Question 1

If the price of labor is $5 and the price of capital is $10,what is the marginal rate of technical substitution at the optimal input choice?

Accepted Answer

A) 0.5 
B) 2 
C) decreasing 
D) increasing 
E) none of the above 
A) 0.5 
B) 2 
C) decreasing 
D) increasing 
E) none of the above

Question 2

Refer to the following graph.The price of capital r)is $20.   What combination of labor L)and capital K)can produce 5,000 units of output at lowest cost?

Accepted Answer

A) 90K,60L 
B) 110K,10L 
C) 42K,52L 
D) 60K,20L 
E) 10K,110L 
A) 90K,60L 
B) 110K,10L 
C) 42K,52L 
D) 60K,20L 
E) 10K,110L

Question 3

Refer to the following figure.The price of capital is $50 per unit:   How many units of capital should the firm use to produce 800 units of output at least cost?

Accepted Answer

A) 110 
B) 98 
C) 108 
D) 102 
E) 120 
A) 110 
B) 98 
C) 108 
D) 102 
E) 120

Question 4

In the above graph,as you move from point B to point C,

Accepted Answer

A) output is unchanged. 
B) cost is unchanged. 
C) the amount of capital increases and the amount of labor decreases. 
D) both b and c 
E) all of the above 
A) output is unchanged. 
B) cost is unchanged. 
C) the amount of capital increases and the amount of labor decreases. 
D) both b and c 
E) all of the above

Question 5

Refer to the following figure.The price of capital is $50 per unit:   What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

Accepted Answer

A) 0.80 
B) 0.40 
C) 2.50 
D) 2.00 
E) impossible to tell without marginal products 
A) 0.80 
B) 0.40 
C) 2.50 
D) 2.00 
E) impossible to tell without marginal products

Question 6

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.When output is 30 units,what is TOTAL cost?

Accepted Answer

A) $1,000 
B) $2,000 
C) $10,000 
D) $20,000 
E) none of the above 
A) $1,000 
B) $2,000 
C) $10,000 
D) $20,000 
E) none of the above

Question 7

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.How much does the seventh unit of output add to total cost?

Accepted Answer

A) nothing 
B) $400 
C) $800 
D) $4,000 
E) $8,000 
A) nothing 
B) $400 
C) $800 
D) $4,000 
E) $8,000

Question 8

expansion path shows how

Accepted Answer

A) input prices change as the firm's output level changes. 
B) the marginal products change as the firm's output level changes. 
C) the cost-minimizing input choices change as the firm's output level changes. 
D) the profit-maximizing input choices change as the firm's output level changes. 
E) the cost-minimizing input prices change as the firm's output level changes. 
A) input prices change as the firm's output level changes. 
B) the marginal products change as the firm's output level changes. 
C) the cost-minimizing input choices change as the firm's output level changes. 
D) the profit-maximizing input choices change as the firm's output level changes. 
E) the cost-minimizing input prices change as the firm's output level changes.

Question 9

Given the above graph,as you move from point A to point B,

Accepted Answer

A) output is unchanged. 
B) cost is unchanged. 
C) the rate at which the firm can substitute labor for capital while holding output constant decreases. 
D) both a and b 
E) both a and c 
A) output is unchanged. 
B) cost is unchanged. 
C) the rate at which the firm can substitute labor for capital while holding output constant decreases. 
D) both a and b 
E) both a and c

Question 10

In the following graph,the price of labor is $15 per unit.Which of the following combinations of capital and labor lies on the expansion path?

Accepted Answer

A) 15K,40L   
B) 18K,40L 
C) 30K,100L 
D) 21K,60L 
E) none of the above 
A) 15K,40L   
B) 18K,40L 
C) 30K,100L 
D) 21K,60L 
E) none of the above

Question 11

If the marginal rate of technical substitution of labor for capital is 6,the price of labor is $18,and the price of capital is $9,then the firm

Accepted Answer

A) can substitute one unit of capital for six units of labor and keep output unchanged. 
B) should use more labor and less capital. 
C) should use more capital and less labor. 
D) both a and b 
E) both a and c 
A) can substitute one unit of capital for six units of labor and keep output unchanged. 
B) should use more labor and less capital. 
C) should use more capital and less labor. 
D) both a and b 
E) both a and c

Question 12

The marginal rate of technical substitution is

Accepted Answer

A) the market rate of exchange between labor and capital. 
B) the rate at which the firm can substitute labor for capital while holding total cost constant. 
C) the rate at which the firm can substitute labor for capital while holding output constant. 
D) both a and b 
E) both a and c 
A) the market rate of exchange between labor and capital. 
B) the rate at which the firm can substitute labor for capital while holding total cost constant. 
C) the rate at which the firm can substitute labor for capital while holding output constant. 
D) both a and b 
E) both a and c

Question 13

Economies of scale exist when

Accepted Answer

A) fixed cost decreases as output increases. 
B) long-run average cost decreases as output increases. 
C) long-run marginal cost is less than long-run average cost. 
D) both a and b 
E) both b and c 
A) fixed cost decreases as output increases. 
B) long-run average cost decreases as output increases. 
C) long-run marginal cost is less than long-run average cost. 
D) both a and b 
E) both b and c

Question 14

Which of the following statements is true?

Accepted Answer

A) In the short run all inputs are fixed. 
B) In the long run a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. 
C) Diminishing returns to labor means that adding one more worker will decrease output. 
D) all of the above 
E) none of the above 
A) In the short run all inputs are fixed. 
B) In the long run a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. 
C) Diminishing returns to labor means that adding one more worker will decrease output. 
D) all of the above 
E) none of the above

Question 15

You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that

Accepted Answer

A) total cost decreases as more is produced. 
B) long-run average cost decreases as more is produced. 
C) marginal cost decreases as more is produced. 
D) total fixed cost decreases as more is produced. 
A) total cost decreases as more is produced. 
B) long-run average cost decreases as more is produced. 
C) marginal cost decreases as more is produced. 
D) total fixed cost decreases as more is produced.

