^.6.The marginal rate of technical substitution is: