Deck 10: Production and Cost Estimation

Question 1

When estimating a short-run average variable cost function,

A) the intercept must be forced to equal zero.
B) the cost data must be deflated.
C) at least one input must have been constant during the period in which the data were collected.
D) both b and c
E) all of the above

Answer 1

both b and c

Question 2

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-At 20 units of labor, what is total product?

A) 48
B) 96
C) 20
D) 62
E) 41

Answer 2

48

Question 3

Which of the following represents a short-run cubic production function?

A) $Q = a K ^ { 3 } L ^ { 3 } + b K ^ { 2 } L ^ { 2 }$
B) $Q = 3 A L ^ { 2 } + 2 B L \left( \text { where } A = a \bar { K } ^ { 3 } , B = b \bar { K } ^ { 2 } \right)$
C) $Q = A L ^ { 3 } + B L ^ { 2 } \left( \text { where } A = a \bar { K } ^ { 3 } , B = b \bar { K } ^ { 2 } \right)$
D) $Q = A L ^ { 2 } + B L \left( \text { where } A = a \bar { K } ^ { 3 } , B = b \bar { K } ^ { 2 } \right)$
E) all of the above

Answer 3

$Q = A L ^ { 3 } + B L ^ { 2 } \left( \text { where } A = a \bar { K } ^ { 3 } , B = b \bar { K } ^ { 2 } \right)$

Question 4

When estimating a short-run production function of the form $Q = A L ^ { 3 } + B L ^ { 2 }$ , it is necessary to specify in the computer routine that

A) A < 0.
B) B > 0.
C) the intercept term is forced to equal zero.
D) a and b
E) all of the above

Question 5

Which of the following is an estimable form of a production function?

A) Q = f(L,K)
B) Q = f(L $\bar { K }$ )
C) $Q = a K ^ { 3 } L ^ { 3 } + b K ^ { 2 } L ^ { 2 }$
D) all of the above
E) none of the above

Question 6

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-What is total product when average product is at its maximum level?

A) 94
B) 86
C) 100
D) 128
E) 150

Question 7

The opportunity cost of capital owned by the firm should reflect

A) acquisition cost.
B) the return foregone by using the capital rather than renting it to another firm.
C) wage rate differences.
D) both a and b

Question 8

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-At 20 units of labor, what is marginal product?

A) 6.0
B) 1.9
C) 6.3
D) 4.0
E) 2.4

Question 9

A potential problem with cross-section cost data is that

A) nominal cost data include the effect of inflation.
B) different firms face different input prices.
C) at least one input is fixed over time.
D) both a and b
E) none of the above

Question 10

A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ², is

A) a > 0, b > 0, c > 0
B) a > 0, b < 0, c > 0
C) a > 0, b > 0, c < 0
D) a > 0, b < 0, c < 0

Question 11

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-At 60 units of labor, what is marginal product?

A) 4.1
B) 1.2
C) 6.3
D) 2.4
E) -2.4

Question 12

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-What is average product when it is at its maximum level?

A) 3.20
B) 8.75
C) 6.92
D) 6.00
E) 9.40

Question 13

An estimated short-run cost function

A) can be used to make price and output decisions.
B) holds the capital stock constant.
C) can be estimated using time-series data.
D) both a and c
E) all of the above

Question 14

A linear specification, Q = aK + bL, is not appropriate for estimating a production function because

A) the marginal products of the inputs are constant.
B) it does not allow the firm to substitute capital for labor.
C) the firm could produce positive levels of output at zero cost.
D) both b and c
E) all of the above

Question 15

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-At 60 units of labor, what is average product?

A) 9.4
B) 8.6
C) 3.7
D) 2.4
E) 6.4

Question 16

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-At 20 units of labor, what is average product?

A) 6.0
B) 1.9
C) 6.3
D) 4.0
E) 2.4

Question 17

Refer to the following:
A short-run production function was estimated as

$Q = - 0.002 L ^ { 3 } + 0.16 L ^ { 2 }$

-At what level of labor usage does the maximum average product occur?

A) 20
B) 30
C) 40
D) 50
E) 60

Question 18

What is a problem with using a production function of the form Q = aK + bL (a > 0, b > 0)?