Question 16

A sofa manufacturer currently is using 50 workers and 30 machines to produce 5,000 sofas a day.The wage rate is $200 and the rental rate for a machine is $1,000.At these input levels,another worker adds 200 sofas,while another machine adds 500 sofas.If the firm uses 45 workers and 31 machines instead,then its

Accepted Answer

A) cost will be unchanged,and its output will decrease by 500 units. 
B) cost will be unchanged,and its output will increase by 300 units. 
C) cost will be unchanged,and its output will increase by 500 units. 
D) output will be unchanged,and its cost will decrease by $800. 
E) none of the above 
A) cost will be unchanged,and its output will decrease by 500 units. 
B) cost will be unchanged,and its output will increase by 300 units. 
C) cost will be unchanged,and its output will increase by 500 units. 
D) output will be unchanged,and its cost will decrease by $800. 
E) none of the above

Question 17

Refer to the following graph.The price of labor is $3 per unit:   What is the minimum cost of producing 100 units of output?

Accepted Answer

A) $150 
B) $105 
C) $ 75 
D) $ 60 
A) $150 
B) $105 
C) $ 75 
D) $ 60

Question 18

In the graph below,the price of capital is $500 per unit.Which of the following combinations of capital and labor lies on the expansion path?

Accepted Answer

A) 500L,100K 
B) 800L,160K 
C) 1100L,220K 
D) both a and b 
E) none of the above 
A) 500L,100K 
B) 800L,160K 
C) 1100L,220K 
D) both a and b 
E) none of the above

Question 19

In the graph below,the price of capital is $500 per unit.Between 30,000 and 50,000 units of output,how much does each additional unit of output add to long-run total cost?

Accepted Answer

A) $1.50   
B) $2.45 
C) $300 
D) $30,000 
E) none of the above 
A) $1.50   
B) $2.45 
C) $300 
D) $30,000 
E) none of the above

Question 20

Diseconomies of scale

Accepted Answer

A) exist when fixed cost increases as output increases. 
B) exist when long-run average cost increases as output increases. 
C) result eventually as the firm uses more and more labor with a fixed capital stock. 
D) both a and b 
E) all of the above 
A) exist when fixed cost increases as output increases. 
B) exist when long-run average cost increases as output increases. 
C) result eventually as the firm uses more and more labor with a fixed capital stock. 
D) both a and b 
E) all of the above

If the price of labor is $5 and the price of capital is $10,what is the marginal rate of technical substitution at the optimal input choice?

Refer to the following graph.The price of capital r)is $20. What combination of labor L)and capital K)can produce 5,000 units of output at lowest cost?

Refer to the following figure.The price of capital is $50 per unit: How many units of capital should the firm use to produce 800 units of output at least cost?

In the above graph,as you move from point B to point C,

Refer to the following figure.The price of capital is $50 per unit: What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.When output is 30 units,what is TOTAL cost?

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.How much does the seventh unit of output add to total cost?

expansion path shows how

Given the above graph,as you move from point A to point B,

In the following graph,the price of labor is $15 per unit.Which of the following combinations of capital and labor lies on the expansion path?

If the marginal rate of technical substitution of labor for capital is 6,the price of labor is $18,and the price of capital is $9,then the firm

The marginal rate of technical substitution is

Economies of scale exist when

Which of the following statements is true?

You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that

Refer to the following graph.The price of labor is $3 per unit: What is the minimum cost of producing 100 units of output?

In the graph below,the price of capital is $500 per unit.Which of the following combinations of capital and labor lies on the expansion path?

In the graph below,the price of capital is $500 per unit.Between 30,000 and 50,000 units of output,how much does each additional unit of output add to long-run total cost?

Diseconomies of scale

Managers, profits, and Markets

Demand, supply, and Market Equilibrium

Marginal Analysis for Optimal Decision Making

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 9: Production and Cost in the Long Run

If the price of labor is $5 and the price of capital is $10,what is the marginal rate of technical substitution at the optimal input choice?

Refer to the following graph.The price of capital r)is $20. What combination of labor L)and capital K)can produce 5,000 units of output at lowest cost?

Refer to the following figure.The price of capital is $50 per unit: How many units of capital should the firm use to produce 800 units of output at least cost?

In the above graph,as you move from point B to point C,

Refer to the following figure.The price of capital is $50 per unit: What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.When output is 30 units,what is TOTAL cost?

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.How much does the seventh unit of output add to total cost?

expansion path shows how

Given the above graph,as you move from point A to point B,

In the following graph,the price of labor is $15 per unit.Which of the following combinations of capital and labor lies on the expansion path?

If the marginal rate of technical substitution of labor for capital is 6,the price of labor is $18,and the price of capital is $9,then the firm

The marginal rate of technical substitution is

Economies of scale exist when

Which of the following statements is true?

You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that

Refer to the following graph.The price of labor is $3 per unit: What is the minimum cost of producing 100 units of output?

In the graph below,the price of capital is $500 per unit.Which of the following combinations of capital and labor lies on the expansion path?

In the graph below,the price of capital is $500 per unit.Between 30,000 and 50,000 units of output,how much does each additional unit of output add to long-run total cost?

Diseconomies of scale

Managers, profits, and Markets

Demand, supply, and Market Equilibrium

Marginal Analysis for Optimal Decision Making

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters