Question 1

Average cost can never rise while marginal costs are declining.

Accepted Answer

A) True 
 B)False  False

Question 2

The production function of a competitive firm is described by the equation y = 8x1/2 1x1/2 2.The factor prices are p1 = $1 and p2 =$4 and the firm can hire as much of either factor it wants at these prices.The firm's marginal cost is

Accepted Answer

A) constant and equal to .50. 
B) constant and equal to 3. 
C) increasing. 
D) decreasing. 
E) None of the above. 
A) constant and equal to .50. 
B) constant and equal to 3. 
C) increasing. 
D) decreasing. 
E) None of the above. A

Question 3

The cost function C(y)= 10 + 3y has marginal cost less than average cost for all levels of output.

Accepted Answer

A) True 
 B)False  True

Question 4

The cost function C(y)= 100 + 3y2 has marginal cost less than average cost for all positive levels of output.

Accepted Answer

A) True 
 B)False

Question 5

If Green Acres Turf Farm's total cost of producing acres of sod is TC = 4Q2 + 25Q + 30, the marginal cost of producing the 20th acre of sod is

Accepted Answer

A) $30. 
B) $25. 
C) $105. 
D) $185. 
E) $345. 
A) $30. 
B) $25. 
C) $105. 
D) $185. 
E) $345.

Question 6

A competitive firm has the short-run cost function c(y)= 2y3 - 16y2 + 64y + 50.The firm will produce a positive amount in the short run if and only if the price is greater than

Accepted Answer

A) $16. 
B) $64. 
C) $32. 
D) $35. 
E) $31. 
A) $16. 
B) $64. 
C) $32. 
D) $35. 
E) $31.

Question 7

The production function of a competitive firm is described by the equation y = 4x1/2 1x1/2 2.The factor prices are p1 = $1 and p2 = $36 and the firm can hire as much of either factor it wants at these prices.The firm's marginal cost is

Accepted Answer

A) decreasing. 
B) constant and equal to 19. 
C) constant and equal to 3. 
D) increasing. 
E) None of the above. 
A) decreasing. 
B) constant and equal to 19. 
C) constant and equal to 3. 
D) increasing. 
E) None of the above.

Question 8

North American Manufacturing has the production function Q = min{0.25K, 0.5L}, where K is units of capital and L is hours of labor.
a.Without any warning, the price of capital doubles.What should North American Manufacturing do in response?
b.If North American were planning a new manufacturing plant, would there be any advantages to a larger facility?

Accepted Answer

a.North American Man

Question 9

A firm has the long-run cost function C(Q)= 4Q2 + 196.In the long run, it will supply a positive amount of output, so long as the price is greater than

Accepted Answer

A) $120. 
B) $112. 
C) $56. 
D) $28. 
E) $61. 
A) $120. 
B) $112. 
C) $56. 
D) $28. 
E) $61.

Question 10

In the reclining chair industry (which is perfectly competitive), two different technologies of production exist.These technologies exhibit the following total cost functions: 
C1(Q)= 1,000 + 600Q - 40Q2 + Q3
C2(Q)= 200 + 145Q- 10Q2 + Q3
Due to foreign competition, the market price of reclining chairs has fallen to $190.In the short run, firms using technology 1

Accepted Answer

A) and firms using technology 2 will remain in business. 
B) will remain in business and firms using technology 2 will shut down. 
C) will shut down and firms using technology 2 will remain in business. 
D) and firms using technology 2 will shut down. 
E) More information is needed to make a judgment. 
A) and firms using technology 2 will remain in business. 
B) will remain in business and firms using technology 2 will shut down. 
C) will shut down and firms using technology 2 will remain in business. 
D) and firms using technology 2 will shut down. 
E) More information is needed to make a judgment.

Question 11

A firm has the long-run cost function C(Q)= 4Q2 + 64.In the long run, it will supply a positive amount of output, so long as the price is greater than

Accepted Answer

A) $64. 
B) $72. 
C) $16. 
D) $32. 
E) $37. 
A) $64. 
B) $72. 
C) $16. 
D) $32. 
E) $37.

Question 12

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC = 8,000 + 6Q.If Florence charges $7 per meal, what is its break even level of output?

Accepted Answer

A) 1,333.33 meals 
B) 1,142.86 meals 
C) 615.38 meals 
D) 16,000 meals 
E) 8,000 meals 
A) 1,333.33 meals 
B) 1,142.86 meals 
C) 615.38 meals 
D) 16,000 meals 
E) 8,000 meals

Question 13

The marginal cost curve of a firm is MC = 6y.Total variable costs to produce 10 units of output are

Accepted Answer

A) $120. 
B) $300. 
C) $80. 
D) $400. 
E) $26. 
A) $120. 
B) $300. 
C) $80. 
D) $400. 
E) $26.

Question 14

A firm has the short-run total cost function c(y)= 9y2 + 144.At what quantity of output is short-run average cost minimized?

Accepted Answer

A) 4 
B) 16 
C) 0.75 
D) 3 
E) None of the above. 
A) 4 
B) 16 
C) 0.75 
D) 3 
E) None of the above.

Question 15

A firm has the production function Q = X1/21X2.In the short run it must use exactly 35 units of factor 2.The price of factor 1 is $105 per unit and the price of factor 2 is $3 per unit.The firm's short-run marginal cost function is

Accepted Answer

A) MC(Q)=105Q-1/2. 
B) MC(Q)= 6Q/35. 
C) MC(Q)= 105 + 105Q2. 
D) MC(Q)= 3Q. 
E) MC(Q)= 35Q-1/2. 
A) MC(Q)=105Q-1/2. 
B) MC(Q)= 6Q/35. 
C) MC(Q)= 105 + 105Q2. 
D) MC(Q)= 3Q. 
E) MC(Q)= 35Q-1/2.

Question 16

A firm has a short-run cost function c(y)= 3y + 11 for y = 0 and c(0)= 8.The firm's quasi-fixed costs are

Accepted Answer

A) $8. 
B) $11. 
C) $3. 
D) $7. 
E) They are not possible to determine from this information. 
A) $8. 
B) $11. 
C) $3. 
D) $7. 
E) They are not possible to determine from this information.

Question 17

A goatherd has the cost function c(y)= 4y2, where y is the number of tubs of goat cheese she makes per month.She faces a competitive market for goat cheese,with a price of $40 a tub.How many tubs should she produce per month?

Accepted Answer

A) The square root of 40 
B) 16 
C) 5 
D) The square root of 10 
E) 2.50 
A) The square root of 40 
B) 16 
C) 5 
D) The square root of 10 
E) 2.50

Question 18

The VCR manufacturing business is perfectly competitive.Suppose that currently, firms that manufacture VCRs utilize either technology 1 or technology 2, whose cost functions are
 TC1(Q)= 1,120 - 60Q + Q2
TC2(Q)= 300 - 20Q + Q2
In the long run, assuming no new manufacturing technologies,what will happen in this industry?

Accepted Answer

A) Firms utilizing technology 1 and firms utilizing technology 2 will stay in business. 
B) Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business. 
C) Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down. 
D) Firms utilizing technology 1 and firms utilizing technology 2 will shut down. 
E) None of the above. 
A) Firms utilizing technology 1 and firms utilizing technology 2 will stay in business. 
B) Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business. 
C) Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down. 
D) Firms utilizing technology 1 and firms utilizing technology 2 will shut down. 
E) None of the above.

Question 19

The area under the marginal cost curve measures total fixed costs.

Accepted Answer

A) True 
 B)False

Question 20

Mr.Dent Carr's total costs are 2s2 + 40s + 40.If he repairs 10 cars, his average variable costs will be

Accepted Answer

A) $60. 
B) $64. 
C) $80. 
D) $120. 
E) $40. 
A) $60. 
B) $64. 
C) $80. 
D) $120. 
E) $40.

Exam 20: Cost Curves-Part A

Average cost can never rise while marginal costs are declining.

The production function of a competitive firm is described by the equation y = 8x1/2 1x1/2 2.The factor prices are p1 = $1 and p2 =$4 and the firm can hire as much of either factor it wants at these prices.The firm's marginal cost is

The cost function C(y)= 10 + 3y has marginal cost less than average cost for all levels of output.

The cost function C(y)= 100 + 3y2 has marginal cost less than average cost for all positive levels of output.

If Green Acres Turf Farm's total cost of producing acres of sod is TC = 4Q2 + 25Q + 30, the marginal cost of producing the 20th acre of sod is

A competitive firm has the short-run cost function c(y)= 2y3 - 16y2 + 64y + 50.The firm will produce a positive amount in the short run if and only if the price is greater than

The production function of a competitive firm is described by the equation y = 4x1/2 1x1/2 2.The factor prices are p1 = $1 and p2 = $36 and the firm can hire as much of either factor it wants at these prices.The firm's marginal cost is

A firm has the long-run cost function C(Q)= 4Q2 + 196.In the long run, it will supply a positive amount of output, so long as the price is greater than

A firm has the long-run cost function C(Q)= 4Q2 + 64.In the long run, it will supply a positive amount of output, so long as the price is greater than

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC = 8,000 + 6Q.If Florence charges $7 per meal, what is its break even level of output?

The marginal cost curve of a firm is MC = 6y.Total variable costs to produce 10 units of output are

A firm has the short-run total cost function c(y)= 9y2 + 144.At what quantity of output is short-run average cost minimized?

A firm has the production function Q = X1/21X2.In the short run it must use exactly 35 units of factor 2.The price of factor 1 is $105 per unit and the price of factor 2 is $3 per unit.The firm's short-run marginal cost function is

A firm has a short-run cost function c(y)= 3y + 11 for y = 0 and c(0)= 8.The firm's quasi-fixed costs are

A goatherd has the cost function c(y)= 4y2, where y is the number of tubs of goat cheese she makes per month.She faces a competitive market for goat cheese,with a price of $40 a tub.How many tubs should she produce per month?

The area under the marginal cost curve measures total fixed costs.

Mr.Dent Carr's total costs are 2s2 + 40s + 40.If he repairs 10 cars, his average variable costs will be

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

The production function of a competitive firm is described by the equation y = 8x^1/2 1x^1/2 2.The factor prices are p1 = $1 and p2 =$4 and the firm can hire as much of either factor it wants at these prices.The firm's marginal cost is

The production function of a competitive firm is described by the equation y = 4x^1/2 1x^1/2 2.The factor prices are p1 = $1 and p2 = $36 and the firm can hire as much of either factor it wants at these prices.The firm's marginal cost is

A firm has the production function Q = X^1/2₁X₂.In the short run it must use exactly 35 units of factor 2.The price of factor 1 is $105 per unit and the price of factor 2 is $3 per unit.The firm's short-run marginal cost function is

Mr.Dent Carr's total costs are 2s² + 40s + 40.If he repairs 10 cars, his average variable costs will be