A) MRTS is constant.
B) A positive output can be produced when one input is not used.
C) The marginal products of the inputs do not have diminishing marginal returns.
D) both a and b
E) all of the above

Question 19

With a cubic production function of the form $Q = a K ^ { 3 } L ^ { 3 } + b K ^ { 2 } L ^ { 2 }$ , in order for the average and marginal product functions to have their theoretical properties, it must be the case that

A) a < 0, b > 0
B) a > 0, b < 0
C) a < 0, b < 0
D) a > 0, b > 0

Question 20

An average variable cost function is estimated as $A V C = 96 - 2 Q + 0.05 Q ^ { 2 }$ Which of the following cost functions is associated with this estimate?

A) SMC = 96 - 4Q + 0.1Q²
B) TVC = 96Q - 2Q² + 0.05Q³
C) TVC = 96Q + 4Q² + 0.15Q³
D) SMC = 96 - 4Q + 0.15Q²
E) both b and d

Question 21

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 20 units of output, what is estimated total variable cost (TVC)?

A) $1,348
B) $1,498
C) $2,348
D) $4,428

Question 22

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 12 units of output, what is estimated total variable cost (TVC)?

A) $171.40
B) $463.20
C) $1,348
D) $2,348

Question 23

For the short-run cost function AVC = a + bQ + cQ²,

A) the AVC curve is $\cup$ -shaped when a < 0, b > 0, and c < 0.
B) the AVC curve is $\cup$ -shaped when a > 0, b < 0, and c > 0.
C) the corresponding SMC function is $S M C = a Q + 2 b Q ^ { 2 } + 3 c Q ^ { 3 }$ .
D) both a and c
E) all of the above

Question 24

When estimating a cubic short-run production function $Q = A I ^ { 3 } + B L ^ { 2 }$ using linear regression analysis, you must

A) transform the equation into linear form by defining L3 and L2 as L³ and L², respectively.
B) suppress the intercept term (regress through the origin).
C) convert to logarithms.
D) both a and b
E) both b and c

Question 25

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 20 units of output, what is estimated total cost (TC)?

A) $1,348
B) $1,498
C) $2,348
D) $4,428

Question 26

The empirical specification $Q = A I ^ { 3 } + B L ^ { 2 }$ can be used to estimate

A) a short-run cubic production function.
B) short-run cubic cost function.
C) a family of U-shaped product curves.
D) both a and c
E) none of the above

Question 27

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 20 units of output, what is estimated average variable cost (AVC)?

A) $19.40
B) $67.40
C) $171.40
D) $179.40

Question 28

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 20 units of output, what is estimated short-run marginal cost (SMC)?

A) $171.40
B) $463.20
C) $1,348
D) $2,348

Question 29

The empirical specification $T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }$ can be used to estimate

A) a short-run cubic production function.
B) short-run cubic cost function.
C) a -shaped TVC curve.
D) both b and c
E) none of the above

Question 30

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-At Straker Industries, average variable cost (AVC) reaches its minimum value at $________.

A) $24.50
B) $33.60
C) $72.80
D) $121.80

Question 31

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 12 units of output, what is estimated average total cost (ATC)?

A) $121.93
B) $171.40
C) $463.20
D) $1,348

Question 32

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$
Suppose the firm employs 12 units of capital.

-At _______ units of labor, marginal product of labor begins to diminish.

A) 32.21
B) 44.44
C) 66.67
D) 76.66
E) 82.27

Question 33

A cubic specification for a short-run production function is appropriate when the scatter diagram indicates

A) an S-shaped total product curve.
B) marginal product of labor falls throughout the range of labor usage.
C) total product is decreasing throughout the range of labor usage.
D) an S-shaped marginal product of labor curve.
E) a -shaped marginal product of labor curve (MP first falls and then rises as labor usage increases.

Question 34

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-The estimated short-run marginal cost function (SMC) at Straker Industries is:

A) $S M C = 43.4 Q - 1.4 Q ^ { 2 } + 0.07 Q ^ { 3 }$
B) $S M C = 43.4 - 1.4 Q + 0.07 Q ^ { 2 }$
C) $S M C = 43.4 Q - 5.6 Q ^ { 2 } + 0.6 Q ^ { 3 }$
D) $SM C = 43.4 - 5.6 Q + 0.6 Q ^ { 2 }$

Question 35

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 12 units of output, what is estimated average variable cost (AVC)?

