Question 1

If a profit-maximizing competitive firm has constant returns to scale,then its long-run profits must be zero.

Accepted Answer

A) True 
 B)False

Question 2

A competitive firm produces a single output using several inputs.The price of output rises by $4 per unit.The price of one of the inputs increases by $2 and the quantity of this input that the firm uses increases by 8 units.The prices of all other inputs stay unchanged.From the weak axiom of profit maximization we can tell that

Accepted Answer

A)  the output of the good must have increased by at least 4 units. 
B)  the inputs of the other factors must have stayed constant. 
C)  the output of the good must have decreased by at least 2 units. 
D)  the inputs of at least one of the other factors must have decreased by at least 8 units. 
E)  the inputs of at least one of the other factors must have increased by at least 8 units. 
A)  the output of the good must have increased by at least 4 units. 
B)  the inputs of the other factors must have stayed constant. 
C)  the output of the good must have decreased by at least 2 units. 
D)  the inputs of at least one of the other factors must have decreased by at least 8 units. 
E)  the inputs of at least one of the other factors must have increased by at least 8 units.

Question 3

The production function is f(x1,x2)=x1/21x1/22.If the price of factor 1 is $6 and the price of factor 2 is $12,in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

Accepted Answer

A)  x1 = 12x2. 
B)  x1 = 0.50x2. 
C)  x1 = 2x2. 
D)  x1 = x2. 
E)  We can't tell without knowing the price of the output. 
A)  x1 = 12x2. 
B)  x1 = 0.50x2. 
C)  x1 = 2x2. 
D)  x1 = x2. 
E)  We can't tell without knowing the price of the output.

Question 4

If the price of the output of a profit-maximizing,competitive firm rises and all other prices stay constant,then the firm's output cannot fall.

Accepted Answer

A) True 
 B)False

Question 5

A competitive firm produces output using three fixed factors and one variable factor.The firm's short-run production function is q =154x -5x2,where x is the amount of variable factor used.The price of the output is $2 per unit and the price of the variable factor is $8 per unit.In the short run,how many units of x should the firm use?

Accepted Answer

A)  15 
B)  30 
C)  17 
D)  7 
E)  None of the above. 
A)  15 
B)  30 
C)  17 
D)  7 
E)  None of the above.

Question 6

A competitive firm produces output using three fixed factors and one variable factor.The firm's short-run production function is q = 305x - 2x2,where x is the amount of variable factor used.The price of the output is $2 per unit and the price of the variable factor is $10 per unit.In the short run,how many units of x should the firm use?

Accepted Answer

A)  37 
B)  150 
C)  21 
D)  75 
E)  None of the above. 
A)  37 
B)  150 
C)  21 
D)  75 
E)  None of the above.

Question 7

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven,the faster he drives,the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S)= eS F -  (60/5).To maximize his profit,Dan should drive

Accepted Answer

A)  60 miles per hour. 
B)  60.92 miles per hour. 
C)  64.58 miles per hour. 
D)  72.63 miles per hour. 
E)  79.56 miles per hour. 
A)  60 miles per hour. 
B)  60.92 miles per hour. 
C)  64.58 miles per hour. 
D)  72.63 miles per hour. 
E)  79.56 miles per hour.

Question 8

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400,then in the short run,if the market price of output is $24,a profit-maximizing firm will

Accepted Answer

A)  not produce at all,since marginal costs are increasing. 
B)  produce as much output as possible since there are constant returns to scale. 
C)  produce up to the point where average costs equal $24. 
D)  produce a level of output where marginal revenue equals marginal costs. 
E)  produce exactly 400 units. 
A)  not produce at all,since marginal costs are increasing. 
B)  produce as much output as possible since there are constant returns to scale. 
C)  produce up to the point where average costs equal $24. 
D)  produce a level of output where marginal revenue equals marginal costs. 
E)  produce exactly 400 units.

Question 9

The production function is f(x1,x2)=x1/21x1/22.If the price of factor 1 is $10 and the price of factor 2 is $15,in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

Accepted Answer

A)  x1 =1.50x2. 
B)  x1 =x2. 
C)  x1 =15x2. 
D)  x1 = 0.67x2. 
E)  We can't tell without knowing the price of the output. 
A)  x1 =1.50x2. 
B)  x1 =x2. 
C)  x1 =15x2. 
D)  x1 = 0.67x2. 
E)  We can't tell without knowing the price of the output.

Exam 20:Profit Maximization-Part A

If a profit-maximizing competitive firm has constant returns to scale,then its long-run profits must be zero.

The production function is f(x1,x2)=x1/21x1/22.If the price of factor 1 is $6 and the price of factor 2 is $12,in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

If the price of the output of a profit-maximizing,competitive firm rises and all other prices stay constant,then the firm's output cannot fall.

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven,the faster he drives,the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S)= eS F - (60/5).To maximize his profit,Dan should drive

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400,then in the short run,if the market price of output is $24,a profit-maximizing firm will

The production function is f(x1,x2)=x1/21x1/22.If the price of factor 1 is $10 and the price of factor 2 is $15,in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

Demand-Part A

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 B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

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-Part A

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

The production function is f(x₁,x₂)=x^1/2₁x^1/2₂.If the price of factor 1 is $6 and the price of factor 2 is $12,in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven,the faster he drives,the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S)= e^SF ^- ^(60/5).To maximize his profit,Dan should drive

The production function is f(x₁,x₂)=x^1/2₁x^1/2₂.If the price of factor 1 is $10 and the price of factor 2 is $15,in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?