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| 1 | |
To minimize the cost of producing a given level of output, the manager should employ inputs such that the |
| | A) | marginal products of all inputs are equal. |
| | B) | value marginal product of all inputs are equal. |
| | C) | marginal product per dollar spent on all inputs are equal. |
| | D) | MRTS is equal to the ratio of the quantity of inputs. |
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| 2 | |
Which of the following is most likely to represent a fixed cost of a firm? |
| | A) | Expenditures on low-skilled labor. |
| | B) | Transportation charges for the delivery of products. |
| | C) | Electricity. |
| | D) | Property taxes on the firm's buildings. |
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| 3 | |
Suppose the production function is given by Q = 5K + 6L. What is the average product of labor when 8 units of capital and 10 units of labor are employed? |
| | A) | 10. |
| | B) | 12.5. |
| | C) | 8.25. |
| | D) | 6. |
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| 4 | |
For the cost function C(Q) = 100 + 10Q + 5Q2, the marginal cost of producing 7 units of output is |
| | A) | 140. |
| | B) | 70. |
| | C) | 185. |
| | D) | 80. |
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| 5 | |
For the cost function C(Q) = 75 + 3Q + 4Q2, the total fixed cost of producing 5 units of output is |
| | A) | 115. |
| | B) | 75. |
| | C) | 43. |
| | D) | None of the above. |
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| 6 | |
Suppose a firm's production function is Q = min {K, L}. If the price of capital goes down, |
| | A) | the firm must use more capital in order to minimize the cost of producing a given level of output. |
| | B) | the firm must use less capital in order to minimize the cost of producing a given level of output. |
| | C) | the firm must use less labor in order to minimize the cost of producing a given level of output. |
| | D) | the cost minimizing combination of capital and labor does not change. |
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| 7 | |
If the production function is Q = K1/2L1/2 and capital is fixed at 9 units, then the average product of labor when L = 25 is |
| | A) | 0.6. |
| | B) | 1.7. |
| | C) | 0.5. |
| | D) | None of the above. |
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| 8 | |
Which of the following cost functions exhibits economies of scope when Q1 = 3 and Q2 =5? |
| | A) | C = 80 - 5Q1Q2 + .5Q12 + Q22. |
| | B) | C = 25 + 4Q1Q2 + Q12 + 2Q22. |
| | C) | C = 65 + 5Q1Q2 + 2Q1 + 4Q2. |
| | D) | C = 15 + 2Q1Q2 + Q12 Q22. |
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| 9 | |
When costs that change with the level of output are divided by the output level, you have calculated |
| | A) | total fixed costs. |
| | B) | average fixed costs. |
| | C) | average variable costs. |
| | D) | marginal costs. |
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| 10 | |
Suppose the production function is given by Q = 7K + 9L. What is the marginal product of labor when 10 units of capital and 5 units of labor are employed? |
| | A) | 2. |
| | B) | 4. |
| | C) | 9. |
| | D) | 7. |
| | E) | None of the above. |
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| 11 | |
What kind of costs are irrelevant when managers are making decisions? |
| | A) | Marginal costs. |
| | B) | Sunk costs. |
| | C) | Fixed costs. |
| | D) | Variable costs. |
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| 12 | |
Suppose the production function is Q = min {4K, 2L}. How much output is produced when 5 units of labor and 3 units of capital are employed? |
| | A) | 20. |
| | B) | 6. |
| | C) | 10. |
| | D) | 12. |
| | E) | None of the above. |
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| 13 | |
Which of the following statements is always true? |
| | A) | When marginal costs are less than average total costs, average total costs will be decreasing. |
| | B) | When average fixed costs are decreasing, the difference in the average variable cost and average total cost is increasing. |
| | C) | When average fixed costs are decreasing, marginal costs must be less than the average fixed costs. |
| | D) | When marginal costs are greater than average total costs, average total costs will be decreasing. |
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| 14 | |
Suppose the marginal product of labor is 20 and the marginal product of capital is 27. If the wage rate is $5 and the price of capital is $9, then in order to minimize costs the firm should |
| | A) | use more capital and less labor. |
| | B) | use more labor and less capital. |
| | C) | use equal amounts of labor and capital. |
| | D) | None of the above. |
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| 15 | |
When a firm is experiencing cost complementarities, it implies that |
| | A) | the total cost of producing two types of product together is less than that of producing the products separately. |
| | B) | long run average total costs decrease as output is increased. |
| | C) | the marginal cost of producing one type of output decreases when the output of another good is increased. |
| | D) | long run average total costs remain constant as output is increased. |
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