A) $28.04
B) $32.40
C) $33.33
D) $38.60

Question 36

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 20 units of output, what is estimated average total cost (ATC)?

A) $19.40
B) $67.40
C) $117.40
D) $1,348

Question 37

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$
Suppose the firm employs 12 units of capital.

-The product curve(s) in the short-run are

A) TP = -12.96 L³ + 1,728L².
B) AP = -12.96 L³ + 1,728L².
C) MP = -38.88 L² + 3,456L.
D) both a and b
E) both a and c

Question 38

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 12 units of output, what is estimated short-run marginal cost (SMC)?

A) $28.04
B) $32.40
C) $33.33
D) $62.60

Question 39

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-At what level of output is average variable cost (AVC) at its minimum point for Straker Industries?

A) 0.14
B) 4.7
C) 7
D) 14
E) 28

Question 40

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$

-If Straker Industries produces 12 units of output, what is estimated total cost (TC)?

A) $1,000
B) $1,463.20
C) $2,348
D) $4,428

Question 41

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$
Suppose the firm employs 12 units of capital.

-Marginal product when 10 units of labor are employed is

A) 12,248
B) 13,142
C) 14,287
D) 15,984
E) 30,672

Question 42

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-When Greene's output is 2,000 units, average variable cost (AVC) is

A) rising
B) falling
C) greater than short-run marginal cost
D) less than short-run marginal cost
E) both b and c

Question 43

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-When Greene's output is 2,000 units, what is total cost (TC)?

A) $144,000
B) $396,000
C) $444,000
D) $642,000
E) $846,000

Question 44

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$
Suppose the firm employs 12 units of capital.

-Average product when 10 units of labor are employed is

A) 12,248
B) 13,142
C) 14,287
D) 15,984
E) 30,672

Question 45

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-When Greene's output is 6,000 units, average variable cost (AVC) is

A) rising
B) falling
C) greater than short-run marginal cost
D) less than short-run marginal cost
E) both a and d

Question 46

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-If Greene Enterprises produces 6,000 units of output, what is estimated average total cost (ATC)?

A) $40
B) $75.25
C) $80
D) $90
E) $168.42

Question 47

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-When Greene's output is 2,000 units, what is short-run marginal cost (SMC)?

A) $20
B) $42
C) $72
D) $90
E) $100

Question 48

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-If Greene Enterprises produces 6,000 units of output, what is estimated short-run marginal cost (SMC)?

A) $45.60
B) $62.40
C) $83
D) $92
E) $100

Question 49

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-When Greene's output is 2,000 units, what is average variable cost (AVC)?

A) $20
B) $48
C) $62
D) $72
E) $85

Question 50

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-At Greene Enterprises, average variable cost (AVC) reaches its minimum value at $________.

A) $28.00
B) $31.67
C) $39.64
D) $43.33
E) $82.00

Question 51

Refer to the following:
A firm estimates its long-run production function to be

$$Q = - 0.0075 K ^ { - 3 } L ^ { 3 } + 12 K ^ { 2 } L ^ { 2 }$$
Suppose the firm employs 12 units of capital.

-At ________ units of labor, average product of labor begins to diminish.

A) 32.21
B) 44.44
C) 66.67
D) 76.66
E) 82.27

Question 52

A short-run marginal cost function is estimated as $S M C = 96 - 4 Q + 0.15 Q ^ { 2 }$ . Which of the following cost functions is associated with this estimated SMC equation?

A) TVC = 96Q - 2Q² + 0.05Q³
B) SMC = 96 - 4Q + 0.1Q²
C) TVC = 96Q + 4Q² + 0.15Q³
D) AVC = 96 - 2Q + 0.05Q²
E) a and d

Question 53

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-At what level of output does average variable cost (AVC) reach its minimum value for Greene Enterprises?

A) 800
B) 3,144
C) 3,800
D) 4,333
E) 51,672

Question 54

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-When Greene Enterprises produces 6,000 units, average variable cost (AVC) is $_________.

A) $40
B) $49.62
C) $55
D) $60
E) $72.46

Question 55

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.

-What is total variable cost (TVC) at Greene Enterprises when average variable cost (AVC) is at its minimum?

A) $48,000
B) $101,101
C) $137,222
D) $190,476
E) $437,212